Zhang Ruimin: As Long As We Find The Way, We Are Not Afraid Of It.

Speech by Zhang Ruimin, chairman and chief executive of Haier group, at the global summit of political and business leaders

Respected hosts, respected leaders, ladies and gentlemen,

Good afternoon.

I was very surprised to get this award (global wisdom leader Elite Award), because as far as I am concerned, the former business leaders should be said to be an example to me. We are still striving to fight. Internet In the era, we hope to create our own business model. There are still many works to be explored. We will share this opportunity with you.

First, only the enterprises of the times, there are no successful enterprises.

I want to take this opportunity to thank Fortune magazine. Almost nine years ago, I read a piece of advice from Fortune magazine, "success is the mother of failure". Over the years, I have kept the cover photo on my desk, and I think it has a great effect on motivating me to stand in this hall today.

There is a saying on the cover, "why did the enterprise fail?" There is also a saying: "chief executives always make excuses for failure of enterprises, but the root lies in their own mistakes". This sentence touches me very much. This article has made a detailed analysis of what mistakes are made. It is because you may have been successful, but the success of your mindset has fascinated your eyes. It is no longer a matter for the external changes. It may not pay much attention to the internal problems. As the article says, the collapse of enterprises will not be a bit of a collapse, it must be sudden.

This advice is very necessary for enterprises and is very useful. From this, I am also thinking about how to avoid being trapped in the mindset brought about by success and avoiding transformation from success to failure. I have two points:

(1) there should be no concept of success in enterprise competition.

The concept of success should be the pursuit of continuous innovation. If there is no end to innovation, there should be no concept of success in the competition of enterprises. For all the success, assuming that others say you are successful, it must be in the past, it must be yesterday, so today's goal is to pursue higher goals than yesterday. When a man stands on the champion podium, he is no longer a champion, but must strive for the next champion.

In order to motivate ourselves to pursue success, we made a group of sculptures in front of the office building. The figure of the sculpture came from Zhouyi. There were 64 hexagram in Zhouyi, and the last one was called "no Ji". The so-called "no help" is unsuccessful. Just like people go to the end, the goal of struggle is to pursue success. It reminds us all day by day that we must constantly pursue higher goals.

(two) if one enterprise Being considered successful, it must be in line with the requirements of the times.

There is a Western proverb, "when a typhoon comes, a pig can fly." That is to say, if you catch up with good opportunities, you may soon be able to develop, but will your next opportunity come to you? For example, in 80s, after China's reform and opening up, when we began to make refrigerators, there were more than 300 fridge factories in the whole country, but now there are only a few.

So I think enterprises have the characteristics of the times. You can only keep on developing opportunities by constantly catching opportunities. The world's top five hundred enterprises have an average life expectancy of only 30 to 40 years. One of the most important reasons is that they have not really become an enterprise of the times. Now that we want to become an enterprise of the times, we should create a new business mode in the new era.

Two, to become an enterprise of the times, there must be a business model that meets the requirements of the times.

I personally feel that the success or failure of enterprise competition is largely determined by the business model adopted by the enterprise, and the success or failure of the business model is determined by the customer value proposition. Or, in other words, whether we can create customer value in this era.

(1) challenges brought by the Internet to enterprises: from information asymmetry to information symmetry

In the creation of customer value, the Internet age and tradition Economic Era There's a very big difference. Because in the era of Internet, fragmentation of marketing brings the individuation of customer value and user needs. What we are facing is no longer a mass market, but a niche market. The development of social networking and mobile services has further accelerated the pace and brought new challenges to enterprises.

In the traditional economic era, the initiative of information asymmetry is in the enterprise. What products are launched by enterprises and what products they publicize will be sold out. Users are essentially passive. But in the Internet era, the initiative of information asymmetry has become a user. Users see all product information on the Internet. He decides which product he wants, and the enterprise becomes passive.

So I think the challenge that Internet brings to enterprises is how to solve the problem of information asymmetry. If we want to become information symmetry, that is, the enterprise will understand what the users want, and the users will choose the right products when they choose, which is very challenging for the enterprises. As a big manufacturing country, China faces the first challenge: how to transform from mass manufacturing to mass customization. So in recent years, we have been exploring a business model that can adapt to the competition in the Internet era.

(two) Haier explores the business model of the Internet Age -- the "win-win" mode of "man alone".

The so-called "man in one", people refer to our employees, the so-called narrow refers only to the order, but refers to the needs of the market users. Linking employees with user needs, creating the needs of users by employees themselves, and realizing their own value in creating value for users. This exploration has brought about two very important changes to enterprises. {page_break}

1, organizational structure: from the positive triangle to the inverted triangle.

Chandler, a master of American business history, has a saying: "the development of an enterprise depends on two changes. One change is the correct strategy of an enterprise, and the other is the organizational structure of an enterprise. Between these two transformations, the enterprise's strategy determines the organizational structure and organizational structure to ensure the realization of enterprise strategy. Our strategy in the Internet age is to unite every employee and user. This strategy has subverted the original organizational structure and must be transformed from "positive triangle" to "inverted triangle" in order to support the realization of strategic objectives.

The traditional organization is very similar to the army. It is a triangular triangle of Pyramid. Now we turn it into an inverted triangle with employees at the top. Front-line employees can grasp the rapid changes in the market, innovate independently, and provide the most competitive service solutions for users. The relationship between leaders and employees has changed, too. Leaders have been giving instructions to employees, but now leaders are required to support employees' satisfaction with users' needs. When I talked to Gerstner in front of the United States and IBM before last year, Gerstner said he always wanted to do this when he was in office, but this was a subversion of the whole organization, and the difficulty was too great for CEO to do so. But he thinks that the organization in the Internet age must be like this.

In the process of pushing forward, we also realize the difficulties of subversion, but we are still moving forward. The whole group of Haier has more than 70 thousand people. What we are exploring now is to turn these more than 70 thousand people into more than 2000 independent businesses. Each business entity is like an independent company. The company is responsible for its own profits and losses, and it can also be divided into employees after creating value added.

The realization of autonomy is mainly due to the quest for "two rights": the use of human rights and distribution rights. Team leaders can choose members or members of the team. Team members decide to recall the captain and members of the team, which is totally different from the original organization theory.

The Walton School of business has been tracking our research. If an independent business is regarded as a small company, the Western contract theory is also applicable. Contract can take place outside the enterprise, and it can also take place within the enterprise and play a key role in the relationship between the principal and the agent. According to Professor Walton's research, our contractual autonomy is different from traditional ones. Traditional contracts are static, and we are dynamic optimizes. Our exploration is the advancement of the Western contract theory. The contract of every business body is a contract with the users. It fundamentally avoids the game between employees and enterprises, but becomes a game for employees to create the greatest value and ability. Walton business school professors also feel very reasonable.

2, the transformation of business mode to promote competitiveness.

So far, because we are still exploring, but it has been felt that this change has played a great role in the competitiveness of enterprises.

(1) fusion of virtual and real networks

For example, in the field of electronic commerce, there are two difficult problems of online shopping in China, one is honesty and the other is distribution. Haier's marketing is now turning to the marketing of virtual reality network integration. The virtual network refers to the Internet, and the real network is the marketing, distribution and service network. Our real network has now penetrated into towns and villages, which has strong support for virtual networks. We can promise users to "24 hours time limit" and "timeout". This commitment to the user is pushed to the inside of the enterprise, which poses a great challenge to the whole process. At present, in the field of home appliances, no enterprise can make such a commitment to users. Although it is only a pilot project in some cities, the transformation of our business model has brought great benefits to users and enterprises.

(2) from selling products to selling services

In the book "Facebook Effect", the Facebook website has 45 million user groups and has built up a huge social network. We apply this idea to interaction with users.

Because in essence, users need not only products, but a service plan to meet their needs. Before the launch of the product, we put forward the solution on the network, allowing users to participate in interaction, allowing users to participate in the design.

(3) resource interchange

In the Internet era, Haier's ability to integrate virtual and actual resources is itself a resource that can exchange resources with international enterprises. For example, Haier has a strong network capability, and the US GE appliance has handed over all its sales in China to us. That is to say, if we see the sales of GE brand appliances in China now, they are all sold by Haier. HP also commissioned the Haier market for the rural market. At the same time, our cooperation with FPA in New Zealand is also the case. His sales in China are made by us, and our sales in Australia and New Zealand can be realized through his sales network.

(three) deepening the exploration of business models

The seventy thousand people turned into nearly 2000 business teams at once, and the organization was flattened instantly. After the flattening, many of the original hierarchies did not exist, which brought us great difficulties over a period of time. Now, although there are still many challenges, the vertical integration of the first-line market team and resource support platform has been basically formed, and the horizontal integration between the market team and R & D team has been formed. The traditional organizational structure and process system have been initially replaced by a new vertical and horizontal matrix structure.

Three, the key to the sustainability of business models is that employees become the main body of innovation.

(1) employees become the main body of innovation.

I think this business model can really succeed, whether it can continue to innovate, the important thing is in the staff. So in our design, employees become the main body of innovation. Our group has a saying, "my user I create, my value added I share". That is to say, every employee has his users, who want to create value for users and share them with users.

Many western enterprises have a slogan called "shareholder first", but I do not quite agree with this concept. I think "shareholder first" should be the result of business operation, but it should not be a goal. The purpose of business is to create customer value. In order to create customer value, it is necessary to provide better innovation space for employees. Only after providing this innovation space for employees can he ensure the realization of user value.

If employees and users are combined to create value, the interests of shareholders are the inevitable result. In fact, we ourselves are like this. We have a listed company in Shanghai and Hongkong. After our mode innovation, the company's profit grew very well and was accepted by the investors. In fact, investors have taken a look at how your business model improves profitability.

(two) promote the autonomous business in an orderly way with the strategic income statement.

Traditional enterprises have three tables, one balance sheet, one cash flow statement, and a profit and loss account. We are now exploring the three tables to turn into a strategic profit and loss statement for each autonomous entity. Each business entity has to study how it can innovate in the market so that its profit and loss statement will not be lost.

For example, most enterprises, especially large companies, have such regulations. What class of staff travel on business and what kind of hotel they live in. But after entering the business body, although the choice of transportation or guesthouse can still be done, the cost must be entered into your own profit and loss account, which is associated with the profit and loss of the business entity. {page_break}

In 2007, we received the attention of the American Institute of management accountants, and continued to follow up the research and discuss with us. They regard this as a breakthrough in management accounting. There are two kinds of accounting, one is financial accounting, the other is management accounting. Financial accounting is report accounting, but more importantly, management accounting, management accounting is the decision accounting, is the future accounting. Therefore, the development of enterprises depends very much on management accounting. In December 2010, the American Institute of management accountants and we jointly established a research center to further explore how to really push management accounting forward.

(three) Chinese enterprises need their own management mode.

At present, we are speeding up our exploration, but we have encountered many difficulties.

Internally speaking, Chinese enterprises have so far not been their own management mode, they all learn from the West. But when learning western countries, most of them learn western management tools. For instance, during the period of reform and opening up, we mainly studied the total quality management of Japan, and later learned many management tools such as six sigma, but really guided the Chinese enterprises how to do it in theory.

Externally speaking, we also want to learn the successful management mode of foreign countries in the Internet era. We have made many discussions, but it is hard to find a mature management mode in the Internet age. So we rely mainly on ourselves.

From my point of view, my overseas study and communication have gone through three different stages. From 80s to 90s of last century, it mainly imported advanced technology and equipment from abroad. After 90s, it was mainly for overseas factories to export products to foreign countries. It can be said that the first stage is the introduction, and the second stage is to go out. Now, for enterprises, these tasks are still being done, but for my part, I no longer do these, but mainly study management mode.

I now go abroad mainly to the United States and other developed countries, and some international entrepreneurs, management scholars, business schools, and well done enterprises to explore. Last year, I also went to a supermarket in the United States to communicate. They also did a good job in self-management, including Amazon, which is a very good company in the Internet era. But they also believe that in the era of Internet, the subversion of large enterprises will face many challenges.

Although we have many difficulties, we have decided that this direction must be carried out, and so far, we have achieved preliminary results. Last year, a statistical institution in Europe named Haier as "the first brand of white goods in the world". Our strategic performance has also changed greatly. Last year, Haier's business revenue increased by 9.2%, but its profit increased by 77.7%. The profit growth was 8 times that of the revenue growth. Why profit will increase substantially? It is because some of the independent businesses become profit centers. In order to achieve higher profits, we create more user resources.

More important than profit growth is cash flow. Haier's current working capital turnover days can now reach a negative ten days, and the number of Chinese manufacturing enterprises has not reached a high level. The best business in this regard is the DELL of the United States. It can reach a negative more than 30 days at the highest time, which is also a positive change brought by mode innovation.

Because of the time relationship, I can not elaborate on it. All in all, in this direction, we must continue to work hard, unswervingly explore, and persevere in exploration. Because as long as we find the way, we are not afraid of going far.

Thank you!