Visiting One Of The World's Most Radical Workplaces
This week we are in China to visit some of Haier’s local plants and to further research their unique Rendanheyi Model.
We are here at the invitation of Haier to conduct interviews with employees and to attend their 3rd International Rendanheyi Model Forum.
The forum's theme
This year’s theme is build around the concepts of the so-called “Ecosystem Micro-Community Contract (EMC)” and the “Ecosystem Brand”.
The EMC is at the heart of Haier’s newest change in organizational development. The concept builds on the "microenterprise" and "ecosystem" created previously. This innovation aims to create an organization that focuses on creating products and services that change one off customers into permanent users of Haier brands.
To try to simplify this: instead of selling you a washing machine once, Haier now strives to provide you with a "scenario" (product + service) that attracts multiple stakeholders to provide a "scenario ecosystem" which should meet the complex needs of customers.
To give you an example: The "washing scenario ecosystem"; which is a "smart" washing machine that does not simply wash your clothes but can also automatically identify the different brands of your clothes, the fabrics they are made of and the water quality of your machine. Your "smart" washing machine will then recommend you with a desired washing mode.
Both innovations (EMC & Ecosystem Brand) are milestones in the evolution of the Rendanheyi Model, and were only proposed and developed by Haier at the beginning of this year. We are curious to learn what they are really about (the nuts and bolts) and will report back you as soon as we figure it out.
Last year we played an active role in the annual forum. This year we hope to be inspired by a stellar line-up of speakers. Here are the ones we most look forward to learn from:
Zhang Ruimin & Gary Hamel
Like last year’s forum, this event is jointly hosted by Haier and Gary Hamel’s MLab. This means that both Zhang Ruimin (CEO of Haier) and Gary Hamel (management guru) will hit the stage. In their personal invitations, both offer hints on what they will be talking about:
“The Internet of Things has presented us with a world that is exciting yet complex, chaotic and overwhelming all at the same time. But if you look around, companies are still mostly managed by bureaucratic systems; this is like trying to run the highly sophisticated human civilization of today on a reptilian brain. How do we develop the ‘neocortex’ of the management model for the IoT era?”
This is something to look forward to!
On day one, a keynote will be delivered by Eric Maskin, an economist from Harvard. In 2007, Maskin, Hurwicz and Myerson shared the Nobel Prize in Economics for their work on mechanism design theory.
Mechanism design theory provides a framework for studying collective decision problems. The three economists came up with a theoretical explanation of the interaction among people, markets and institutions. In particular, two topics are at the heart of their research: (1) The gap in knowledge between buyers and sellers (known in economics as “information asymmetry”), and (2) The costs and consequences of the efficient operations of a market.
Why is the theory important? Simply, sellers have an incentive to ask the highest possible sales price. Buyers have exactly the opposite interest. Now, most sellers and buyers have different levels of knowledge about the overall value of the transaction they are about to make (“information asymmetry”). Therefore, the final outcome of this transaction may not be efficient for the economy as a whole.
Their theory allows people to identify these pitfalls, and avoid them where possible. It can show which markets work well and which do not, and help people to identify efficient trading mechanisms and regulation schemes.
This is especially relevant to the Rendanheyi Model, as the "EMC Contract" is providing microenterprises and entrepreneurs with internal and external markets to allow trading of their products and services between each other. Obviously, Haier wants those markets to be as efficient as possible. The theory can help them design rules to avoid “information asymmetry” between groups of buyers and sellers.
Oliver Hart & Bengt Holmström
On day two, keynotes are delivered by two more Nobel laureates: Oliver Hart from Harvard and Bengt Holmström from MIT. In 2016, Hart and Holmström shared the Nobel Prize in Economics for research into contract theory.
Their work helps people understand how contracts work, and how and when they can be improved. They highlight a special interest in the trade-offs being made when setting contract terms. This helps our understanding of the often conflicting incentives present in the contracts between, for example, employers and employees.
This theory is relevant because contracts play a vital role in the operation of the modern economy, and for the efficient operation of Haier’s online platforms where microenterprises negotiate contracts with and among each other. This is important because people tend to be self-interested. But to be able to create as much value as possible for the users, microenterprises must often work together and find ways to align their interest to minimize conflicts of interest. This is where contracts come in.
But contracts are often incomplete because it is difficult to specify all elements of a contract. This leaves room for unexpected events to occur-events not covered in the agreement. When this happens, decision rights become important. Whoever has the right to make decisions about unexpected events has more power. And power matters.
The role of power is an important thread in the work of Hart and Holmström – especially the role of power in co-operative ventures between employees and organizations. In such co-operative ventures, both parties have power. Employees have the power to use or withhold their services, organizations have power over the resources they own. Here again, contracts are often used to shape those power relationships.
This is especially relevant to the Rendanheyi Model as Haier is increasingly promoting co-ownership with its employees. Obviously, Haier wants to generate as much value as possible from these co-operative efforts for all involved, and hopefully for society as a whole, too.
W. Brian Arthur
Another day two keynote will be by W. Brian Arthur. Arthur is an economist at Stanford and the Santa Fe Institute. He is a pioneer of the science of complexity – the science of how patterns and structures self-organize.
In the 1980s, Arthur led a group at Santa Fe Institute that developed an alternative approach to economics called “complexity economics”. Where standard economics is based on the idea of super-rational actors operating in a static-equilibrium world, complexity economics regards the economy as an evolving, complex system.
Arthur advocates a non-equilibrium view of the economy where it is not static but always forming with actors who do not necessarily use super-rationality or face well-defined problems. Instead, they explore, try to make sense, and react to the outcomes they create together. And all are being influenced by modern technology.
This is especially relevant for the Rendanheyi Model as Haier’s online platforms can be regarded as self-organizing structures on which microenterprises and entrepreneurs create value together – all supported and enabled by the "EMC Contract".
Hats off to the organizers of the 3rd International Rendanheyi Model Forum for compiling such an impressive line-up. The speakers and topics highlight the complex dynamics at play in progressive organizations. It will, hopefully, shed light on the ways in which these affect the lives of many in the future.