CEO Interviews at Fortune Global Forum: Zhang Ruimin
- January 18, 2018
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One of the highlights of the Fortune Global Forum were the really fantastic interviews with the CEOs of amazing companies. Even for CEOs, these are heroes that are looked up to in large part. Each one of them had a way of distilling really important initiatives in their companies down to *very* simple phrasing that anyone could remember. This is part of a series of short posts based on my notes in each session:
Zhang Ruimin, Haier CEO
Zhang was immediately asked about the recent acquisition of GE Appliances. He said that sales dropped 11% after the merger, but now sales are up 6% and profit 20%, so he believes Haier is on the right track. Combining models and teams, and customers is hard but they are well on their way. He conveyed some interesting stories from a management point of view:
- GE team members asked “how are you going to manage us” – and his response was “well, we’re not your boss, the client is your boss, so we’ll work together to figure it out”
- In his view, GE was very vertically oriented and integrated in the management structure – very strict. Discipline is top-down. But in the internet era, his view is that linear management isn’t the best path- that we need non-linear management of teams.
- I found this to be a really intriguing indictment of GE culture – at least at one division. Given the way GE has been covered in the news lately, it raises questions.
Zhang says that the precondition to everything is creating value for customers. Since we are paid by customers, that’s what drives us. If I understood correctly, he believes most companies are learning from the US practice of using incentive policy – as shareholders – to create incentives. In Haier every employee has shares, but you need to create value for the customers. It’s a modification of the traditional stockholder incentive.
Quite rightly, he was asked how do you coordinate complex appliance building with what you call entrepreneurs in charge who tend to want to go their own way? Zhang’s response was interesting:
- The platform is non-negotiable – all of the appliances have to connect to the internet or provide that platform capability.
- When everything is connected, then hardware functions are less important, but service solutions can be much more important.
- For example, we can layer services on top of a connected fridge regarding food and cooking versus just cooling.
- So connectivity is the basic requirement, but,…
- AI is another basic requirement – to make sense out of IoT and its massive amounts of data.
I loved this line from Zhang (paraphrased): “They’re not building appliances, they’re building services delivered through the appliances. But they need to find product market opportunity.”
Asked if his company would export management talent in the future the way GE has in the past – Zhang says he doesn’t see too many companies adopting their management practices yet – but maybe someday. Usually companies don’t like to delegate power like he does – it’s hard for people to give up control and power if they’re used to having it.