Professor Xie Yongzhen is Standing Director of the Chinese Institute of Business Administration, Standing Director of the Corporate Governance Committee of the Chinese Institute of Business Administration, Standing Director of the China Network Governance Committee, member of the Academic Advisory Committee of the Management Philosophy Committee of the Chinese Institute of Business Administration, core development team member of the China Corporate Governance Index (CCGINK), and visiting Professor of Soochow University. Professor Xie is also a member of the editorial board of Foreign Economics & Management: The Oriental Management Column, a member of the editorial board of Chinese Culture and Management, member of the Academic Committee of China, Practice and Management, and columnist and senior researcher of Directors & Boards. Professor Xie is an expert in the Top Ten Industrial Think Tanks of Old and New Driving Forces in Shandong Province, Standing Director of Shandong Provincial Applied Statistics Association, Director and Chief Expert of the Cultural Organization and Governance Research Center of Shandong Cultural and Industrial Research Institute. Professor Xie is also an expert of the National Natural Science Foundation of China, the National Social Science Fund of China, and contributes to the Nankai Management Review, Journal of Management, and other journals.
Professor Xie was employed by the home appliances and consumer electronics multinational Haier, and conducted research into the theory and methods of employee–user value integration. Professor Xie participated in the Haier 920 Summit many times and made numerous research visits to Haier, dedicating herself to exploring the theoretical innovations of Haier’s employee–user value integration approach and its quantum management practice. As an advocate of China quantum management theory and its practice, Professor Xie has delivered keynote speeches at the first, second, and third China Quantum Management Forums and has reported on quantum management theory and practice in Nankai University, Northeastern University, Shandong University, Weifang University in Shandong province, the Cultural Corporate Training of Shandong Province, Shandong Special Equipment Inspection and Testing Group (SDSEI), and the Non-public Personnel Training of Shandong University.
A quantum approach to management involves a holistic view, the driving of value, non-linear operations, uncertainty management, and potential activation. Mr. Zhang Ruimin implemented organizational reform and initiated the “employee–user value integration” approach in Haier in 2005. By 2015, the successful original mode of employee–user value integration was upgraded to encompass stakeholder value integration. Based on this innovative quantum approach, Haier has realized its transformation from a traditional hierarchical organization to an open business ecological platform, which represents a “win-win” business ecosystem driven by business chain value and incorporating the Internet of Things. Haier developed COSMOPlat, an industrial Internet platform that enables the employee–user value integration approach to be implemented and can be used to conduct large-scale customized designs. Through such designs the platform has empowered numerous industries, enabling them to manage uncertainty related to employees and users and to greatly improve the value and creativity of business enterprises. Haier was thus identified as an effective example of China quantum management by Danah Zohar, a pioneer of quantum management theory. Mr. Zhang was presented with the “Special Contribution Award for China Management Science” for his innovative approach to employee–user value integration, and was the first entrepreneur to win this award. The study focused on COSMOPlat and was aimed at systematically interpreting its system of empowering business ecosystems to create value.
Haier’s Digital Industrial Internet Platform Integrating “To B” (to business) with “To C” (to customer)
Rapid technological change, globalized trade, users who require personalized services, and the growth of the knowledge-based workforce all present uncertainties to the effective running of a business. Effectively managing innovation and uncertainty, enhancing organizational resilience, and improving enterprise value and creativity are now common concerns in both theory and practice.
General Electric published its white paper, Industrial Internet: Breaking the Boundary between Wisdom and Machine in 2012, to address the challenges brought by the expansion of the Internet. This suggested that incorporating Internet technology into industrial production through building a platform for manufacturing and industrial management (To B) could reduce costs and improve efficiency through big data analysis. The German government put forward its “Industry 4.0” strategy at the Hannover Messe in 2013, which encouraged Germany to take the lead in this new stage of industrial revolution. Siemens also developed a factory management and industrial service system (To B).
Haier first promoted its “employee–user value integration” approach in 2005 and carried out disruptive organizational reform to develop an intelligent manufacturing process, transforming the bureaucratic organization into a platform organization. To address the challenges of the industrial Internet and the Internet of Things, Haier launched its COSMOPlat Industrial Internet platform in 2016. The company holds the platform’s independent intellectual property rights in China, and it is the first platform on which users can participate in the whole process . The term “chaos” is used in COSMOPlat to refer to “a state of complete confusion and lack of order,” and can thus be regarded as the origin of everything. The resources linked to by the platform thus represent building blocks that provide infinite creative possibilities. COSMOPlat is an ecological brand platform that breeds new “species” under the guidance of Haier’s “employee–user value integration” approach. It aims to provide transformation and upgrading solutions to enterprises, so that they can innovate and develop, obtain and pool resources, and achieve large-scale demand-driven customization that involves users in the whole process, from creativity to delivery. Unlike the “To B” approach taken in the U.S. and Germany, COSMOPlat has functions related to both To B and To C. It can incorporate platform users and other stakeholders into the manufacturing system and provides seven types of large-scale customized plans: interactive customization, openness and innovation, precise marketing, modular procurement, intelligent manufacturing, logistics, and intelligent services. COSMOPlat gathers massive resources from users, developers, enterprises, and institutions, thus enabling all of these parties and other stakeholders to realize the creation, transmission, and sharing of value. Stakeholders can continue to interact throughout the whole cycle, including in its process and ecology.
With a focus on users, COSMOPlat has developed an Internet community ecology, integrating global resources, and offering iterations from mass production to large-scale user-driven customization.
Function and Empowerment of Haier’s Industrial Internet platform
Function modules of Haier’s Industrial Internet platform
COSMOPlat is an open industrial Internet platform driven by users that involves interconnected factories and has user experience at its center. The aim is to create lifetime value for users through mass customization. Users can participate in the whole process, including product interaction, design, procurement, manufacturing, logistics, experience, and iterative upgrading through the platform. The interconnections of stakeholders within the global business ecosystem mean that resources can be intelligently allocated throughout the industrial chain. Haier has successfully applied its industrial Internet operation mode and has shifted from being “enterprise-centered” to “user-centered,” from an “enterprise brand” to an “ecological brand,” and from “product” to “scene,” through COSMOPlat.
COSMOPlat is an open and shared industrial ecosystem that gathers hardware and software resources from all parties and links various industries, enterprises, and resources. The platform is composed of seven main modules: user interaction, R&D and innovation, collaborative procurement, intelligent manufacturing, precise marketing, intelligent logistics, and intelligent service.
(a) The User Interactive Customization platform enables user communities to interactively customize products. Through the platform, users can propose ideas, requests for products, and make comments online to encourage creativity.
(b) The R&D and Innovation platform consists of the three central aspects of openness and innovation, HID iterative R&D, and collaborative development. Its main focus is on the demand interaction of R&D technology, product design, and the collaborative interaction of module suppliers.
(c) The Collaborative Procurement platform provides resources and services in accordance with users’ demands after their online interactions with module suppliers. It can also offer on-demand designs, modular supply, and prompt delivery.
(d) The Intelligent Manufacturing platform includes 12 core software packages, such as OES, APS, MES, MMS, EMS, TPM, SCADA, EAM, SPC, and WMS . Through intelligent production scheduling, real-time monitoring, and precise distribution, it can personalize and customize millions of products.
(e) The Precise Marketing platform creates user profiles based on customer relationship management and the resources of user communities. It applies big data analysis to users in addition to cluster analysis.
(f) The Intelligent Logistics platform consists of two software suites that focus on intelligent operation and visualization, and includes platform reservation management, intelligent logistics transportation management systems (TMS), collaborative distribution, visual logistics trajectory, and the intelligent management of vehicles. The software required includes a VOM system, a reservation platform, a TMS, HLES3.0, WMS, HUB allocation, and a mobile app system. This one-stop warehouse distribution service is aimed at delivering the best possible user experience.
(g) The Intelligent Service platform has been developed to meet users’ product maintenance needs and aims to provide users with an overall maintenance services solution.
Through these seven business modules, stakeholders are offered solutions for manufacturing, R&D and design, digital transformation, public services, and for evaluating consulting services. COSMOPlat has already provided solutions in many sectors, such as electronics, energy, the textile and garment industry, the abrasives industry, culture and tourism, emergency preparedness, agriculture, construction and assembly, and transportation.
Haier’s Industrial Internet makes the business ecosystem more effective
As the world’s first mass customization platform, through which users can participate in the whole manufacturing process, the COSMOPlat Industrial Internet platform was identified as the first intelligent manufacturing demonstration site by the Ministry of Industry and Information Technology of the People’s Republic of China in 2015. It became the only Chinese enterprise included in the International Electrotechnical Commission (IEC). In 2016, it was selected as the only Chinese member of the Standardization of Intelligent Manufacturing. It was also the only such platform listed in the Industrial Internet Standard System Framework in 2017 and was authorized to develop international standards for mass customization by the Institute of Electrical and Electronics Engineers (IEEE), one of four International Organizations for Standardization. The Ministry of Industry and Information Technology also listed it on the 2018 Pilot Demonstration of the Industrial Internet, and it was one of the first enterprises listed in the international “Lighthouse” list of advanced factories by the World Economic Forum (WEF). In 2019, it was selected as an innovative example of an industrial Internet platform by the Ministry of Industry and Information Technology, and won the New Technology, New Products, and New Applications Gold Medal in the World Internet of Things Exposition (WloT). In 2020 it was recognized as the only ecological Internet of Things brand in the world and selected for the 2019-2020 IDG Global Leading Brands – Ecological Brand of the Industrial Internet. It also became one of the top 100 most valuable global brands.
Haier launched the nine interconnected factory models in 2012 , and with the support of COSMOPlat has expanded across industries and fields, and has driven the development of high-quality manufacturing industries through innovation. COSMOPlat has currently developed 15 industries in sectors such as chemicals, agriculture, emergency supplies, stone, molding, and equipment. It has a presence in 12 regions of China and 20 countries including the U.S., Japan, Mexico, Thailand, India, and Russia, and has created 11 leading interconnected factories across the globe. It provides users with major benefits in terms of food, clothing, shelter, transportation, health, medicine, and teaching. The platform has constructed ecological systems for food, clothing, residences, and entertainment, created four intelligence spaces for sitting rooms, kitchens, bathrooms, and bedrooms, and has developed seven air quality and water supply solutions for dwellings.
COSMOPlat has enabled Haier to become an initiator and leader in the field of mass customization, and the company has led or participated in the formulation of five international standards and 36 national standards. As the country’s mode of development has shifted from high-speed growth to an innovation-driven and high-quality approach, the COSMOPlat intelligent energy platform has helped to reshape the energy service landscape and integrate the flows of energy, data, and carbon traceability by constructing an integrated energy management system. Haier’s Sino-German Intelligent Park has become the world’s first carbon-neutral “lighthouse base.” COSMOPlat has established 15 industrial parks across the country and achieved full coverage through 55 interconnected factories. The overall costs of the Wuhan Dongbei Electric Appliance Company have reduced by 20%, due to the implementation of intelligent energy solutions.
COSMOPlat provides a Support System for Haier Ecology
Unique entrepreneurship
Mr. Zhang has a unique understanding of entrepreneurship, which he argues depends on the ongoing cultivation of entrepreneurs. In this new economic era, he regards entrepreneurship as the leveraging of various resources that support the longstanding goals of business, and through building a platform that can support all employees, they can create their own stories. His approach involves integrating Eastern wisdom with the Western philosophy of quantum science, which extends the Newtonian atomic view to quantum thinking, and he regards employees as self-driven quantum individuals. He proposes the concept that “Everyone is a CEO,” which suggests that employees can become “quantum selves” through innovative institutional and organizational structures. Employees can then be empowered with the rights to employ people, make decisions, and propose salaries, thus enabling them to become creative individuals who create value and obtain beneficial results. His phrase “creating my users and sharing my fruits” implies that employees have the right to start their own businesses and achieve self-organization and self-operation, according to the needs of users. “Employee customization” has led to a complete shift from “enterprises taking responsibility” to “employees taking responsibility.” Based on self-organization theory and his unique view of entrepreneurship, Mr. Zhang has established an open ecosystem with small and micro enterprises as the basic business units and has effectively realized the potential of Haier employees, thus developing enterprise value and employee self-growth by creating value in terms of users and experiences.
Creation of human value
Culture can be a source of corporate value, as it sustains a company and resonates with all of its employees. “Employee-oriented, user-centered, value-creating, and innovation-driven” are the core concepts that lead to the creation of innovation and value in Haier. Mr. Zhang regards people as the goal rather than the means and adheres to the value of putting people first. This transcends the traditional concept of putting shareholders and customers first, recognizes the key role of employees in value creation, and regards user value as the central goal. The Haier business ecosystem is the result of an innovative shift from the classical management approach to “employee–user value integration.” Its strategy has evolved from a “brand strategy” to an “ecological brand strategy,” its goals from “dedicating selflessly and pursuing excellence” to “integrity ecology and win-win evolution,” and its structure has transformed from a bureaucratic to a platform-based structure. Thus, Haier can create further value and success.
Ecological brand strategy
An “ecological brand” refers to the business ecosystem, and is a brand concept that has emerged alongside the Industrial Internet and the Internet of Things, based on quantum science. Competition among brands was the main driving force pre-Internet, and brand value depended on product quality, reputation, and marketing. However, the competitive advantage of a platform in the digital age depends on the platform’s brand, and brand value is highly correlated with its traffic. Competitive advantage now depends on the ability of enterprises to integrate the resources available in the commercial ecosystem. The concept of an ecological brand has value creation rather than the pursuit of profit at its core, the business ecosystem rather than the enterprise as the boundary, and brand interaction rather than one-way output as its goal. A brand’s value depends on the ability to create value in the business ecosystem, and involves value co-creation and sharing through the continuous participation of the ecosystem’s stakeholders. In the process of iteration from a product life cycle to a user experience cycle, Haier focuses on the construction of such an ecological brand, which is regarded as the sixth stage of Haier’s development strategy. The various ecological brands it has currently developed depend on the ecological systems of the clothing Internet, food Internet, blood Internet, and so on. Future competition in the realms of the industrial Internet and the Internet of Things is likely to involve enterprises with superior ecological brand influence having a greater ability to absorb resources and to create value in the business ecosystem.
Chain group platform organization structure
The successful operation of the industrial Internet depends on effective organizational structures. Haier currently breaks through traditional organizational boundaries and establishes links between external users and internal employees, thus enabling enterprises to interact with users in real time. This internalization of external users means they can directly participate in product design, manufacturing, and other aspects of production. Enterprises can create value through user knowledge, enabling them to innovate and efficiently achieve mass customization. The enterprise is also removed from the bureaucracy, and the original bureaucratic system is subverted into a multi-dimensional interactive chain group platform, so that the enterprise becomes a system with flows of energy and information. To conduct rapid iterations based on user experience, in early January 2019 Haier proposed implementing a non-linear organization system of small and micro groups in an ecological chain. This “chain group” is a spontaneous, open, and cross-platform parallel dynamic system involving the macro and the micro, which has the goals of creating lifelong users, enabling user experience iterations, and linking user experiences. Continual user experience enhancements are at the core of this chain group. The development of Haier’s chain group is divided into the creation of single chain group and a user experience chain group. The single chain group involves a specific implementation that provides good user experiences through iterative solutions. The user experience chain group is focused on the market, and directly faces the user community through a contact network. By interacting with users, new information about their requirements can be obtained. The instant interaction between the single and the user experience chain group through the contact network can ensure the complex needs of users are met and higher value is created in the user experience.
Non-linear operation mode
A user-centered closed loop has thus been established with “zero distance for users, zero delay in experience, and zero signature in the process,” along with a non-linear user-centered rather than a linear enterprise-centered operation mode from “design, manufacturing, storage, and logistics, to users.” Through COSMOPlat, the relationships among enterprises and between enterprises and users have undergone fundamental changes, and the relationships among stakeholders have changed from linear unilateral market transactions to multilateral cooperation in a non-linear business ecosphere. In each link of the business process, users can directly interact with the enterprise, thus realizing the aforementioned closed loop. The non-linear parallel operations of the platform regard the user as the center and thus form this closed loop. Any of the internal links of the enterprise can interact with users at any time and thus they can exchange information. By internalizing external users, enterprises can understand their needs in a timely fashion and effectively manage uncertainties. In this non-linear operation mode, the relationships between employees and users and between enterprises and other stakeholders dynamically evolve. Enterprises can then more effectively create value from user knowledge, in addition to catering to users’ specific needs. This continuous interaction enables Haier to develop customers into users and then into lifelong users, and thus empowers stakeholders in the business ecosystem.
Three-dimensional ecosphere with three layers
Smooth corporate operations are integral to value creation. Haier’s ecosystem is constructed on three levels. At the bottom is the basic ecosystem, which is mainly the technical support platform. Here, traditional functional departments such as finance, human resources, procurement, legal affairs, and IT, and small housekeeping platforms such as rural water stations and community container services, are transformed into a broad sharing platform. In the middle is the small and micro startup ecosystem, which mainly consists of chain groups and small and micro enterprises. This currently includes 150 chain groups, 776 small and micro enterprises, and 4,595 small and micro enterprise nodes that directly face users. At the top is the iterative ecosystem of user experience, which represents the contact network Haier uses to interact with users. The platforms of COSMOPlat, Dashun Shopping (that provides products and services), Agritainment, and R & D and HCH (a platform for global entrepreneurs) currently offer the best user experiences.
Haier’s basic ecosystem will update the traditional functions of a management platform and could be the basis for building large sharing platforms for global taxation, shared finance, internal control and internal audits, human resources, litigation and anti-fraud activities, commercial law, and value-added data. Diverse value-added features such as the seamless docking of services can then be provided for small and micro enterprises and chain groups on the industrial Internet platform. The small and micro startup ecosystem in the middle layer represents the backbone of innovation and entrepreneurship in terms of employee-user value integration. This connects the foundation with the iterative ecosystem of user experience and enables user interaction, by providing zero distance between users. The technical architecture of COSMOPlat in the upper ecosystem consists of three basic components: data acquisition (Saas) at the most basic level, resource allocation (Paas) at the middle level, and an application layer (Laas) at the top level.
Win-win value-added accounting table
To effectively measure ecological income and value, Haier developed the win-win value-added table, which comprehensively reflects the financial and non-financial information of an enterprise. Unlike traditional management accounting, the win-win value-added table focuses on users to measure the added value that is shared by enterprises, users, and stakeholders in the business ecosystem. The table consists of resources in the six dimensions of users, stakeholders, revenues, costs, marginal revenue, and ecological value, and represents an adaptation of the main traditional accounting systems. This innovative system represents a strategic change from an enterprise-centered to a user-centered approach. The win-win value-added table accounting system helps to accelerate the transformation of small and micro consumers from product buyers to a form of resource, and continues to encourage the small and micro business ecosphere to move from homogeneous competition with diminishing marginal benefits to a self-evolution ecology with increasing benefits.
To summarize, based on quantum thinking, Mr. Zhang Ruimin of Haier has developed a new global management approach of “employee–user value integration.” The industrial Internet platform links employees, users, enterprises, and stakeholders, enabling the full participation of users and zero-distance interactions. The remarkable achievements of this platform to date include leading the formation of industrial standards, facilitating the digital development of manufacturing, and enabling value creation in the business ecosystem, which is both integrated and dynamic. To enable businesses to more effectively create value, the development of the technology and the platform must also be accompanied by the systematic transformation of entrepreneurship, corporate culture, organizational strategies and structures, operations, and accounting systems.
Note: This article is adapted from the account of the operation mode and experiences of Haier’s COSMOPlat Industrial Internet Platform given in the research report of the Provincial Committee of China Association for Promoting Democracy (CAPD). This won the Excellent Research Results award from the Shandong Committee of the People’s Political Consultative Conference (CPPCC) in 2020.
