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Becoming a Digital Organization: Haier’s Experience

January 13, 2016

When Zhang Ruimin, CEO of Haier Group, addressed the Global Drucker Forum in Vienna last November, he spoke about how businesses will change and how they must manage in an increasingly technology-driven economy—a topic he knows first-hand. It’s also a topic that we at MIT IDE have addressed squarely in our digital organization research.

MIT IDE research reveals that digital transformation requires much more than just altering a company’s business processes and business models. The enterprise must truly transform itself into a digital organization, developing digital dexterity, not just digital skills.  That means altering employee perceptions about digital work and creating consensus about responsibilities without regard to traditional boundaries and roles. It is leadership’s job, then, to set the tone and conditions so that all workers flourish personally when they use digital technologies to help the business flourish.


Foundations of Digital Organization

Our recent MIT IDE research identified four foundational pillars of digital organizations:

  • a digital-first mindset;
  • widespread digital practices;
  • an empowered and engaged workforce;
  • access to key digital resources.

These characteristics underpin digital dexterity, the ability to rapidly and continuously self-organize along with repeated waves of technology.  Astute digital leaders focus on building these foundational pillars of digital organizations. The dexterity they create is essential to building ever-more effective strategic advantage through digital capabilities.

Even when these pillars are in place, achieving and using digital dexterity requires strong top-down leadership as well as bottom-up collaboration—efforts that are more elusive than they may seem. Nevertheless, Haier is making strides toward meeting these challenging goals.


Ongoing Transformation

Over the past year we studied Haier in depth.  We examined historical and contemporary accounts of Haier’s operations, interviewed business managers from startup micro-enterprises and established businesses and surveyed nearly 700 employees at different levels. We concluded that the company has incorporated many elements of a digital organization into its design and operations. For example, a series of executive mandates has empowered the workforce to be entrepreneurial and collaborative. Robust digital platforms facilitate entrepreneurial collaboration both within and beyond Haier, while a strong cultural core helps to align values and disseminate digital practices across internal and external boundaries.

In many ways, Haier has been on an organizational journey since its establishment in 1984. Led by Zhang, the company has continually expanded its business beyond refrigerators to household appliances, communication, IT digital products, home furnishings, logistics, finance, real estate, bio-pharmaceutical solutions and “smart” products. Over a decade ago, Haier’s leaders also increased the autonomy and supervisory power of front-line employees so that they could respond nimbly to fast-changing user and customer demands.

Employees were encouraged to start their own micro-enterprises, leading to the formation of about 200 internal start-ups. This marked the start of Haier’s efforts to transform its organization structure from a top-down pyramid to a series of flat, interactive business platforms.

In September 2015, the company announced the goals of its next transformation phase in which “employees can become entrepreneurs with decision-making authority, able to distribute benefits and optimally unleash talent.” Instead of simply offering employment, Haier is offering a platform for people to become entrepreneurs by facilitating access to financial, design, manufacturing and other resources. Taken together, these deliberate, phased-in structural changes are helping to cultivate digital dexterity across Haier’s many units.

Not surprisingly, changes have taken hold more strongly in some businesses than others. Yet even as Haier’s older product groups transition to new digital business models, there is solid recognition of the competitive opportunity of digital technologies. We uncovered areas Haier should strengthen to advance and preserve its digital success and competitive advantage in the long term. Overall, however, it is well on its way toward becoming a digital organization.

Haier is not alone. Our research on building digital organizations shows that traditional companies in many industries are rapidly building digital dexterity.

How is your digital journey progressing? Share your experiences and lessons-learned in comments on this blog.