The Haier Road to Growth—Part 1
Customers always come first for this Chinese appliance maker — even as it continually reinvents itself and expands around the world

http://m.strategy-business.com/article/00323

Haier Group is a Chinese multinational consumer electronics and home appliances company headquartered in Qingdao, Shandong province, China. It designs, develops, manufactures and sells products including air conditioners, mobile phones, computers, microwave ovens, washing machines, refrigerators, and televisions. The following blog postings will highlight how this innovative company became a global powerhouse.

This first posting highlights their approach to developing a room air conditioner for the Chinese market followed up by some of the key capabilities they developed to enable this type of innovation.

Start with 30 million responses on your QZone, Tencent, and other social media platforms — all to a simple question: “What do you want in air conditioning?” Then pay attention to the more than 670,000 people who take part in the online conversation that follows. You’re bound to come up with something cool — or, more precisely, “cool, not cold.” This concept, drawn from online responses, became the tagline for the Tianzun (“Heaven”), Haier’s advanced household heater/air conditioner/air purifier, released in 2014. Many Asian consumers don’t like the chilling effect of conventional temperature control. They’d much prefer to be “cool, not cold.” But there’s more to the concept than temperature. Air from most such devices in China is dry and dusty. The machines themselves are too noisy, or too likely to spread disease (bacteria live in air conditioning systems). Moreover, the machines look — well, like air conditioners. 

The Tianzun doesn’t have any of those drawbacks.(THEY ADDRESSED THE PAIN POINTS) It is an obelisk-like device with a small wind tunnel that draws air through it from the room where it is positioned. It has an Internet connection, so consumers can use their smartphones to warm or cool the room while on their way home. Some consumers probably knew they wanted that feature, but they didn’t know that they wanted to see the circle’s light shift from red to blue as their air quality improved. Once they saw that happening, they were hooked. The product is targeted directly at a consumer segment that no other company, in the West or the East, has recognized, and that could end up being much bigger than a niche. 

By building cooling machines based on this in-depth and multilayered approach to consumer insight, Haier is following its own core principle: “customer service leadership,” or the necessity to shape the future by giving customers what they want most (but may not have yet realized they can ask for). Even the decision to use the phrase “cool, not cold” in its Chinese advertising campaign reflects this principle. These are the words that customers use themselves, as opposed to a slogan dreamed up by a marketing professional. 

Just as unconventional was the cross-functional nature of the appliance’s launch. (YOU NEED MORE THAN JUST HAVING THE INSIGHT) While the marketing staff digested the insights gained from Haier’s online customer interactions, manufacturing was already considering what they would mean for production, procurement was speaking directly to suppliers about sourcing feasibilities, and after-sales service was developing plans for follow-through. Because they worked closely together from the start, managers from all these functions were moving forward in concert, addressing possible disconnects as they arose. This allowed products to go to market as soon as they were designed and developed, instead of waiting for each department to throw its work “over the wall” to the next one. Meanwhile, representatives of each company function conducted conversations directly with customers, thereby adding a responsive new dimension to the company’s consumer insight capabilities. 

Haier’s rapid introduction of the Tianzun air conditioner is typical of the company’s track record since the late 1990s. The company is known for several distinctive capabilities: a precise understanding of consumer needs, especially in China and other emerging markets; the ability to rapidly innovate new types of appliances that meet those consumer needs; the management of complicated distribution networks, a skill honed in the complex Chinese market; and a high level of execution ability, including the automation of factories to deliver products to consumer specification. (See “Haier's Capabilities System,” below.) These attributes have served it especially well in China, allowing Haier to outcompete more experienced appliance companies such as Whirlpool and Maytag in that country. In fact, Haier’s prowess — and particularly its emphasis on “what we can do and who we are” rather than on “what we sell and how we make money” — shows the kind of capabilities needed by companies that were founded in emerging economies if they are to succeed in the global sphere.