A Chinese business model for the Internet age

[LeveragedBuyout]

@TaiShang I haven't read Rifkin's book, but I agree with the author that we need to be cautious about accepting his predictions. First, his timeline of zero marginal cost in energy by 2028 is wildly optimistic, and probably wrong. @FairAndUnbiased can probably shed more light on this issue (I do like my puns).

But the rest of the author's assertions are in line with my thinking: marginal costs may fall (there is no such thing as zero marginal cost), but initial investments of fixed costs will skyrocket, which means that the world will gradually be divided into those who have the capital to benefit from this new society, and those who are left behind. As the author points out, one needs to buy all of the equipment necessary to make the zero marginal cost products that he envisions, but 3-d printers don't appear magically, they must be purchased. This elimination of the need for unskilled labor will have social costs that must be factored in (e.g. increased welfare, increased education costs, increased law enforcement spending, etc.), so the costs may decrease in one area, but they will increase in another.

Also, I'm no expert on 3-D printers, but can they produce entire systems, or just components? Won't assembly still be required by a skilled labor force? A 3-d printer cannot print a functioning 3-d printer, can it? But we can see a world in which 3-d printing combined with robotics will eliminate the majority of the labor force, which is a frightening prospect. Maybe the holders of capital will print their own robotic private armies to defend themselves from the mobs of starving unemployed people, but somehow I don't see a bright future in this. We haven't even touched on how all of this is leading to a Skynet-like outcome.

I don't consider myself a luddite by any means, but somehow, this revolution of energy, information, and automation seems different, and more dangerous.

 

[terranMarine]

Definitely it is unfair to make a blanket judgment that Chinese products are of inferior quality. The success of brands such as Huawei, Lenovo, Xiaomi, Haier, DongFeng is proof of Chinese brand quality.

PS. Still using my Iphone-5. Why are you gonna get me a chinese phone? hmmm? early b-day present?

i would be so touched if you gave me your iphone as x-mas gift though

 

[Sanchez]

I think now China makes world class air conditioner and cooler/freezers: low cost, high quality and durable. The same feeling goes to Japanese products 10-15 years ago.

 

[Beast]

I used iphone6. Made in China product. Good quality!

 

[FairAndUnbiased]

@TaiShang I haven't read Rifkin's book, but I agree with the author that we need to be cautious about accepting his predictions. First, his timeline of zero marginal cost in energy by 2028 is wildly optimistic, and probably wrong. @FairAndUnbiased can probably shed more light on this issue (I do like my puns).

But the rest of the author's assertions are in line with my thinking: marginal costs may fall (there is no such thing as zero marginal cost), but initial investments of fixed costs will skyrocket, which means that the world will gradually be divided into those who have the capital to benefit from this new society, and those who are left behind. As the author points out, one needs to buy all of the equipment necessary to make the zero marginal cost products that he envisions, but 3-d printers don't appear magically, they must be purchased. This elimination of the need for unskilled labor will have social costs that must be factored in (e.g. increased welfare, increased education costs, increased law enforcement spending, etc.), so the costs may decrease in one area, but they will increase in another.

Also, I'm no expert on 3-D printers, but can they produce entire systems, or just components? Won't assembly still be required by a skilled labor force? A 3-d printer cannot print a functioning 3-d printer, can it? But we can see a world in which 3-d printing combined with robotics will eliminate the majority of the labor force, which is a frightening prospect. Maybe the holders of capital will print their own robotic private armies to defend themselves from the mobs of starving unemployed people, but somehow I don't see a bright future in this. We haven't even touched on how all of this is leading to a Skynet-like outcome.

I don't consider myself a luddite by any means, but somehow, this revolution of energy, information, and automation seems different, and more dangerous.

You are absolutely right. The initial investment of fixed cost will essentially solidify the existing socioeconomic structure. No longer can people, companies or countries achieve social mobility by making small innovations - even the cost of innovating will become prohibitive. For example - want to innovate in semiconductor processes? Without access to millons of dollars in equipment (the entire fab itself costs 10+ billion dollars) you can't do anything. There will be spheres where innovation is possible, of course. However, those spheres will be dependent on, and regulated by, entities that are essentially monopolistic.

 

[bolo]

A Chinese business model for the Internet age

A shop assistant adjusts a Haier air conditioner in a store in Queens, New York. [Photo/China Daily]

Since the launch of reform and opening-up in 1978, China has imported and adapted international business theories and practices. But the winds of change may be coming as some of the more successful Chinese companies are trying to pursue their own innovative ways to work in the market.

Zhang Ruimin, chairman and CEO of the Haier Group, recently talked to China Daily about how the company, one of China's largest manufacturers of electronic and electrical appliances, is pioneering new values and practices in its organizational management.

Zhang not only wants to make Haier a big global company, but also a business "platform" where different Haier teams offer niche services to customers.

He says that requires the company change its old pyramid-shaped, command-and control-based organization into a "flattened" community of small business organizations that, to a large extent, are self-managed.

And that is a revolution in Zhang's traditional power as CEO.

"What power?" Zhang asked. "The bosses are not customers, why should the workers listen to them?"

In Zhang's model, the CEO can only earn his authority from the consent of the small "enterprises" operating on the company's platform. The CEO's responsibilities are to coordinate the "system", and to provide expertise-based services to the different units that are essentially self-managing.

There have already been some 200 "micro-enterprises" under the Haier umbrella. But up to now, only 10 percent have become fully independent and able to draw all their revenues from market-oriented innovations. "It takes time, as it inevitably will, for workers to adapt to the change and to tap the new resources they can use," he said.

Haier still doesn't have a mature organizational model, Zhang admitted. But he is quite clear about its basic goal. That is for it to become a company of many innovators and implementers, a company of "makers" who are good at combining new technologies and practical skills.

Zhang has been active in explaining his new management concept at various business forums, although he says it is still too early to obtain tangible results and solid data from the structural change he has initiated.

"As a direction for progress, I think this is absolutely correct", he said, although he noted that such a change will unavoidably meet many uncertainties along the way and will have to avoid contracting the so-called large-enterprise disease, such as rampant bureaucracy. But the key, he stressed, is that in the "Internet age" it needs to be done.

Since 2013, Haier has radically restructured - cutting 26,000 positions for middle-level managers in a company that had 86,000 employees in total.

Zhang explains business in the Internet era has three main characteristics: zero distance from customers, centerless organizations and distributive use of resources.

"Hanging on to the past is just impossible," said the 65-year-old industrialist.

Following these new characteristics of the times, Haier's ongoing organizational change aims to make the company into a platform that encourages employees to become innovators (or "makers", in Zhang's own word) by utilizing the resources within the company and on the Web so they can provide customized products and services to satisfy the demands of customers.

By transforming Haier into an open business platform, Zhang said he hoped that the company would enable customers to access services provided by some of the most intelligent people in the world.

Zhang's determination to pursue change comes from his deep conviction that Haier's growth up to now is mainly a result of its following trends rather than creating trends.

"When a storm comes, pigs can also fly in the sky - although they don't know why," he said.

During that storm in the early 1980s, Zhang turned a bankrupt State-owned refrigerator factory in the coastal city of Qingdao, Shandong province, into a company that takes in 160 billion yuan ($27 billion) in global revenue now.

To achieve that, the company has been engaged in a constant learning process, whether adopting the Total Quality Management from Japan in the 1980s, or the Six Sigma management model from the United States in the 1990s.

"But these models are losing their shine in the Internet age," Zhang said, and so, braving all kinds of criticism and disbelief, he is courageously pursuing his own model.

I think CEO Zhang is focusing too much on the wrong stuff. Many corporations in N America have a "flatten" system but who are we kidding, the CEO is still boss.
I think if Chinese companies want to really make a difference, they should change one area

1.There are still a lot of "yelling" and belittling of subordinates by middle management bosses. Companies need to implement rules to get rid of that. Yelling at someone doesn't make the wrong thing right and it will degrade company morale

 

[BoQ77]

I used iphone6. Made in China product. Good quality!

btw, that's an Apple product.

 

[Beast]

btw, that's an Apple product.

Yes but it's made in China by Chinese workers. Even a basic assembler in Foxconn are one of the best paid blue collar workforce at $2500 yuan to $4000 yuan excluding OT per month. That is lots of money returning back to China.

 

[BoQ77]

Yes but it's made in China by Chinese workers. Even a basic assembler in Foxconn are one of the best paid blue collar workforce at $2500 yuan to $4000 yuan excluding OT per month. That is lots of money returning back to China.

It benefits for both. Nice to hear.
The Apple, Foxconn created jobs for Chinese workers.

 

[AgentOrange]

This is how you know Haier has made it in 'Murica .