The Haier Approach: Structurally Aligning Organizations With The Ecosystem Era

A recent article describes an astonishing achievement enabled by an ecosystem mindset. In 2016, Haier, the world’s largest appliance manufacturer headquartered in China, acquired GE Appliances. As author Bill Fotsch states: “What followed was nothing short of astonishing. Market share, which had languished around a mere two percent for the previous four years, skyrocketed to 20 percent. Haier had achieved what GE could not: a resounding success in the appliance market.”

There is a direct linkage between the success experienced by Haier and a profound structural shift that has been years in the making. I have written extensively about the movement towards ecosystems. Access to those articles can be found here. In short, the world is undergoing a structural transformation, where grand challenges like climate change, disability, chronic disease, food scarcity, and shifting views of retirement demand solutions beyond siloed industries. This transition marks the shift from vertical integration to horizontal collaboration, with ecosystems emerging as the dominant framework for value creation. Organizations must rethink how they operate, breaking down internal boundaries while engaging external stakeholders to foster innovation, adaptability, and resilience.

While the article above does not explicitly reference ecosystems, in exploring the Haier Approach, the author describes the ecosystem model. Viewing these two themes as two interconnected lenses helps us understand this shift. Together, they offer insights into how organizations can navigate and thrive in this new era of collaboration.

THE ECOSYSTEM MODEL

The Ecosystem Model envisions a future where value creation relies on networks of interconnected stakeholders working collaboratively to address human needs. These ecosystems dissolve traditional industry boundaries, enabling cross-sector partnerships and holistic solutions. Key characteristics of the model include:

Horizontal Collaboration: Ecosystems prioritize relationships over hierarchies. Industries, sectors, and organizations converge to co-create value. Success depends on breaking down silos and fostering seamless interactions among participants.

Composability and Agility: Organizations must be modular, with structures that can reconfigure around emerging opportunities. This agility allows them to respond quickly to shifting market dynamics and societal needs.

Outside-In Strategy: Ecosystemic organizations let external forces — market shifts, technological advances, and societal challenges — shape their strategies. This outside-in approach ensures relevance in an ever-changing environment.

Shared Value Creation: Ecosystems emphasize co-creating and sharing value. Products, services, and capabilities transcend organizational boundaries, leveraging both internal strengths and external partnerships to deliver customer-centric solutions.

THE HAIER APPROACH

Haier’s model offers a practical example of how the Ecosystem Model operates within an organization. Haier transformed its traditional hierarchy into a decentralized system of micro-enterprises, each directly connected to customer needs. This approach demonstrates the value of internal and external ecosystem collaboration. Key pillars of the Haier Approach include:

Customer Engagement: Haier’s philosophy of “zero distance” to the customer reflects the heart of its ecosystem thinking. By reorganizing into micro-enterprises-autonomous units that handle everything from design to sales-Haier empowered employees to engage directly with customers. This structure enabled rapid responsiveness, fostering a customer-centric culture.

Economic Compensation: Compensation in Haier is tied to the performance of its micro-enterprises, breaking down silos and aligning goals across departments. Leaders signed contracts based on clear performance metrics, ensuring shared accountability and driving collaboration. While not every employee saw direct financial gains, job security and psychological ownership improved, boosting morale and productivity.

Transparency and Economic Awareness: Haier utilized real-time performance tracking and weekly collaborative forecasting sessions to drive strategic agility. This transparency allowed employees to understand their impact on the company’s success and to contribute meaningfully to decision-making and innovation.

Employee Participation: Haier empowered employees to co-create value with both internal and external stakeholders. For example, a refrigerator team partnered with a research institute to develop high-humidity storage technology, which was brought to market in just 11 months. This culture of participation fostered creativity and accelerated problem-solving.

CONNECTING THE TWO MODELS

Both the Ecosystem Model and the Haier Approach highlight the importance of dissolving traditional boundaries and fostering collaboration. The key difference lies in scope:

The Ecosystem Model emphasizes a broader, cross-industry perspective, focusing on how organizations interact with external stakeholders to address complex challenges.

The Haier Approach illustrates how these principles operate within an organization, showing how internal ecosystems and decentralized structures can enhance adaptability and customer-centricity.

Haier’s model bridges the internal and external worlds, encouraging micro-enterprises to seek value regardless of whether it originates from internal resources or external partnerships. This hybrid strategy aligns perfectly with the broader ecosystem framework, where organizations must engage external stakeholders as critical contributors to their success.

IMPLICATIONS FOR ORGANIZATIONS

To thrive in this new landscape, organizations must adopt a dual focus: Internally, organizations should embrace decentralized, flexible structures like Haier’s micro-enterprises to foster innovation, responsiveness, and psychological ownership. Externally, build broader stakeholder ecosystems that leverage cross-sector partnerships to co-create and share value. Organizations that can fluidly integrate internal and external ecosystem strategies will be best positioned to navigate complexity, adapt to change, and drive shared value creation.

A Call to Action

The transition from vertical integration to horizontal collaboration requires more than operational adjustments; it demands a fundamental shift in mindset and structure. The Ecosystem Model provides the framework for cross-sector collaboration, while the Haier Approach offers a proven method for internal transformation. Together, they chart a path for organizations to lead in a boundaryless world.

The time to embrace this dual ecosystem strategy is now. By fostering adaptability, resilience, and a capacity to thrive — what I’ve called the ART framework — and external collaboration, organizations can drive innovation, meet evolving customer needs, and tackle humanity’s greatest challenges.

Originally published at http://frankdiana.net on January 9, 2025.