A new management model exists, applied by companies born in the digital age. This model is based on a set of principles that allow these companies to be highly innovative, agile and fast moving in the same time.
Traditional companies need to respond, and some have been highly proactive. One of these companies is Haier. Chairman Zhang at Haier understood in 2001 that the old management paradigm had to be exchanged by a new one to survive in the digital age. The result is the philosophy ‘RenDanHeyi’, which Professor Laker is regarding as a revolutionary new model, that should be aspirational for companies around the world:
Drucker Forum 2021
“[Customer centricity] absolutely worth aiming for and I think the premise of proximity and reducing proximity to customers…is all the rage. Just look at the organizations in Silicon Valley…so I think that premise seems to be widely adopted. I think the second part, [Regarding employees as entrepreneurs], which is more about structures, systems and processes, still, particularly in Europe is regarded as somewhat revolutionary, particularly the way you can turn structures completely on their head and regard employees as entrepreneurs…I think elements of this is absolutely aspirational and should be aspirational” (Rendanheyi Open Talk, 2021)
In 2016, Haier acquired GE Appliances (GEA), a firm with a 100 years’ history. With Rendanheyi, GEA went from a 0-growth company to a double- digit growth company. According to Professor Edgar Schein, GEA’s transformation is fascinating and well worth studying:
“I am intrigued how GEA was able…to get the present set of bosses to behave according to McGregor’s Y theory. They had to make a massive change in their own daily behavior, and it will be important to understand how GEA could accomplish that”
(Rendanheyi Open Talk, 2021)
The GEA case is of interest, but it needs to be relevant for other companies as well.
I stated earlier that the management principles used by Haier and by GEA have been found at other successful companies as well, for example at Google. This would mean that the Haier and GEA cases are not unique, stand-alone cases of a new set of management principles, but are indeed mirroring a more universal set of new management principles for the digital age.
I call these universal principles ‘meta management principles for the digital age’.
Meta Management Principles and A Comparison
To support my argument that we now have a set of new ‘universal’ management principles for the digital age, a comparison between Google and Haier would be useful to further test this hypothesis.
On a high level the principles could simplified as:
- Ecosystem strategy for co-creation and win-win partnerships instead of the vertical and well-integrated model
- A networked organization that gets rid of barriers between employees and users instead of a tall, hierarchical structure
- Entrepreneurs and dynamic partners instead of ‘employees’
- Zero distance to users instead of a clear division line between the company and the customers/users
- Pay- by- users instead of pay-by-fixed salary that doesn’t reflect true value created
- Visionary, Coaching and Decentralized leadership instead of a top down and a command-and- control leadership
(Source: Steiber, 2021 inspired by the Haier Dictionary of RenDanHeyi)
We can compare the six principles with my findings from a 1- year study on Google and its management model for innovation, shown in the table below (Steiber, 2014).
Table 1. A comparison between the Google model and the Rendanheyi model
(Part of my forthcoming book ‘Leading in the Digital Age: The transformation of GEA to be published early in 2022)
|Factor/ Model||The Google Model||The Rendanheyi Model|
|(Source: The Google Model: Managing Continuous Innovation in a Rapidly Changing World, 2014)||(Source: The Haier Dictionary of ReDanHeyi, 2016)|
|Strategy: Ecosystem for co-creation and win-win partnerships||Google knows that ideas often come both from within the company and from outside sources. The company has built up a network composed of various outside actors, such as developers, universities, government agencies, and startup companies (p: 80).||Enterprises should evolve from vertically integrated closed organizations into open, platform- based organizations driven by the best user experience and aims at co-creation and win-win partnership for stakeholders. (p:18-19)|
|Organization: networked organization||“…a flat organization…reduced the likelihood of too much top-down management and micromanagement was…an undesirable situation…” (p:68) “…both founders wished to avoid a hierarchal organization with many layers of management” (p:69)||Clear the barriers between employees and users through flattening and shared internal information and quick access to external info through the shortest path (p: 30,32)|
|Employees: Entrepreneurs and dynamic partners||The company wants employees that are…entrepreneurial (scrappy) and curious, who question the status quo, are energetic, driven, nonpolitical, humble and change-oriented self-starters (p: 62)||Facing the market directly, each employee creates value for users and evolve into a dynamic partner. (p:37)|
|Users: Zero distance||“Focus on the user” (p:49). “…an employee is expected to concentrate on user benefits early in the development of the project” (p:52)||Provide the best end-2-end experience, user interaction online, and user participation along the value chain, everything connected. (p:43)|
|Compensation: Pay by users||“The system is built on key accomplishments, and evaluation process, and pecuniary and non-pecuniary rewards.” (p:71) “Promotions and compensations are connected to the OKR process” (p:71)||Employees create and are rewarded based on the value for users…the compensation system adopts VAM pay related to user value, which requires commitment-oriented planning. The microenterprise takes the initial risk and pays employees their co-investment capital first and then a compensation based on extra profit sharing. (p:48)|
|Management: Non- linear, support self- evolution||Every employee is expected to be self-organized, be able to lead, take initiative, require little management support, and be skilled in networking and collaborating with others. (p:56). The individuals are daily evaluated by peers after their Googliness (pp:45-46, 56)||A non-linear management is providing resources and services for a networked organization. Let employees manage themselves and at the same time be managed by their teams. Let employees get involved in entrepreneurial innovations by focusing on user demands. Target to lead to realize self-evolution. (pp:52-54)|
The two companies’ management principles seem similar on a high level, why they might represent a new set of ‘meta- principles’ for management in the digital age.
This would mean that there is a paradigm shift in management, and that it is a global phenomenon. To survive and stay relevant in the digital age, companies need to transform their management model, and the new Meta Principles should be used as the guiding star in this work.
About the Author:
Dr. Annika Steiber is a Professor, Best-Selling Author, Speaker, Founder, Investor and the Director of the Rendanheyi Silicon Valley Center. She is the author of eight management books.
This article is one in the “shape the debate” series relating to the 13th Global Peter Drucker Forum, under the theme “The Human Imperative” on November 10 + 17 (digital) and 18 + 19 (in person), 2021.