Traditional home appliances innovation cuts off the "insulation layer"

Whether it was voluntary or induced, under He Xiangjian's efforts and management, Huang Jian, former director and president of Midea Group, Cai Qiwu, former director and vice president of Midea Group, and Huang Xiaoming resigned one after another. Among the "team" built by He Xiangjian during his tenure as chairman of Midea Group, except for Yuan Liqun who is still the senior vice president and financial director of Midea Group, the rest have "released their power". Fang Hongbo, chairman of Midea Group, successfully completed the first step of centralized management. In the next step, under the promotion of Fang Hongbo, Midea will transform towards the Internet.

Fang Hongbo's centralized management is a microcosm of the self-reform of the home appliance industry. Zhang Ruimin, the godfather of home appliances and CEO of Haier Group, recently proposed "eliminating the middle level", which is similar to Fang Hongbo's centralized reform.

The vigorous and resolute "Fang" style of centralization

The old ministers' giving way was just the beginning of Fang Hongbo's centralized management.

In April this year, at the first quarter business analysis meeting of Midea Group, the group was determined to be "small" and the business units to be "big" as the direction of organizational structure adjustment. Fang Hongbo said that transformation and upgrading will still be the direction that Midea will adhere to in the next two to three years. On the basis of core business, growth business and cultivation business, new growth points will be found through mergers and acquisitions.

This means that Midea Group will become flatter and more flexible. In fact, eliminating redundancy and improving efficiency have always been the changes that Fang Hongbo has been promoting.

In 2011, Midea's huge machine was bloated: it had 70 kinds of small household appliances, but more than 20 of them were not profitable or even loss-making; the total number of employees was close to 200,000, and the number of managers was close to 25,000.

After Fang Hongbo took over as chairman of the group, he proposed a change from emphasizing scale to emphasizing products. Fang Hongbo had a clear attitude towards those who could not keep up with his transformation thinking, "At this time, you must change your thinking and actions. If you can't change, then change people." Facing internal and external pressure, Fang Hongbo cut the Gordian knot and laid off employees. At the same time, some small home appliances with no prospects and low profitability were shut down and transferred. By April 2014, the total number of employees had been reduced to more than 130,000, and the number of managers had been reduced to about 15,000. Today, Midea razors and electric irons are no longer seen on supermarket shelves.

Home appliance expert Liu Buchen believes that since He Xiangjian handed over the power of Midea Group's chairman to Fang Hongbo, Midea has entered the Fang Hongbo era. Whether there will be new forces added to the Midea Group's board of directors depends on the company's next actions.

Judging from Fang Hongbo's vigorous and resolute style, Midea Group will usher in many "heroic" transformations, both in personnel and in group business.

From the separation of princes to a beautiful

Decentralization or centralization? This is a question Midea has been thinking about. In its nearly half-century development, Midea has made many structural adjustments, and each adjustment involves the collection and release of power.

Midea initially implemented a linear centralized management system, with the president managing both sales and production. However, as the company expanded, this model could no longer meet the growing demand for product categories. In 1997, He Xiangjian began to implement the divisional system reform, with the company having five divisions. After the new system was implemented, the decentralization of management autonomy led to a continuous increase in performance, and the divisional system was thus established.

After the establishment of the business unit system, decentralized management continues.

In 2005, Midea established four secondary industrial groups, forming a four-level organizational structure consisting of the group, secondary industrial group, business unit, and product company. The group's decentralized management system, culture, and processes have gradually matured.

When He Xiangjian was the chairman of Midea Group, Huang Xiaoming, Li Jianwei and Yuan Liqun were the three functional vice presidents in charge of human resources, strategy and finance, while Fang Hongbo, Huang Jian, Cai Qiwu and He Hengle were the presidents in charge of the four major industrial groups: refrigeration, solar power, electromechanical and real estate.

But the separation of the lords means each one is doing his own thing. Midea Group has nearly 25 product divisions, each operating independently and signing contracts independently, like 25 independent kingdoms. The biggest problem with each one being independent is that internal resources cannot be integrated and efficiency is low.

The decentralized management culture was put to an end by He Xiangjian himself before Fang Hongbo took office.

Before the handover, He Xiangjian cancelled the four original secondary platforms under Midea Group, among which Midea Real Estate was assigned to Midea Holdings, and the other three secondary industrial groups including Refrigeration Appliance Group, Daily Appliance Group, and Mechanical and Electrical Group were cancelled. The original functions of the three secondary groups were assumed by the group headquarters and its subordinate product divisions. At the same time, the assets of refrigeration, electricity, mechanical and electrical, and logistics were packaged to prepare for the overall listing.

Traditional home appliances innovation cuts off the "insulation layer"

Midea needs to transform to the Internet, and Fang Hongbo needs to understand "Internet thinking". In December 2013, in a large conference room at Midea headquarters, the company's senior executives sat in a circle, and Fang Hongbo suggested that they read three books: "The Big Data Era", "One Net Catch All", and "O2O: Business Revolution in the Mobile Internet Era".

Transforming to the Internet requires not only intelligent products and e-commerce channels, but also a flat and grid-based organization with a consumer-centric approach. How can a large group with annual sales revenue of over 100 billion yuan respond quickly to demand?

Reducing the middle layer and establishing an agile organization is an inevitable choice for Midea. From this perspective, Haier Group CEO Zhang Ruimin's proposal to "eliminate the middle layer" and Midea's upcoming organizational change are similar in nature, both of which are "self-innovation" of the traditional home appliance industry's transformation to the Internet.

Last year, Haier proposed that in the Internet era, enterprises must be user-centric and encourage employees to start their own businesses. In terms of organizational structure, they must "eliminate external middlemen and internal insulation layers." Middlemen refer to external suppliers and distributors, and "insulation layers" refer to middle managers. On June 14 this year, Zhang Ruimin, CEO of Haier Group, revealed at the Wharton Global Forum that the company plans to lay off another 10,000 "insulation layers" this year.

"Flattening the organizational structure is an innovation that the traditional home appliance industry must undergo in order to face the impact of the Internet," an industry insider said.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.