Aug 072010

Haier Power Pad

The Haier PowerPad is a concept device shown at SinoCES which captures the energy contained within the water that runs off our bodies every morning in the shower, and returns said energy to the hot water tank.

Haier claims the PowerPad is currently capturing and returning 15% of the energy coming out of the faucet and by the time it goes on sale six weeks from now, that figure will be 20-30%. Haier is one of the world’s most innovative companies and is hence foolish to bet against, but we’re struggling to understand the technologies being used and just how optimistic the claims are.

The rise of Haier

Just 30 years ago, 0.2 percent of Chinese homes had a refrigerator – that is, one in every 500 homes. Today that figure is almost 100% and China’s largest white goods manufacturer Haier made most of them.

Few companies embody the essence of China’s manufacturing miracle as comprehensively as Haier – in December 1984 it had annual sales of US$420,000 and debts of US$180,000 – bankrupt in every sense except unable to cease production because of State laws – exactly 25 years later in December 2009, it became the world’s largest white goods manufacturer thanks to implementing a policy of total innovation management.

The turn-around is the stuff of legend and will almost certainly be the first Chinese innovation case study to make the business school text books.

On the December 26, 1984, when Zhang Ruimin, now CEO, was appointed director of the Qingdao Refrigerator Factory, the ailing “collective production plant” had a massive quality control problem. Its rudimentary refrigerators cost two years of the average Chinese wage, and they had a dead-on-delivery rate of greater than 20%.

Zhang scoured the factory for defective refrigerators and eventually located 79 in the inventory of just 400. He then assembled them on the factory floor along with the entire staff, produced a sledgehammer and smashed the first one to pieces. He then produced further sledgehammers and invited the company’s employees to join him. ”The message got through that there’s no A, B, C, or D quality”, he said at the time. ”There’s only acceptable and unacceptable.”

One of those original sledgehammers is on display in the foyer of the company’s head office in Qingdao, whith good reason: that single act helped to precipitate one of the most profound turnarounds in business history. Zhang transformed the Qingdao (the same word and same home town as the Tsing Tao brewing company known internationally for its beer) Refrigerator Company into Haier, where he now holds the position of CEO.

In his 25 years at the helm, he has changed the company from one where no-one took individual responsibility to one where every employee considers themselves a Strategic Business Unit and where innovation is paramount – it may have been kickstarted with German knowhow but the company now holds more than 7000 homegrown patents and it is this policy of Total Innovation Management that has powered its growth into the biggest white goods manufacturer in the world.

Haeir now has 29 factories and sales in 160 countries and is rated as the number one global Chinese brand by the U.K.’s Financial Times, which has written extensively about the rise and rise of Haier, applauding its “transformation from a manufacturing to a service business” in order “to speed up the pace of providing clients with services and responding to market.”

Haier is living proof that China can develop global brand names. Though China boasts unequaled low-cost, high-quality, mass-manufacturing prowess, its success in marketing and brand development has to date been modest, and Haier is a rare example of a Chinese company growing a global brand name let alone one with brand values such as innovation, quality and customer service.

The application of modern manufacturing principals, plus being in the right place at the right time to ride China’s phenomenal economic growth, has spectacularly propelled sales past a raft of better known western brands to global leadership.

One of the primary factors in this growth has been the company’s diversification from producing refrigerators – in addition to the 20 million refrigerators a year it produces, that’s one of every ten refrigerators globally, it also makes one of every eleven washing machines produced globally.

It now makes freezers, home heating and air conditioning systems, dishwashers, microwaves, stoves and a list of other household technologies that just keeps growing so it can expand its 5.1% share of the global white goods market. Haier Group now also manufactures communications equipment, computers, media players, televisions, netbooks, tablets, oh, and solar panels which will initially power hot water systems but … progressively much more of the energy used in the home will be created this way as time goes by.

… and Haier’s total innovation philosophy sees it now turning its attention to developing products and technologies we don’t yet have, with the company’s eight R&D centres taking concepts and readying them for market at a dizzying pace – its concept-to-market times increasingly look to have surpassed what we in the West regard as world class time-frames.

Read more . . .

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