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China’s Jack Welch Rethinks Management Strategies

TVs on display at Haier booth at the 2013 International CES at the Las Vegas Convention Center on Jan. 10 in Las Vegas
TVs on display at Haier booth at the 2013 International CES at the Las Vegas Convention Center on Jan. 10 in Las VegasPhotograph by Joe Klamar/AFP via Getty Images

Sometimes innovation pops up in unexpected places. If you’re hunting for cutting-edge ideas, the last place you might think to look would be a 30-year-old Chinese company making refrigerators and washing machines. It isn’t Haier’s product innovations that arguably deserve international attention, but rather its management innovation, a case author Bill Fischer makes in his recent book, Reinventing Giants: How Chinese Global Competitor Haier Has Changed the Way Big Companies Transform. Fischer is a professor of innovation management at IMD in Lausanne, Switzerland, and former executive president and dean of the China Europe International Business School in Shanghai.

Today, Haier is the world’s leading brand of home appliances, with annual revenue exceeding $27 billion. Back in 1984 it was the money-losing Qingdao Refrigerator Factory, and local authorities appointed Zhang Ruimin to oversee its turnaround. Haier’s legendary CEO, now 64, famously told line workers to smash 76 defective refrigerators with sledgehammers, emphasizing that shoddy quality was no longer acceptable. He created modern assembly lines and streamlined Haier’s mass production. But no competitive advantage lasts forever, and as the expectations of China’s consumers have radically evolved throughout the 1980s, ’90s, and 2000s, Haier has had to periodically reinvent its business model to retain its market position.