IVA’s Entrepreneurship Academy is exploring different ways of working with intrapreneurship. At a recent webinar the internationally renowned Rendanheyi management model was presented.
Companies have been managed in roughly the same way for the past century. The traditional management model is based on a bureaucratic and hierarchical corporate structure consisting of employees, middle managers and top management. Employees follow orders and have minimal contact with the customers. But in today’s fast-moving society the conditions are quickly changing and this requires new ways of running companies.
When the entrepreneurs become the company
Zhang Ruimin took over the Chinese white goods company Haier in the mid-80s and made a radical change. Some middle managers were placed in different positions or let go and other employees were encouraged to start up – or be part of – smaller, self-governing enterprises with their own responsibility for customers.
“Entrepreneurship is not just for entrepreneurs; it can be incorporated into all types of enterprises and maximise value for employees, customers and the company,” said Ruimin.
These micro-enterprises in turn worked together in an ecosystem that included both other micro-enterprises within Haier and external ones. The common goal for all parties in the ecosystem was a focus on the customer and delivering products and solutions that met specific customer needs. Enterprises in manufacturing, service, support and software worked together to create as much value as possible for the customer. This enabled constant product development, resulting in satisfied and loyal customers – and a considerable increase in profits for Haier.
This new way of working called Rendanheyi became a great success and has had a major impact internationally. The model is based on three core principles:
- Zero distance to the customer/user
- Employees as entrepreneurs and partners in the company
- Distribution of the business value created to all those involved in the effort
Read more about Zhang Ruimin and his philosophy here: Zhang Ruimin - Thinkers50
Start on a small scale
Often it is a crisis or major change – such as a pandemic or a new competitor taking a share of market – that requires a company to change the way it works.
Dr. Annika Steiber https://www.menlo.edu/academics/centers-of-study/rendanheyi-center/ is Director of Rendanheyi Silicon Valley Center in the USA. She says there are five steps that an organisation can take to implement the Rendanheyi model.
- Set new visionary goals
- Turn employees into independent entrepreneurs
- Give the independent entrepreneurs more decision-making power and the opportunity to build a micro-enterprise within the company
- Focus on the principle of zero distance to the customer
- Encourage micro-enterprises to work together in an ecosystem with the common goal of creating value for the customer
- Take a long-term approach – the journey has no definitive destination
“This may seem simple, but for most companies implementing this type of change is a complicated process. A first step could be to test it on a small scale within the company. If it’s a success, introduce the concept on a larger scale,” said Dr. Steiber.
Rendanheyi in practice
GE Appliances Kitchen Appliances, Refrigerators, Dishwashers | GE Appliances has completed the first two steps and is now working on creating an ecosystem where micro-enterprises can work together. Thanks to Rendanheyi the company has more satisfied customers, more engaged employees, a larger market share and higher profits. It has also been named one of the best companies to work for in the USA.
Fujitsu Europa FUJITSU GENERAL Europe & CIS (fujitsu-general.com) has also been inspired by Rendanheyi and started a process of creating micro-enterprises almost two years ago. The company is focusing on the importance of recruiting a diversified team, which is key for innovation and creativity. It also emphasises that managers need to stop micromanaging and accept not being in control of everything.
Rendanheyi in Sweden
Annika Steiber sees great opportunities for Swedish businesses. Many of them have been network-based for a long time and decentralised decision-making is common. There is also a tradition of valuing the employees’ skills at a higher level in the Company than the level where they work. But the concept is not without its challenges.
“Creating an ecosystem consisting of small micro-enterprises is different to delegating decision-making. It’s a whole new way of working,” said Dr. Steiber.
The rules in Sweden may also make it a challenge to provide performance-based compensation.
“But there are companies that have solved this by either having sales commission make up a larger percentage of the individual’s compensation or paying a performance-based bonus to all employees. Those adding value for the customers receive a higher bonus,” says Steiber.
All content in the text is based on presentations and discussion during the webinar on the Rendanheyi management model. It was arranged by IVA’s Entrepreneurship Academy on 16 February 2022. See the whole webinar in the video above.