Hello from Hamburg,
“Our people need to think more like entrepreneurs!” “We need more entrepreneurs in the company!” I often hear these kinds of sighs from business owners or executives. They reflect a desire for greater speed and flexibility within the organization.
Now, the thing about entrepreneurs within a company is this: True entrepreneurship means dealing not only with successes, but also with setbacks, defeats, and personal financial losses. Very few employees are willing to do that. And those who are willing to do so either start their own company or want to become shareholders in the company they work for. However, this isn’t affordable for most ambitious employees because the company’s valuation is too high. The call for entrepreneurs within the company therefore sounds like trying to square the circle.
The Chinese home appliance manufacturer Haier, with its 80,000 employees, has been demonstrating for 20 years how entrepreneurship can still work. The company has been organized into approximately 4,000 independent micro-enterprises (MEs) with up to 20 team members. Some MEs are involved in manufacturing, others in research and development, some have direct customer contact, and others perform support functions. Each ME is responsible for its own budget and personnel, sets its own goals, and competes with external companies. Each ME is free to purchase services from Haier or elsewhere. For larger projects, several MEs and external companies temporarily join forces to form so-called Ecosystem Micro Communities (EMCs), which, if successful, divide the profits among themselves according to a predetermined formula.
The entrepreneurial freedom given to employees is paying off. From 2008 to 2018, Haier posted annual growth rates of 20 percent. And the company is very quick to develop new products. These include the ultimate recipe for Peking duck on Haier’s Smart Kitchen app, through which customers can order everything they need to make it a success: from the duck sourced from partner farms to logistics and the Haier oven. Or an app that allows Chinese students to book slots at their universities’ laundromats, which is open to third-party providers for their products in exchange for a commission. Successful innovations are spun off early as separate ME companies. Team members can take an equity stake in these companies and thus become co-entrepreneurs.
Under the motto “Zero Distance to Our Customers,” Haier took a radical step and eliminated the middle management level. In a traditional organization, the role of middle management is to “cascade” instructions, goals, and key performance indicators down through the company from the top. The approximately 10,000 middle managers were given the choice to become co-entrepreneurs or leave Haier.
Now, you don’t have to be Haier to foster entrepreneurship. At my company, we’ve long since digitized and automated our proven processes for organizational and leadership development and have begun developing Software-as-a-Service products based on them. Colleagues who help drive these or other new business ventures forward can become co-founders of spin-offs in conjunction with their own investment.
Perhaps we shouldn’t take the sighs mentioned at the beginning too seriously. I know excellent salaried managers (and was one myself) who take their responsibilities so seriously that it’s as if it were their own company. For colleagues who want to be entrepreneurs right away—and for their organizations—the Haier model offers a twofold opportunity for success. In uncertain territory, speed, agility, and a willingness to experiment are key. Exposing new businesses to market challenges within a protected environment—as spin-offs—allows for early testing under real-world conditions. And for high-performing entrepreneurs, co-ownership in an existing company offers attractive prospects.
