With the changes in the new economic environment, traditional manufacturing brands in the Internet of Things era urgently need transformation, and home appliance and consumer electronics giant Haier is reinventing itself into an ecosystem brand to offer scenarios instead of products.
This interview is part of WARC's Marketer's Toolkit 2022. Read more.
For a brand to create value and develop sustainably, what are crucial are the underlying operations and the need to seek insights into consumer demand and adapt to changes constantly.
From brand value and sustainable operations, to brand innovation, enterprise management and the sustainable development of the entire enterprise, the core of Haier's response is "human value first".
By adhering to this philosophy internally and externally, Haier is trying to find the second curve of corporate development, to adapt to risks and uncertainties, and stimulate the innovative vitality of the company.
In the context of the new economic environment, traditional manufacturing brands are in urgent need of change, and Haier has replaced the concept of product with the concept of scenario in order to meet the new needs of users in an ecosystem-integrated manner.
As Zhang Ruimin, founder of Haier Group and honorary chairman of Haier Group’s board of directors, said: "If we operate as an ecosystem, we must solve the problem, which is to add value and share, and attract ecosystem parties to flock to join us. For ecosystem companies, brand no longer refers to a brand in terms of traditional companies and products, but to a new brand paradigm arising from the integration of all products and industries."
In the traditional era, enterprises could create product premium upgrades through product iteration but in the IoT era, enterprises must transform themselves and create the premium experience by delivering the best experience for users. Therefore, enterprises need to transform from being mere product manufacturers to scenario service providers and continuously innovate user experiences by creating an integrated ecosystem community to address the fact that a single enterprise alone cannot meet all user needs.
In the process of creating IoT scenarios and ecosystems, the two major challenges are how to make the ecosystems more open, and how to make the experience iterate continuously. Haier has said that attracting more parties to join the ecosystem, breaking the boundaries of enterprises and industries, and co-creating solutions around user needs is a challenge. Users need a more personalised scenario experience. Another challenge is how to more efficiently involve users in the innovation process and provide users with a continuous iterative experience.
In the 37 years since its founding in 1984, Haier has experienced a total of six brand strategy phases:
- The brand name strategy phase
- Diversification strategy phase
- Internationalisation strategy phase
- Globalisation brand strategy phase
- Network strategy phase
- In 2019, Haier unveiled the strategic ecosystem branding phase
As users shifted from the pursuit of a single product to the pursuit of more personalised scenario experiences and solutions, Haier transformed from a traditional brand to an integrated ecosystem brand to adapt to the changing times. Haier’s development timeline reflects the requirements for the transformation of corporate brand strategies demanded by the changing times.
In the traditional industrial era, product brands dominated and companies either became OEMs for famous brands or world-famous brands themselves. In the internet era, the online economy gave rise to platform brands, which either became famous platforms or were acquired by platforms. In the IoT era, user needs are becoming more and more personalised – a single enterprise can no longer meet all the needs of users, and industry boundaries are becoming increasingly blurred, so companies must transform themselves into ecosystem brands.
Product brands are about premium quality, while platform brands are about premium traffic, but ecosystem brands are a closed-loop creation of value; the first two involve only transactions and not long-term users, but ecosystem brands create lifelong users. Therefore, to achieve sustainable brand development, one must think outside the box and create a brand paradigm adapted for the new era, which is the ecosystem brand.
According to Zhang Ruimin, "user first" will always be the priority, but the connotation of "first" is different at different times. "User first" was originally embodied in "quality first" but the problem is that Haier's refrigerators and washing machines are already number one, so how much more growth can there be? Haier has therefore evolved step-by-step from a traditional product brand into an ecosystem brand.
Zhang Ruimin believes that many companies have still not embraced ecosystem brand thinking because they only have customers, not users. For traditional enterprises, the purpose was to pursue the maximisation of both shareholder value and long-term corporate profits. These two "maximisations" meant that they did not create value for users but rather had customers create value for shareholders. Their way of thinking was that "product is king" and "web traffic is king". As for Haier, it creates an ecosystem brand with the goal and concept of "experience is king".
Haier has, in fact created a three-tier brand structure consisting of high-end brands, “scenario” brands and ecosystem brands and has built an IoT ecosystem of "clothing, food, housing, entertainment, health, medicine and education" around the needs of global users.
- The high-end brands are Haier and Casarte, plus its US acquisitions of GEA and Fisher & Paykel
- The “scenario” brand is Sanyiniao (Triwing Bird) launched in 2020
- The ecosystem brand hopes to introduce the whole process of user participation through COSMOPlat to create the best experience for users
Casarte is an international high-end home appliance brand founded by Haier in 2006. Haier created this brand to meet users’ desire for high-end products and to guide consumers in the process of upgrading.
In the domestic high-end home appliance market, Casarte's product sales are as much as double those of European and American brands, with the average unit price being much higher. Zhou Yunjie, CEO of Haier Group and chairman of the board, has said that this reflects the Chinese consumer’s growing demand for high-end products and improved lifestyles, and shows that the high quality and premium experience offered by high-end brands are conducive to encouraging consumption upgrading.
It also shows that building high-end brands is a powerful driver for leading new consumption and driving domestic economic cycles in which brands play a leading role. Chinese companies are fully capable of creating local high-end brands which surpass those from Europe and the US.
"The brand is both the soul of enterprise development and the hope of the nation,” he said. “But in the brand creation process, one has to be patient."
The scenario brand Sanyiniao is different from an individual product. It gives users a customised solution for the whole home scenario, including kitchen, living room, bathroom, bedroom and closet. It meets users' needs for a better life by designing and building a home.
Take the Sanyiniao balcony for example. At present, there are more than 1000 ecosystem parties creating the whole home scenario for the user and customising a total of 12 different balcony-related solutions for users, including pet balcony, leisure balcony and fitness balcony.
In 2021, Haier and Central Video (Yangshipin) jointly created the program "Young Summer". The brand implanted the Sanyiniao usage scenario into the program and incorporated elements of the Haier brothers, triggering memories for many netizens and initiating many discussions and much word-of-mouth publicity.
Apart from topics, "Young Summer" also created many solutions for young users in terms of scenarios. For example, in a livestream in August 2021, Haier invited user designers and expert designers to provide users with many scenario solutions on-site. Within one hour, a total of 5,000 users explained their whole-home customisation needs and placed orders, and the average expenditure per customer (for customised whole-home scenarios) was more than RMB 420,000.
The ecosystem brand is empowered by Haier's COSMOPlat Industrial Internet platform to transform the apparel industry.
At one end of the process, it provides users with a full range of clothing customisations and a whole ecosystem scenario of washing, caring, storing, matching and purchasing services.
At the other end, it provides customised solutions for apparel enterprises, linking up textile and apparel industry factories, stores and homes to form a complete ecosystem.
Building an ecosystem brand
In building an ecosystem brand, Haier believes that three things are very important.
1. An open business ecosystem
We must create an open ecosystem, especially in the IoT era when industry boundaries are melting away and "we" has replaced "I" to become more important. "We" represents how many boundaries have been opened up and how many partners have been integrated.
2. Shared value and the creation of a win-win situation for all
The ecosystem parties not only co-create user value but also share value, realising the value cycle of user experience iteration and value-added sharing among ecosystem parties.
For example, there is the food networking platform, ie the food networking scenario solutions that Haier has provided to users in addition to refrigerators, ovens and other kitchen products. In 2020, due to the pandemic, consumers could not buy products offline. With offline channels shrinking, Haier launched online live broadcasts presenting food scenario solutions.
Many ordinary users wanted to eat authentic roast duck at home but could not do so, so “creator” Zhang Yu brought together a state banquet chef, a duck breeding factory and other ecosystem resources, and created a home version of roast duck. You just need to put the duck into a Haier oven and after 90 minutes, you can enjoy authentic Beijing roast duck, of which 300,000 have already been sold.
Along with a satisfying user experience, the state banquet chef also received added value through the publicity and the overall revenue of each ecosystem party increased by an average of 5%. Since then, the brand has iterated around new needs raised by users and created more versions of roast duck, such as a reduced-fat version, a specially flavoured version and a sliced version.
Today, Haier’s Food Network platform works with more than 70 ecosystem parties, such as the South Beauty restaurant chain, to create more than 100 food solutions, including steamed fish head with diced hot red peppers, to continuously iterate the user experience and create win-win opportunities with ecosystem parties.
3. Never forget the original intention, always put human value first
The "human" referred to here includes two types of people – the user, for whom the best experience should be created by focusing on the user's needs, and the employee.
With the proposition that “The value of an employee is the value he creates for users”, Haier aims to stimulate employees’ creativity and release each individual’s potential so that employees can create value for users while realising their own value. That is, "everyone is CEO", thus promoting innovation and progress of the whole society.
In 2005, Haier created this business model, breaking the pyramidal hierarchy structure of enterprises. Haier believes that the focus of the brand must be on people, rather than on data and traffic, in order to effectively face the challenges of the times.
In fact, all of Haier's ecosystem brand innovation exploration stems from Haier's "value-in-one" model, which is the basis of the whole innovation. The core of the model is that each employee is inseparable from the user value they create, because the more user value the employee creates, the more value they share. In this way, two value cycles can be realised – one being the value cycle of user experience iteration, and the other the value cycle of value-added sharing by the ecosystem parties.
Insights into the new needs of users and the creation of user experiences of value
Haier's transformation into an ecosystem brand is based on the changing needs of today's consumers. As we all know, meeting consumer needs and being consumer-centric have always been a priority for companies, and the ultimate goal is to create user value. In Haier's view, today's users are more focused on immersion, engagement and experience.
What users are buying is not a single product but a variety of life scenario solutions and immersion in those scenarios. For example, users buy refrigerators but in fact what they want is not just an appliance but an overall food solution.
As mentioned in the case above, Haier did live broadcasts online during the pandemic and in one broadcast, focused on promoting refrigerators and ovens, inviting state banquet chef Zhang Weili to cook roast duck online, which resulted in users commenting that they not only wanted to buy refrigerators and ovens, but also customised roast duck, and the demand triggered more than 30,000 orders.
Later, Haier launched a “one-click roast duck” scenario through the Food Network platform. This shows that users need not only products but also gourmet solutions.
2. A sense of engagement
Users have changed from consumers to prosumers and are increasingly inclined to interact, co-create and share with brands.
Users in the traditional era could only buy products. In the Internet era, they had more product choices and in the Internet of Things era, users can participate in the whole process and personalise their solutions.
During the pandemic, a netizen in Shenyang came up with the idea of producing a washing machine that could also sterilise and after he placed this suggestion on Haier's platform, designers and enthusiasts linked through the platform came up with their own solutions and all participated in the design process and soon launched the new washing machine, which immediately became a hit.
3. A sense of experience
Users want immersive experiences and continuous iteration and upgrading. The above “one-touch roast duck” solution and the washing machine that can sterilise are examples of continuous iteration based on user needs.
However, it is not easy to understand what consumers want, which is why companies are placing so much emphasis on consumer data. With the help of big data, it is possible to outline a profile of a consumer, address their needs and constantly provide new value experiences. Under the premise of securing user information, Haier has the following thoughts on how to understand user needs and create user value.
1. Putting people first and creating positive interactions
To truly understand the needs of users, there must be sincere communication and interaction. Haier tries to understand users and gain insights into their needs through long-term interaction with them, so that it can unite with other ecosystem parties to create solutions.
In addition to smart appliance touchpoints, Haier also has numerous scenario experience guides at thousands of experience stores to ensure zero distance interaction with users, and 200,000 installation and maintenance personnel to allow for communication with users on their home needs, and to establish a sincere relationship of trust.
2. Creating a win-win situation and building an ecosystem community
The user value lies in the fact that the brand must constantly launch new designs to solve users’ problems. Haier has said that this is not only the purpose of individual companies but also an important point for attracting ecosystem parties to join.
Innovating the user experience and creating user value in the ecosystem is the only way to achieve mutual promotion of the value cycles of creating user experience iterations and value-added sharing by ecosystem parties.
The key to sustainable brand development: human value first
Haier's brand development history can be summed up with three incidents involving "smashing".
- The first was "smash the refrigerator". In 1985, Haier smashed 76 below-standard refrigerators with a sledgehammer, thereby awakening the quality consciousness of all Haier staff.
- The second was "smash the organisation system". In 2005, in the face of internet changes, Haier smashed its bureaucratic system and Zhang Ruimin put forward the "value-in-one" model, in which each employee faces the user themselves to create value for the user.
- The third was "smash the label." In 2019, Haier entered the ecosystem brand strategy stage and began to transform itself from a home appliance brand into an ecosystem brand with the goal of creating the best experience for the user by combining with other ecosystem parties.
Haier has embraced the concept of "human value first" in the sustainable operations of the brand for 37 years and carries out continuous innovation and development on that basis. Haier believes that brand value and sustainable operation of the brand must take into account the times, the ecosystem and society.
1. In tune with the times
Brands are products of the times and as Zhang Ruimin has said, "There are no successful enterprises, only enterprises of a certain era."
Enterprises must constantly subvert themselves according to the times, create value for users, and achieve continuous innovation and development. Haier is transforming itself from a traditional home appliance brand to an IoT ecosystem brand, innovating in response to the changing times.
To develop, an enterprise must not only achieve growth itself but also create the best experience for users together with all parties in the ecosystem, creating a win-win situation in order to achieve sustainable development.
For example, Haier's COSMOPlat Industrial Internet Platform is an open platform built jointly with ecosystem parties through the model of "building in association with large enterprises and sharing with SMEs", which empowers huge numbers of companies. This platform has linked more than 800,000 enterprises and promoted the digital transformation of SMEs.
Brands must integrate themselves into society’s development, effectively solve social problems and fulfill social responsibilities in order to achieve sustainable development. For example, in response to common cases of incorrect or missed vaccinations, and the inconvenience of vaccinating in remote areas, Haier Smart Vaccine Network joined hands with the National Health Commission, the Centre for Disease Control and Prevention, vaccine manufacturers, vaccination stations and other ecosystem parties to customise the "Haier Vaccine" (Hai Le Miao) smart vaccination program, which results in safety and control of the whole vaccination process and guarantees safe and convenient vaccinations.
At the same time, Haier Group has long been committed to the development of youth welfare. Since the establishment of the first Hope Primary School, which Haier funded and built in 1995, it has thus far built 345 Hope Primary Schools and one Hope Middle School across the country, helping to develop rural youth education.
Adherence to "human value first" doesn’t only exist in the sustainable operations of the brand but also runs through Haier's brand innovation and corporate management. The latter often provides a constant source of authority and strong guarantee for the solid development of the brand.
Haier has said that no matter what external changes occur, the essential principles and the original intention underlying brand innovation and corporate management should remain the same. Haier has always insisted on “people value first”, with the "people" referred to being users and creators.
Haier has always adhered to two principles for its users. The first principle is "The user is always right",, and the second is "If you think the user is wrong, please refer to the first principle and correct yourself".
All of the brand's communication with users and creative expressions are now based on these user-centric principles. For example, its scenario brand, Sanyiniao, is designed to meet the needs of users for customised scenario experiences.
Haier insists on maximising the value of the creators and one core aspect of that is its “value-in-one” model. By promoting this model, everyone is transformed from being staff working to meet the goals of the enterprise to being autonomous; from being ordinary people to being creators and then becoming small and micro organisations, and eventually becoming linked groups contracted together.
Zhang Ruimin explains that "value-in-one" will always link "people" (creators) and users together. The value of the creator is reflected in the value they create for the user, resulting in self-evolution and self-adaptation, in contrast to the self-rigidity of the traditional organisation. Each person is a value centre, a value-added centre, and regardless of what else is happening, Haier can then stand firm.
At the same time, this approach also fully reflects the dignity of the individual. The reason why "value-in-one" is acceptable in different countries and cultures is that it respects the personal dignity of each person, a concept which is common to every country, culture and person.
For example, there is Dr Liu Zhanjie of Haier Biomedical, who gave up his stable job as a university teacher and became a "creator" on Haier's ecosystem platform, starting his own entrepreneurial journey.
Guided by the "value-in-one" model, Haier Biomedical has created comprehensive solutions for IoT biosecurity such as vaccine networks, blood networks and drug networks with ecosystem parties according to the needs of users. The vaccine network is derived from Haier's earliest cooler products and Liu Zhanjie connected the medical cooler to hospitals and users through IoT technology, creating the IoT blood platform, vaccine network, sample network, etc.
During the epidemic, he iterated the COVID-19 mobile vaccination program, serving more than 200 cities and towns nationwide, providing more than five million doses of COVID-19 vaccine, and resolving the delivery difficulties experienced in many places by deploying mobile vaccination vehicles.
Today, with the development of technologies such as the Internet of Things, Artificial Intelligence and big data including blockchain, we are entering the fourth industrial revolution. To achieve sustainable growth in the face of growing economic uncertainties and complexities, companies must look for a second curve in their development process before the first curve has peaked.
In this regard, from the sustainable operation of the brands to the sustainable development of the enterprise, the core of Haier's response is still "human value first". On the one hand, Haier continues to pay attention to user needs to create the best experience possible for users and on the other hand, through the "value-in-one" model, it promotes the autonomy of each employee, encouraging each to create value for users while achieving growth of their own sense of self-worth.
In Haier's view, the biggest challenge to achieving sustainable growth is still the issue of mindset. When the path to doing business or developing a brand is successful, it is difficult to innovate and change. Therefore, the key challenge is how to constantly challenge oneself and subvert oneself.
By insisting on the concept of "people value first" internally and externally, Haier is trying to find the second curve of enterprise development, to adapt to risk and uncertainty, and to stimulate innovation and vitality.
For example, in the process of creating dialogues with young users, Haier starts with both internal employees and external users.
- First, the internal staff should be young, otherwise, it is difficult to capture users’ needs.
- Second, the company should capture the needs of young users externally and continue to create good products, scenarios and services, whether they are smart appliances and regular appliances, or scenario brand Sanyiniao’s food network ecosystem, designed to meet the “lazy economy” needs of young users.
- Third, the media communication forms loved by young people cannot be ignored either. For example, in cooperation with Mango TV, Haier joined in the IP creation of "Call Me By Fire" to provide young users with energetic scenarios and with the program, which is also a way to continue to communicate with young users in the future.
There is a line in "Finite and Infinite Games" that with a finite game, the aim is winning, while in an infinite game, the aim is to keep playing.
According to Zhang Ruimin, "Under the traditional model, all enterprises aim to win and in order to win, they adopt KPI assessments, attempt to manage growth every month and strive to be the first in the industry. But even if they become the first in the industry, they will still disappear in the end. A game centred on user experience iteration must be an infinite game. Because it requires endless interaction with users and infinite evolution."
For a brand to achieve sustainable development, the most difficult task is always capturing the consumer’s heart. Especially in today's world, full of risks and uncertainties, the ability to gain insight into the complex and changing needs of consumers and immediately meeting them is the greatest competitive advantage.
For mature brands that have developed over many years, the issues of how to adhere to brand value, create user value and obtain lifelong users are related to the sustainable development of the brand and cannot be ignored. As a representative traditional manufacturing brand, Haier's approach to breaking the pattern is to transform itself into an ecosystem brand, focusing on the ecosystem and scenario experiences, adhering to the concept of "human value first" and making sure that it runs through all aspects of the brand and business operations.
In this process, in line with the "value-in-one" model, it stimulates human creativity and fully mobilises user and manufacturer innovation, so that the user value experience is more personalised and easier to implement, constantly creating new experiences and values.