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Haier Starts a New Era for IoT Model

05-24 2019

BrandZ, the World-Renowned Brand Instituition, Launches Ecosystem Brands 

Haier Starts a New Era for IoT Model

On May 6, 2019, BrandZ released the “Top 100 Most Valuable Chinese Brands 2019” in Beijing, which indicates a significant growth of the overall value of all the brands and a high attention from the academic and business circles on innovation – two new categories, namely “Platform” and “Ecosystem”. Meituan, Dianping and Ele.me are included in the “Life Service Platform”, while Haier, commonly known as home appliance enterprise, is classified into the “Home Appliance/IoT Ecosystem”. Haier ecosystem is the only ecosystem brand in the list with a brand value of USD16.272 billion. 

The list was jointly released by WPP and Kantar, a research company under WWP, and the research method and brand valuation are provided by Kantar. WWP is the world’s largest transformation company with leading position in consumer market and brand communication. Since the Internet and IoT have become the infrastructures for the social life and business, the significance for BrandZ™’s addition of “Platform” and “Ecosystem” will be thought-provoking for the whole industry. 

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Brand is easy to understand but difficult to interpret. In fact, it is an outcome of the industrial revolution like the enterprise and an existence under the context of Neoclassical Economics. Neoclassical Economics is a subjective theory of value focusing on psychological factors, i.e. Marginal Utility Theory, which thoroughly subverts the objective theory of value with focus on inputs in Classical Economics. Supply and demand then become the major aspects of research for the economists, between which brand plays an important role in maintaining the balance. Under this theory, an enterprise becomes a famous brand or a worker for famous brand. 

The development of the information technology and Internet provides necessary technical conditions and social relation for the emergence of new business models and type of business. With the rapid development of AI and 5G technologies, the economic explosion of the IoT is coming. Before the IoT players’ development of product sensors, Haier had commenced the transmission of users’ emotions. Zhang Ruimin, Chairman of the Board and CEO of Haier Group, said that IoT is a form of community economy, sharing economy and experience economy, and its core is the connection of people. With focus on “ecosystem”, “ecosystem income” and “ecosystem brand”, Haier strives to promote the transformation of IoT ecosystem model. It is reasonable for BrandZ to separately list “Life Service Platform” and “IoT Ecosystem”. The scenario business and co-creation experience model of the IoT are not available on e-commerce and other Internet platforms. 

On the list where Haier is classified as “Home Appliance/IoT Ecosystem”, home appliance can be interpreted as a unique feature in the connection of the IoT ecosystem. We are expected to see more enterprises to be included in the IoT ecosystem in the future. Different IoT ecosystems may vary in the touch points. Haier is now upgrading home appliance to networked appliance and then to network community. With the development of community ecosystem, the home appliance will only become a carrier in traditional function, and the interconnection among networked appliances and between men and networked appliance, men and men, men and scenes will be achieved. 

In line with the direction of electric appliance – networked appliance – community, the users in the eye of Haier Ecosystem will change from traditional customer, to interactive user, lifelong user. The competition among traditional enterprises focuses on resources, while that for IoT ecosystem definitely on lifelong users as the more lifelong users are possessed, the longer will one survive. For instance, Haier’s IoT ecosystem includes an Internet of Clothing, where products can be rapid iterated due to the users’ activities and frequent communication with Haier in communities. However, users need more than washing machines, namely the high-end clothing care service, new clothes and clothing storage, which cannot be satisfied by Haier solely. The traditional enterprise may say that I am just selling washing machines, so I cannot meet these requirements. However, with focus on user’s experience, Haier will take efforts to satisfy users’ requirements under the support of partners who keep connection with users. Song Zhiming, the Chairman of WPP Greater China, said on the opening speech: “Haier has made special performances in the sector of home appliance as it integrates different categories of products in an ecological and systematical strategy, which has been proved greatly successful. ”

In terms of business model, it seems not difficult to apply the model of Haier, but it is extremely difficult for implementation. The traditional enterprise is a closed organization with boundaries, which contains vertical silos and a dozen of hierarchies. Such organization is operated under the command of the supreme leader, and such command is conveyed downwards from level to level, showing a linear process in series. In case of any problems on market, on one would take the responsibility. Haier spent 14 years solving this problem as it believes that if the problem is solved, Haier will keep growing and leading the world; otherwise, it will not survive for long despite its power. The solution is “Rendanheyi”. In 2018, Harvard Business Review described “Rendanheyi” on the cover story as the end of bureaucracy. In early 2019, Paul Michael Romer, winner of 2018 Nobel Prize for Economics, commented “Rendanheyi” as the key to the success of the Internet of Everything upon investigations. “Rendanheyi” is complicated for its thorough subversion of the traditional theories and practical experience in the past 200 years, and is simple for its zero distance between users and employees. “Rendanheyi” is a concept, which should be kept updating without blindly following others, and is also a dynamic and perpetual exploration in integrating the value of employees and users, which should never be stopped. Doreen Wang, Global Head of BrandZ at Kantar said that, in the past few years, Haier successfully transformed from a brand of traditional home appliance to an ecosystem brand of IoT and achieved the “mastery by users” from the “mastery by boss”. All the stakeholders are creating value for users, which contribute to the significant rise of its value to USD16.272 billion. This is owing to Haier’s constant self-disruption.