Thriving During The Covid-19 Outbreak: The Story Of Chinese 'U-Vaccine'
Chinese U-vaccine, one of thousands of Haier Micro Enterprises (MEs), thrived when the world around it came to an ominous halt. We interviewed its leader, Mr Gong, to learn how this was achieved and bankruptcy averted. One thing is clear: without their management model there would have been no success.
In 2018, Mr Gong became leader of U-vaccine, a company that provides complete solutions for ‘Clinics of Vaccination’. In earlier years, China was haunted by a series of vaccination scandals. Shots weren’t properly stored, and there was persistent quality fraud. Most of Chinese parents had lost trust in the vaccination system.
U-vaccine employed Haier’s ‘Scenario Thinking’, in which the ME looks holistically at the user’s problem. In this case it was important to find a solution that created trust. Think smart logistics to ensure vaccines are correct and valid, improved transparency, sensitive patient information systems and locations where children feel comfortable (as if walking through cotton candy with cartoon characters all around). The approach worked and U-vaccine has rapidly expanded.
"Without our organizational model we wouldn't have coped"
The lockdown in China, just weeks after Joost and I visited Qingdao, had brought the country to a standstill. In February and March companies closed, production plummeted, and employees had to stay home.
“When Covid-19 broke out, we were hit quite hard,” reports Gong. “Our production and logistics stopped, and the vaccination Clinics had to close. Hospital nurses performing vital tasks could stay, but the others had to go, and families were not allowed to leave their homes. Non-essential healthcare came to a stop. Nobody went to the vaccination clinics anymore.”
After the restrictions were eased, Gong realised that user pain points had changed. Earlier solutions were not sufficient. Now parents needed reassurance that the clinics were safe, and if not convinced, they would keep their children at home. Nurses were concerned about having contact with so many people, and the hospital directors needed to guarantee safety.
“There was an opportunity here,” Gong continued, “but without the RenDanHeYi model we wouldn’t have coped”. Haier’s way of working allowed them to react quickly and new solutions were developed in no-time. Improved reservation systems via Wechat eased pressure on facilities, temperatures were tracked via infrared cameras, IoT solutions confirmed hand washing prior to appointments, and smart refrigerators made it easier to locate and use vaccines about to expire (because of inactivity during the previous months).
How a management model enabled them
By applying Scenario Thinking, U-vaccine understood that solving all these problems by themselves would not be possible. As Mr Gong explains, “For each new scenario we initiate an Ecosystem Micro Community (EMC), in which different ‘nodes’ (MEs or other companies) form a network that is centered around solving all user problems.”
U-vaccine became the initiator of a new EMC. It was now responsible for attracting the necessary resources to bring solutions that would take away the ‘pain’. Resources come in all shapes and sizes, and include time, funding, knowledge, special techniques, access to networks and more. Haier’s network-structure allows resources to flow freely throughout the organisation without blockages being caused by managers, silos, or job descriptions. Each ME can collaborate with any of the other nodes in the network and exchange resources in the process.
The EMC model stimulates the sharing of resources even further – by making sure all nodes are aligned and working towards the same goal: finding solutions to user pain points. The process goes something like this:
Step 1: Sharing the pain points
The EMC leader describes the user pain point, outlines the resources required to address it, lays out the potential rewards and shares all this on a platform. Thereby MEs – and sometimes companies outside Haier – can see what is needed.
In the image above, you see the U-Vaccine node being surrounded by other nodes both from inside and also outside the organizational boundaries of Haier.
Step 2: Placing a bid
Just like individuals are able to bid on certain tasks or goals within Haier in order to join an ME. Any ME or company that feels that it can add value to the EMC, can ‘bid’ by developing a proposal that shows in detail how they propose to solve the problem, lists the resources needed to achieve the goal and states the share of profits they would require.
Step 3: Selecting the EMC
The bid is reviewed by the EMC leader (or their deputies), the winners are identified, and contracts negotiated. In these contracts, the role and goals of the node are clearly formulated, and the percentage of total EMC profits to be distributed is stipulated. All contracts are based on blockchain technology, making everything fully transparent with automated payments. When a product created by the EMC is purchased, the proceeds are automatically disbursed amongst the nodes.
In the image, contractual relationships are indicated with a black line. All nodes that are bound by such lines have a contractual relationship and therefore form the EMC, which is indicated by the gray line.
Step 4: EMC in action
Now that all nodes are bound by ‘smart-contracts’, solutions can be combined so that all user pain points are relieved. The nodes benefit from the profits generated by the EMC, so all have a stake in the outcomes. This motivates collaboration and encourages nodes to help one another whenever possible. If the ME responsible for infrared temperature measurement fails, and sick people infect others at a vaccination center, the trust in the entire EMC drops, affecting overall income. Seeing another node in your EMC fail and not doing anything about it will always backfire.
Step 5: Dynamically Adjusted Contracts
The value nodes bring to the network varies over time. Each month nodes meet to discuss and sometimes renegotiate profit-sharing to get the balance right.
As Mr Gong indicates, “Usually, the EMC leader will propose a new balance with the goal is to reach consensus. For example, after the Covid-19 outbreak, we lowered the percentage of profit attributable to the Marketing ME, because it cannot organise events or conduct any offline marketing (which is usually a big part of the work). It can only do online marketing which is cheaper and adds less value. And the Research and Development ME now receives a bigger share of profits because they are more important to the enterprise.”
Just like at Buurtzorg, Haier uses the relatively simple to create something extremely complex. It creates an EMC around a specific user problem by attracting resources and aligning incentives for each of the nodes, and, in some cases, this is repeated many times. Some EMCs emerge within existing EMCs to solve even more specific scenarios. The hand washing scenario in the U-vaccine EMC for example. The same logic is applied for logistics and other services the EMC might require. The result: an EMC in an EMC in an EMC….
"Covid-19 surfaced the advantages of our management model"
Mobile Vaccination Centres
U-Vaccine’s success has not gone unnoticed by the Chinese government. They have been asked to build mobile centres that can reach remote villages of China so that the vaccines can go direct to the people. You can imagine how helpful this will be.
Such a complex project requires high levels of collaboration. By using the same model, a network of companies and EMCs will work together to develop solutions that respond to government needs. If they succeed, all nodes will benefit. If some fail, all will need to think of improvements so that user needs are properly addressed.
Not for everyone
Haier’s latest iteration of their Rendanheyi management model includes the EMC initiative. Mr Gong sees this development as of critical importance: “As a regular employee during the health crisis, I would have stayed home, enjoyed a holiday, and had nothing to worry about. But I am an entrepreneur and knew that to survive we had to find new solutions for our users, so we all worked hard and now are benefiting.”
The EMC model has had a positive impact on U-vaccine’s success, but their industry activity is highly valued right now, so this was probably not the only reason that things worked out so well. During our visits to Haier we have seen many EMCs – across all industry sectors – that work in the same way and achieve great things too. And based on several reports it seems that Haier has managed better than others during the Covid-19 outbreak. During a webinar about applying Rendanheyi outside China, Kevin Nolan (CEO of GEA) and Yannick Fierling (CEO Haier Europe) even took it a step further and stated that this Covid-19 crisis surfaces the advantages of their management model.
Hierarchical organisations are not for everyone, and neither is the Haier model. It’s merely an alternative. And even if this solution is not for you, there is lot to learn from the way they have enabled resources to flow freely through an extremely complex organisation. Upon closer inspection, it seems that the complexity is not as extreme as first I suspected. A simple pattern repeated many times allows MEs to respond in a speedy and dynamic way to sudden changes in the world around them. Even if that change is a global pandemic.
An organizational model that can change direction and respond rapidly to sudden changes. Even if that change is a global pandemic.
FYI; This blog is part of a series and is the result of a research collaboration between Haier & Corporate Rebels. Want to know more?
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The I read about EMCs, the more I am fascinated by what is truly possible in terms of using structure to achieve amazing agility.
I love the idea of the renegotiated, mutually beneficial contract at a cadence. Contracts in most organizations are a nightmare, so most organizations batch them and do them as seldomly as they can.
Haier apparently went the opposite way, an followed the lean principle of doing it frequently and it becomes easy.
Perhaps making too big a deal out of this, but in my opinion the contract is not about collaboration, but about *assuring* the collaboration — the parties want to collaborate, the contract should merely avoid this collaboration is unduly affected.
Agreeing on the potential profit instead of fixed prices is not enhancing collaboration. But it may prevent this collaboration from falling apart in case something unforeseen happens which would add considerable cost for one of the parties, affecting profit.
Perhaps too fine a point...
Most of us know monopolies are bad. “They have no incentive to deliver better products or to get more efficient.” And if a monopoly can do whatever it likes, the victim is likely to be the customer. If it exists outside an organization, measures can be taken to end that. Within organizations, creating monopolies seems standard practice, but why!?
“It was like being with a parent that didn’t really want us”, says CEO of GE Appliances, Kevin Nolan. He explained: “The one hope everyone had was that Haier bought us because they wanted us, and we were curious to find out what that would mean”. 4 years later, we visited to find out how GEA was doing. Getting to talk to them was harder than we thought: “Our managers and executives are currently working on the assembly lines.” They are doing what!?