Books Recommended by Zhang Ruimin

Ruimin cites Shirky's book as another example of contemporary thought leadership influencing Haier's direction. In the book, Shirky offers examples of companies which have thrived in the absence of traditional organizational structures. The ideas have clearly influenced Ruimin. He tells strategy business: We used to have a pyramid-style structure for our sales in China. The people in charge of sales had to manage business at the national, provincial, and city levels. After the arrival of the internet age, we realized that under this triangular hierarchical structure, people had a difficult time adapting to the requirements of the times. So we reorganized ourselves as an entrepreneurial platform. We flattened everything out, taking out all the middle management. We decentralized the structure to one with more than 2,800 counties. Each county organization has seven people or fewer.

Ruimin mentions Schumpeter's classic in the course of explaining Haier's philosophy on innovation. In a sentence, Ruimin says, that philosophy is: "Never follow only a single road."

Diving deeper, Ruimin refers to Schumpeter's definition of innovation in Business Cycles: "The reorganization of the factors of production." Here's what that means, from Ruimin's perspective: Generally speaking, your company and your competitors have access to the same resources. So the ongoing challenge of innovation is finding new ways to differentiate yourself, given the comparable access to those resources (talent, cash, raw materials).

"It's like poker. Everyone has the same number of cards," Ruimin tells strategy business. "It's how you play your hand that matters."