Any company has the capacity to become an interaction field company.

Welcome back to Exponential Growth, where I’ll share my insights and ideas on brand strategy, platform business, new technology, innovation, and staying relevant in a digital world. For more information, check out my website.

In my last newsletter, we covered How do you shift to an interaction field model? You may be thinking—my company is too entrenched in the value-chain model. There’s no way we could make the transition to becoming a successful interaction field business.

Think again.?

Let’s look at Haier, a global manufacturing company founded in China in 1984 and the world’s largest supplier of home appliances.?

Haier produced a limited portfolio of products in standard configurations to avoid too much complexity. It achieved high value with minimal defects, high productivity, and low waste.?

Appliance manufacturers are typically hierarchical, large, and benefit from economies of scale. The more they increase production volume, the more they can drive down costs, and thus, theoretically anyway, improve their profits.?

However, such a model disables the kind of innovation necessary to compete when an industry faces changing consumer demands, and that is exactly where Haier was headed: proliferation, personalization, customization—all antithetical to a well-controlled, long-run, cost-constricted, superefficient manufacturing, marketing, and distribution operation.?

So Haier decided to dramatically remake itself.?

Realizing that successful innovation in the marketplace depended on catering to shifting consumer demands, Haier restructured its entire business around a concept of “zero distance”—each unit within Haier would be directly in contact with consumers. The company eliminated ten thousand positions in middle management and restructured the majority of their remaining employees into more than four thousand microenterprises (MEs).

All MEs are charged with autonomous responsibility for their product, conducting their own market research and setting their own ambitious goals for growth, while developing and strengthening the ecosystem in which that product lives. Each ME is positioned to realize and build its own interaction field. They are able to do this by maintaining zero distance from consumers of their product.?

The culmination of this restructuring can be seen in Haier’s establishment of the Haier Open Partnership Ecosystem (HOPE). This online portal connects Haier’s MEs with one another, as well as with external business partners, designers, and would-be customers to source ideas for product development and innovation.?

Through this channel (as well as various social media platforms) Haier generates more than one thousand product ideas from customers every year; some MEs are even led by would-be customers whose exemplary input online earned them positions in the company.?

The point about Haier is that any company, no matter how entrenched in the standard value-chain model, has the capacity to become an interaction field company.?

Removing strata of bureaucracy—only two layers of management divide Haier’s CEO from its bottom-level employees—enabled Haier to focus discretely on customer-driven product innovation, innovation that hinges on each product’s viability within a market ecosystem.?

The velocity Haier achieved is a simple lesson in physics: it requires less energy to bring a small mass to the same velocity as a larger mass, because there is less friction to overcome. By eliminating the obstacles of bureaucratic hierarchy, Haier got out of its own way. They have since seen profits grow by more than 20% per year, with revenue increasing nearly as much. The company has created more than $2 billion in market value and, after the initial middle management layoffs, has created more jobs than it began with as a result of its rapidly expanding ecosystem.

The lesson here is that it is not necessary to dismantle your business enterprise or begin your interaction field journey with massive layoffs.

The point is, rather, that it is far easier to launch a satellite into an interaction field than launch an entire planet.?

Want to learn more?

Check out my book, The Interaction Field: The Revolutionary New Way to Create Shared Value for Businesses, Customers, and Society.

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