RenDanHeYi 2.0: A Boundaryless, Interconnected, Intelligent Engine

My research shows that most of society’s most transformative innovations, indeed 70%, come not from entrepreneurs working in garages, but from employees working inside established companies. It is thanks to employee-innovators that you have a mobile phone, the internet to connect it to, and email to send. It is because of employee innovators that if you get sick you can get an MRI or a stent. This is why society needs organizations that enable employee innovation. This is not just a nice-to-have, not just something to make employees happy, but, truly, the future of society depends on the liberation of employees to see and seize opportunities.?

It is why, over the last five years, I have been so passionately studying organizational models that liberate employees to innovate. I came across 海尔 's RenDanHeYi model, which I have already written about several times, so I won’t go into too much detail here. After two years of research, it felt like I was finally getting my head around it enough to help companies embrace it.??

But to convince others, I would need proof that the model could work. The members of Outthinker Networks are the chief strategy officers of about 100 large enterprises across the world and across industries. They are smart and visionary thinkers, but they need evidence. After two more years of study, with Haier's support, and our members' involvement, we got that evidence. We were able to show that four elements of RenDanHeYi correlate with measurable advantages in firms’ ability to recruit and retain top talent and overall financial performance. And I'm talking a three to six times advantage!??

We were just celebrating these findings when I learned that Haier had already been implementing what they call RenDanHeYi 2.0, the explanation of which, honestly, I found quite confusing. It involves "breaking through boundaries" to create an "interconnected intelligent engine."

RenDanHeYi 2.0

I recently spend a week in China interviewing leaders of the company's various business units. After 15 hours of interviews, translations, and transcripts, visits to factories and showrooms, I think I can explain what RenDanHeYi 2.0 is and why, in my opinion, it represents the likely future model of every industry. It drives what Robert C. Wolcott and I propose as Proximity in our book by the same name.??

But first, let’s look at what it is not. It is not an organizational design model, as 1.0 is, but rather a model for reorganizing entire industries. It is not people-centric, as 1.0 is, but rather quite tech driven. It initially reminds you of a platform or ecosystem, but it is neither. There are four key words used to describe this 2.0 model: "a boundaryless, interconnected, intelligent engine."?

Let’s break down each in turn...?

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Boundaryless?

I was drawn to business school and then management consulting by a business book called The Mind of the Strategist by Kenichi Ohmae. In that book, he introduced the "3 Cs", which any MBA would know stand for Customer, Company, and Competitor, the three orbs that shape the dynamic of any industry. But boundaries between these three are blurring. The clean line between what was inside and outside your company, or your competitors’, has become a haze of grey. Where the suppliers, shippers, and complementary products were once delt with at arm’s length through contractual relationships, they have been integrating into not only partnerships, but extensions of the company.?

Haier's suppliers (of components or materials or related services) are now connected with the company digitally. They can coordinate in a kind of digital twin of the industry in which when just the bolt of a new part is ready to ship, the shipping company already has a truck at the dock ready to load and deliver it, and when that truck reaches Haier’s factory, the other components that go with the bolt to create a dishwasher or dryer or refrigerator are already lined up, in order, ready to be put together. Similarly, the explosion of at-will workers and contractors – today in the US it is not uncommon to find that 40% of the workforce of a large company are actually independent consultants – conflates the distinction between in or out.?

The concept of a company as having walls that define the boundary between what is inside and out is eroding.?

Interconnected?

Transactions are becoming interconnected relationships. Ten years ago, if you purchased a car, the car manufacturer and dealer might have two opportunities to learn from its interaction with you: when you buy the car and when you bring it in for service. But today, your connected car can constantly share information with them: what time you head to work each morning, what speed you drive, how quickly you brake. You will see the same trend in nearly every product as our refrigerators, toasters, beds, TVs become smart and connected.?

The same trend holds for our suppliers, partners, and complements. The boundaries blown (point one, above), we can now connect in a continuous manner with all of the agents we need to deliver great experiences to our customers.?

Intelligent?

美国麻省理工学院 professor Thomas Malone shows, through some fascinating studies, that the most effective way for humans and machines to collaborate is not to divide up tasks and have humans do, say, the creative stuff and machines do the repetitive stuff. Instead, their collaboration is best served by having them interact through a marketplace in which both humans and machines place bets on potential outcomes ... I bet $10 it will rain tomorrow but I will sell that bet to you for $9.?

What is happening is that AI is starting to be imbedded into the interconnections (point two, above). How long will it take those bolts to be produced and shipped to my factory so that I can line up the other parts, ready to go, as soon as the bolts arrive? It used to be that a human worked with spreadsheets or paper, and made some calls to estimate the delivery time, then told other parts suppliers to slow down or speed up their deliveries. But now, AI can work with that human to far more quickly and accurately predict what is needed when and where.?

AI can also help more rapidly reconfigure production lines, switch supply sources, and reprogram robots as the plants shift from producing, say, front-loading washing machines from top-loading, thereby reducing the cost of personalizing production to needs revealed by our interconnected customers and suppliers.

Engine?

The use of this term took a while for me to get my head around, because engine can hold a variety of meanings. It could be a source of power and drive or it could be the heart of the system, but in this case, it refers to the engine you would use to describe a "search engine."??

One of the most exciting possibilities that the other three aspects – boundaryless, interconnected, intelligent – enable is the ability to both customize at scale and produce at the moment of demand. In other words, to make something to order but to do so quickly. Do you want a red, front-loading dryer sitting on top of a green, front-loading washing machine? Well, with a boundaryless, interconnected, intelligent system, we could do that ... on demand.?

Google and Baidu scaled to dominance by creating a search engine that helped people find content they want. Amazon and Alibaba scaled to dominance by helping people find products they wanted. But that content and those products were already made, sitting somewhere, waiting for someone who wanted them to search for them.?

By contrast, what this boundaryless, interconnected, intelligent engine can become is not a search engine (searching for what is already there) but a kind of creation engine, in which a user’s input triggers the co-creation of a new or an improved product. This model is more Etsy than Amazon.

Final Thoughts?

Combine these four elements – a boundaryless, interconnected, intelligent engine – and you can start to see a new structure of an industry. One in which there is a continuous, always on interaction between users, brands, and their suppliers in which products and solutions are constantly evolving as user needs reveal themselves. The metaphor of industry as a linear chain, taking inputs and adding value to them to produce things that customers will (hopefully) want becomes an infinite cycle of inputs and reactions, needs and solutions, a boundaryless, interconnected, intelligent engine.?

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