Haier - Insights, Learnings and Experiences (Post 5 - The Haier ZeroDX Awards Ecosystem Case Studies)
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits and collaboration with Haier, and why I believe the future of business lies in a NewEconomic Engine driven by AI and Business Ecosystems.
Post 4 - The Haier Zero DX Awards Ecosystem Case Studies
Mirko Kleiner - As a Thought Leader in Lean-Agile Procurement and a Registered Scrum@Scale Trainer, my personal mission is to unite various movements—Agile Leadership, Extreme Manufacturing, Scaling Agile, Lean-Agile Procurement, and more—to push the boundaries of Business Agility across organizations.
One company that stands out, and perhaps the only one of its kind globally, is Haier. With over 50 years of history as a white goods manufacturer, Haier has undergone its sixth major transformation, evolving into a network of over 4,700 Micro Enterprises (ME), all interconnected within Ecosystem Micro Communities (EMC).
Each ME operates with its own balance sheet, its own people, and collaborates closely with partners who share in the ECM’s success. This win-win philosophy, implemented on such a massive scale, is truly unprecedented and sets Haier apart as a pioneer in organizational and management innovation.
For over two years, the LAP Alliance has partnered with the Haier Model Institute (HMI), itself a Micro Enterprise within the Haier Group. Its mission is to spread the word about Haier’s New Economic Engine, or RenDanHeYi, which serves as the foundation of Haier's management model. For those unfamiliar with Haier, it is arguably the most disruptive and successful organization in the world, operating with virtually no bureaucracy and achieving an impressive annual growth rate of 20% over the last decade.
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits to Haier, and why I believe the future of business lies in a New Economic Engine driven by AI and Business Ecosystems.
image source: HMI
Post 5 - The Haier ZeroDX Awards Ecosystem Case Studies
September 20th 2024 the Haier Zero Distance Excellence Awards 2024 have taken place in Qingdao, China. In this post, I’d like to give you more details about our four outstanding nominees, one of them has been awarded—each of whom has already implemented a New Economic Engine.
Stay tuned for an inside look at their remarkable journeys and how they are transforming their industries with innovative, user-centric ecosystems.
Ecosystem Case Studies
Find below a list of our nominees and further applicants from all around the world.
SINAA (Social Innovation Academy)
Uganda🇺🇬
Education / Not-for-profit
eRevo - Energy Revolution
Switzerland🇨🇭
hydrogen power storage technology
NET Engineering
Italy🇮🇹
Engineering in Construction Industry
Miles AS
Norway 🇳🇴
IT Services
Further participants & pioneers
Further Applications have been nominated by an international group of HMI Experts, such as Alidad Ebnoddin Hamidi, David Witney, Emanuele Quintarelli, Joost Minnaar, Ross MacIntyre, Saar Ben-Attar, William Malek.
Alongside with our nominees has Stuart and the Business Ecosystem Alliance, the IMD and Gary Hamel supported the Awards.
Find the full list of winners here.
We might extend the list of detailed Ecosystem Case Studies to a later stage.
Conclusions
The New Economic Engine and this list of Ecosystem Case Studies, that already have applied it, will serve as a huge inspiration for organizations worldwide. All the participants and winners have proven that these principles are universally applicable, regardless of the size, industry, or culture of the organization. It has also reinforced that we’re on the right path with our movement, the LAP Alliance, but at the same time, there is still so much more to do and learn.
Next Post - How to setup your own Economic Engine with the Lean Ecosystem Canvas
Stay tuned for the upcoming posts in this series!
All Posts of this Series
Post 1 - Visiting Haier in Qingdao China
Post 2 - The New Economic Engine
Post 3 - Preview of the Haier ZeroDX Awards
Post 4 - The Haier ZeroDX Awards 2024
Post 5 - The Haier ZeroDX Awards Ecosystem Case Studies
Haier - Insights, Learnings and Experiences (Post 4 - The Haier ZeroDX Awards 2024)
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits and collaboration with Haier, and why I believe the future of business lies in a NewEconomic Engine driven by AI and Business Ecosystems.
Post 4 - The Haier ZeroDX Awards 2024
Mirko Kleiner - As a Thought Leader in Lean-Agile Procurement and a Registered Scrum@Scale Trainer, my personal mission is to unite various movements—Agile Leadership, Extreme Manufacturing, Scaling Agile, Lean-Agile Procurement, and more—to push the boundaries of Business Agility across organizations.
One company that stands out, and perhaps the only one of its kind globally, is Haier. With over 50 years of history as a white goods manufacturer, Haier has undergone its sixth major transformation, evolving into a network of over 4,700 Micro Enterprises (ME), all interconnected within Ecosystem Micro Communities (EMC).
Each ME operates with its own balance sheet, its own people, and collaborates closely with partners who share in the ECM’s success. This win-win philosophy, implemented on such a massive scale, is truly unprecedented and sets Haier apart as a pioneer in organizational and management innovation.
For over two years, the LAP Alliance has partnered with the Haier Model Institute (HMI), itself a Micro Enterprise within the Haier Group. Its mission is to spread the word about Haier’s New Economic Engine, or RenDanHeYi, which serves as the foundation of Haier's management model. For those unfamiliar with Haier, it is arguably the most disruptive and successful organization in the world, operating with virtually no bureaucracy and achieving an impressive annual growth rate of 20% over the last decade.
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits to Haier, and why I believe the future of business lies in a New Economic Engine driven by AI and Business Ecosystems.
Post 4 - The Haier Zero Distance Excellence Awards 2024 & the Winners
September 20th 2024 the Haier Zero Distance Excellence Awards 2024 have taken place in Qingdao, China. In this post, I’d like to give you a sneak peek about the winners, some behind-the-scenes insights from the pre- and post-events, and introduce you to our four outstanding nominees, one of them has been awarded—each of whom has already implemented a New Economic Engine.
Stay tuned for an inside look at their remarkable journeys and how they are transforming their industries with innovative, user-centric ecosystems.
image source: HMI
Summary of the visit
During the Haier ZeroDX Awards 2024, we had the privilege of experiencing a rich lineup of pre- and post-event activities. These offered valuable insights not only from Haier but also from leaders around the globe. Below is an initial summary of the program, followed by more detailed information about the awards, the winners, and my key takeaways.
I arrived in Qingdao, China, late the day before the official program kicked off, following a journey from the Agile Prague Conference via Dubai and Shanghai. Awaiting me in my room was a delightful surprise: my badge, signifying my official recognition as a Haier Model (HMI) Expert. Holding it for the first time, I couldn’t help but feel a sense of pride. Is it selfish to feel that way? Maybe, but it’s also a moment of deep personal significance.
Image source: Mirko Kleiner
Day 1 - Visiting & Learning from Haier’s RenDanHeYi Lighthouse Practices
It all began with the pre-event on September 19, 2024, where we had the opportunity to visit the Haier Ecosystem Experience Center. There, we learned about Haier's rich history and its six major transformations. Following that, we explored the IoT Smart Home Experience Center, where we experienced firsthand what Haier envisions with real-world user scenarios.
Image source: Mirko Kleiner, contents by Haier
Equally fascinating was our visit to one of Haier's more than 2,000 Quantum Shops, which are deeply embedded in local communities and serve over 10,000 households daily. These Micro Enterprises are part of several Ecosystem Micro Committees (EMCs) and play a vital role in identifying and capturing new customer and user needs.
Image source: Mirko Kleiner, contents by Haier
The day concluded with a visit to one of Haier's Lighthouse Factories, where we had the chance to experience firsthand what mass customization truly means.
Image source: Mirko Kleiner, contents by Haier
I might write separate posts about day 1 experiences and learnings. Stay tuned!
Day 2 - Haier ZeroDX Awards 2024
The main event, the Haier ZeroDX Awards, took place at the InterContinental Hotel in Qingdao on September 20, 2024. It was a dynamic blend of meetings, knowledge-sharing among thought leaders, and recognition of both internal and international nominees. The over 70 nominees, representing six continents and various industries, have all embraced the principles of zero distance. Like Haier, these organizations are management pioneers, eliminating bureaucracy to create flat, open, and highly empowering environments.
The event was moderated by Gary Hamel (Founder of MLab and Visiting Professor at London Business School) and Stuart Crainer (Founder of Thinkers50 and Co-Founder of the Business Ecosystem Alliance). In addition to the awards ceremony, international and Haier’s internal leaders presented the next stage of the New Economic Engine, RenDanHeYi 2.0, including its practical applications. A definite highlight was the opportunity to meet Haier's Chairman and Founder, Zhang Ruimin, along with Zhou Yunjie, CEO of Haier Group.
Day 3 - Discovering & connecting with the city & culture of Qingdao
After the awards, we had the opportunity to immerse ourselves in the local traditions, culture, and environment. Haier offered three unique experiences: Traditional Wellness, a Beer & Culture tour, and a Sailing Adventure.
Overall, the three-day program was an incredible experience, providing numerous opportunities for networking, knowledge exchange, and collaboration between business leaders and subject matter experts. I can wholeheartedly recommend attending. From my personal experience—and I've been to many similar events globally—this gathering had one of the most forward-thinking and progressive audiences I've ever encountered.
The Haier ZeroDistance Excellence Awards 2024
Before the formal ceremony, we had a gathering with the international HMI experts, and I was truly impressed by the depth of knowledge in the room, with experts from all over the world. Even more remarkable was the presence of senior leaders from Haier who joined the conversation. I had the honor of speaking first with Zhou Yunjie, the CEO of Haier Group, followed by an inspiring conversation with Zhang Ruimin, the Chairman and Founder of Haier.
Image source: Mirko Kleiner
To be honest, I was a bit shocked when Chairman Zhang took a seat right next to me, and suddenly, the press swarmed around us. Fortunately, Anika Steiner, who was sitting beside me, and I began the conversation, asking him a few questions and sharing some of our ideas. I have to say, both Chairman Zhang and CEO Zhou are immense figures in driving Haier's New Economic Engine. They are true leaders—highly knowledgeable and an invaluable asset to both the organization and everyone who had the privilege of engaging with them.
Image source: Mirko Kleiner, contents by Haier
Gary Hamel and Stuart Crainer kicked off the event, and we then moved on to announce the winners in the ZeroDX Incorporated category:
Image source: Mirko Kleiner, contents by Haier
raizen from Brazil - Is an integrated energy company with more than 46,000 employees operating across the entire bioenergy production chain. Over the last year, Risen created empowered end to end teams and processes to serve its largest fuel station customers, resulting in a 36 percent reduction in service times, a 40 percent increase in customer loyalty scores, and far less bureaucracy.
SD Guthrie from Malaysia - Is one of the largest producers of certified sustainable palm oil of operations in over 90 countries. The company shifted to a customer focused one stream model, empowering cross functional teams to act autonomously across functions and delivering new customer value.
SeamosUno from Argentina They described themselves as a liquid organization. Founded during the pandemic to rapidly distribute critical supplies to people across Argentina. They revolutionized crisis management by bringing together more than 300 organizations and ecosystem, including religious and social entities and state agencies in a highly networked management model. They allowed autonomous units to work at unprecedented speeds.
Ingersoll Rand from USA - Over the last five years, the company has embarked on a remarkable journey of entrepreneurship at scale. Employees now receive substantial equity ownership and take part in hundreds of empowered cross country teams, which have generated over three billion dollars worth of value.
ASA Group from San Marino - This is a metal packaging company with production sites across Europe specializing in tin plate cans. They employ 500 people and they're implementing micro enterprises and ecosystem micro communities that have full autonomy to decide their strategy, their goals, their investments, profit sharing, and coordinate activity with the group functions.
VARGROUP from Italy - A system integrator with over 3,800 employees across 13 countries in 2023. The company started a journey to become a platform organization and began implementing small independent business units called Micro Enterprise, with their own profit and loss responsibilities, shared service platforms to support these units and ecosystems across the collaboration.
Image source: Mirko Kleiner, contents by Haier
The next category focused on the Benchmark Innovators. These are companies that have embraced the principles of zero distance from their very inception—they were, to quote the famous Lady Gaga song, "born that way." Like Haier, these management pioneers have never been burdened by bureaucracy. Instead, they've built organizations that are flat, open, and highly empowering. And the winners are:
Image source: Mirko Kleiner, contents by Haier
Morningstar from USA - Founded by Chris Rupert, Morningstar is America's and the world's largest tomato processor. At Morningstar there are no managers at all, no titles. Employees negotiate their contracts with each other in what they call a colleague letter of understanding. And they have become a benchmark for self managing organizations around the world.
hoxby from UK- hoxby is a community based feed board. A business balancing profits with social impact and it delivers creative and strategic services with a distributed workforce across 43 countries. hoxbys associates work according to their own work style. Organizing around client needs, full autonomy, and participating in a profit sharing scheme.
„We started hoxby where each person is a micro entrepreneur to prove that everybody can have their work style that fits the unique nature of each person's lifestyle.“
— Alex Hirst, co-founder hoxby
BuurtzOrg from Netherlands/Global - The leading Dutch home healthcare organization. They have a hyper flat structure with more than a thousand teams and ten thousand nurses delivering services across the Netherlands. They have become one of the most benchmark healthcare organizations in the world. They deliver better patient care at lower cost, peer beating service, and there's much to learn from them.
„We focus also on creating healthier & better neighborhoods for people to live in “
— Thijs de Blok, CEO BuurtzOrg International
Social Innovation Academy (SINA) from Uganda - 81 social enterprise in Africa having been born in SINA so far, and we have 16 communities in 6 African countries, that empowers marginalised youth and refugees to become social entrepreneurs. At SINA, participants practice free responsibility, combining freedom and responsibility to create their own curriculum and launch social enterprises within a self organized community.
„We unleash the potentials of disadvantaged, marginalized young people, as well as refugees, to really become the change they want to see in the world, as social entrepreneurs “
— Etienne Salborn, Founder SINA
Image source: Mirko Kleiner, contents by Haier
I’m incredibly proud to announce that SINA, one of our nominees, has truly earned this recognition through their purposeful work! Their achievements have already been highlighted in Forbes. You can find more details in the recent article „Zeros For Heroes: New Awards For Organizational Innovation” by Bill Fischer.
We’ve also published their Ecosystem Case Study here.
Image source: Mirko Kleiner, contents by Haier
The next category is Emergent Excellence. Each change within an organization is significant, but the first step is often the most challenging, the most dangerous, and also the most important. These organizations have bravely stepped into the future, and the winners, hailing from countries such as Poland, Japan, Australia, and others, are:
Image source: Mirko Kleiner, contents by Haier
The winners have been asked some idea or principle that has helped them as they’ve been through this journey.
We focused on the employee's well being and the impact on our sales and our customer service after 30 years later was and still is very positive.
We decided to be radically transparent about salaries, revenue, profit, and people utilization. So people could understand the why behind the decisions.
I think everything started when I fired myself. So firing the boss is the key, so that the rest can really Running company. Getting out of the way.
Change is very hard, you have to start with yourself.
Image source: Mirko Kleiner, contents by Haier
The first round of international awards were followed by a Keynote „Celebrating today to Build the Future“ by Zhou Yunjie, CEO Haier Group.
Image source: Mirko Kleiner, contents by Haier
He spoke about the evolution of RenDanHeYi, Haier’s New Economic Engine, highlighting the reasons for its application and the urgent need for a new management model in the ever-evolving AI era. He also introduced the next phase, RenDanHeYi 2.0, Haier’s updated management model, which likely deserves a separate blog post of its own.
A key inspiration: they’ve shifted one of their core principles from "Zero Distance" to "Zero Boundaries", which now extends to collaboration with suppliers and other ecosystems. There’s so much more to share—wow!
Image source: Mirko Kleiner, contents by Haier
The next category was the ZeroDX Pioneers, individuals who have made outstanding contributions and achievements either in theoretical research and consultation or in practical innovations.
Image source: Mirko Kleiner, contents by Haier
Interesting to mention a new ISO standard is on its way!
Image source: Mirko Kleiner, contents by Haier
The next category was the ZeroDX AI, which aims to acknowledge the outstanding organizations within Haier, that have taken the lead in creating a new economic engine through the implementation of RenDanHeYi model and the zero-distance transformation.
San Yi Nico EMC - Trailblazer Award
EU HVACS EMC - Explorer Award
Image source: Mirko Kleiner, contents by Haier
The awards were followed by another very inspiring keynote by the founder and chairman of Haier Zhang Ruimin. He took as back to the thinking of Peter Drucker, the various industrial revolutions and his point of view of the future of Management.
Image source: Mirko Kleiner, contents by Haier
He outlined the three dimensions of Zero Distance, and I was particularly captivated by the concept of "Zero Signatory". When discussing excellence, he emphasized the idea of self-evolution and emergence—processes that never truly end. What resonated most with me was the focus on human value and a win-win mentality, which Haier takes so seriously that they operate under the principle of "Shareholders Last." Another key point was that even in highly digital organizations, such as those utilizing AI, governance and ways of working are equally, if not more, important. These will become increasingly critical as organizations adapt to new changes and market demands.
One noteworthy aspect of RenDanHeYi 2.0 is its broader inclusion of players beyond just customers. Haier applies the same win-win mentality to everyone, including suppliers, other ecosystems forming alliances, and even communities.
In the afternoon, the New Engine Roundtable Forum provided deeper insights into Haier’s strategic industries, including Medicine, CARtech, and Home Appliances.
It's truly impressive to see the capabilities Haier has developed. For instance, Haier can deliver a personalized car in under 15 days—from order to delivery—thanks to its advanced digital platform, which connects all internal and external ecosystem players in real time, alongside its mass customization capabilities. They can even manufacture different models and car types, from sedans to buses, on the same production line.
Another example, shared by Kevin Nolan, CEO of GE Appliances USA, highlighted how they are taking modular design to the next level, both in their products and organizational structures. They've started partnering with other ecosystems—such as menu providers, shops, and delivery services—which will make them unbeatable in the market.
I may write a separate blog post diving deeper into this later. Stay tuned!
Image source: Mirko Kleiner, contents by Haier
Gary Hamel closed the second day with his signature thought-provoking remarks—no surprise there! Seriously though, he made some excellent points about identifying the current challenges and key leverage points for change in management, organizations, and cross-company collaboration. He emphasized the need to start addressing these areas by engaging with relevant institutions far beyond our usual scope, such as investors, regulators, business schools, and government departments. The idea is to form a movement similar to how the medical community collaborates to combat diseases like cancer. Well, count me in, Gary!
Our Nominees
We are proud to of each of our nominees. You are leading examples with the New Economic Engine:
SINA (Social Innovation Academy) 🇺🇬 w/ Etienne Salborn -> their Ecosystem Case Study
eRevo AG 🇨🇭 energy Revolution w/ Gregor Zust -> their Ecosystem Case Study
Miles AS 🇳🇴 The value-based IT Company w/ Camilla Amundsen -> their Ecosystem Case Study
NET Engineering 🇮🇹 Engineering Agility w/ Silvia Furlan -> their Ecosystem Case Study
We’ll be sharing more details about their Case Study in separate upcoming post of this series, so stay tuned!
Conclusions
This was, without a doubt, one of the best events I’ve ever attended, and I’ve been to many across all kinds of domains. The maturity level of the participants—whether they were business leaders, researchers, or consultants—was exceptional. More people need to see and hear what we had the privilege to experience. The combination of engaging with the most disruptive, world-leading companies and connecting theory to real products and people was outstanding.
Content-wise, I’m a firm believer that the New Economic Engine will serve as a huge inspiration for organizations worldwide. The nominees and winners have proven that these principles are universally applicable, regardless of the size, industry, or culture of the organization. It has also reinforced that we’re on the right path with our movement, the LAP Alliance, but at the same time, there is still so much more to do and learn.
Book references
At the event the following books have been mentioned:
Management Challenges for the 21st Century by Peter F. Drucker
The Fourth Industrial Revolution by Klaus Schwab
Humanocrazy by Gary Hamel
The Startup Factory by Corporate Rebels
Global Business Model Shift by Umberto Lago
The Silicon Valley Model by Anika Steibler
Proximity by Robert C. Wolcott & Kahn Krippendorff
Next Post - Our Case Studies in more Details
Stay tuned for the upcoming posts in this series!
All Posts of this Series
Post 1 - Visiting Haier in Qingdao China
Post 2 - The New Economic Engine
Post 3 - Preview of the Haier ZeroDX Awards
Post 4 - The Haier ZeroDX Awards 2024
Post 5 - The Haier ZeroDX Awards Ecosystem Case Studies
Haier - Insights, Learnings and Experiences (Post 3 - Preview of the Haier ZeroDX Awards)
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits and collaboration with Haier, and why I believe the future of business lies in a NewEconomic Engine driven by AI and Business Ecosystems.
Post 3 - Preview of the Haier ZeroDX Awards
Mirko Kleiner - As a Thought Leader in Lean-Agile Procurement and a Registered Scrum@Scale Trainer, my personal mission is to unite various movements—Agile Leadership, Extreme Manufacturing, Scaling Agile, Lean-Agile Procurement, and more—to push the boundaries of Business Agility across organizations.
One company that stands out, and perhaps the only one of its kind globally, is Haier. With over 50 years of history as a white goods manufacturer, Haier has undergone its sixth major transformation, evolving into a network of over 4,700 Micro Enterprises (ME), all interconnected within Ecosystem Micro Communities (EMC).
Each ME operates with its own balance sheet, its own people, and collaborates closely with partners who share in the ECM’s success. This win-win philosophy, implemented on such a massive scale, is truly unprecedented and sets Haier apart as a pioneer in organizational and management innovation.
For over two years, the LAP Alliance has partnered with the Haier Model Institute (HMI), itself a Micro Enterprise within the Haier Group. Its mission is to spread the word about Haier’s New Economic Engine, or RenDanHeYi, which serves as the foundation of Haier's management model. For those unfamiliar with Haier, it is arguably the most disruptive and successful organization in the world, operating with virtually no bureaucracy and achieving an impressive annual growth rate of 20% over the last decade.
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits to Haier, and why I believe the future of business lies in a New Economic Engine driven by AI and Business Ecosystems.
Post 3 - Preview of the Haier Zero Distance Excellence Awards & our Nominees
In less than a week, the Haier Zero Distance Excellence Awards 2024 will once again take place in Qingdao, China. In this post, I’d like to give you a sneak peek of what to expect, some behind-the-scenes insights, and introduce you to our four outstanding nominees—each of whom has already implemented a New Economic Engine.
Stay tuned for an inside look at their remarkable journeys and how they are transforming their industries with innovative, user-centric ecosystems.
image source: HMI
Review - How it all started
During one of our regular calls, the Haier Model Institute (HMI) surprised me with the exciting news that I had been appointed as an HMI Expert and Partner—an unexpected and humbling honor. As part of this new role, I was invited to support the Haier ZeroDX Awards 2024, which I gladly accepted. The international judging panel was tasked with nominating leading individuals, organizations, or cases that have developed a New Economic Engine similar to Haier’s groundbreaking model.
image source: HMI
The ZeroDX Awards are one of the ways the Haier Model Institute (HMI) spreads inspiration about the New Economic Engine worldwide. I was deeply honored to be part of this mission and immediately began reaching out to my global network and clients. Soon after, we convened for the first time as the judging board.
Historically, the Haier Awards primarily celebrated Haier’s own success stories. However, with the inclusion of the international judging board, our goal is to broaden the scope—opening up the Haier ZeroDX Awards to recognize anyone who has applied similar principles of the New Economic Engine, regardless of industry or affiliation.
image source: HMI
Our Assessment
At the core of our assessment was RenDanHeYi and its foundational values and principles. These served as the guiding criteria for evaluating nominees, ensuring that each individual or organization exemplified the spirit of innovation, empowerment, and user-centricity that defines Haier’s New Economic Engine.
image source: HMI
The Haier Model Institute provided us with a comprehensive assessment framework designed to distinguish the good from the truly exceptional individuals, organizations, and cases. As an experienced coach, I’ve encountered many maturity models, but this one offered a fresh perspective, pushing the boundaries of what I had seen before.
Here are a few selected example questions from different domains of the assessment:
Level of Organizational Autonomy - Leadership
image source: HMI
image source: HMI
Level of Organizational Autonomy - Organizational Structure
image source: HMI
image source: HMI
Level of User Value - Ecosystem
image source: HMI
When my colleagues from the Haier Model Institute refer to the New Economic Engine, they are talking about the integration of the AI Economy with an Intelligent and Interactive Ecosystem. At its core is the Zero Distance Organization, where entrepreneurship and the principles of RenDanHeYi form the foundation for a thriving Ecosystem Economy. This combination enables seamless interaction between businesses and users, driving innovation and growth in a dynamic, user-centered environment.
image source: HMI
Our Nominees
We are proud to announce our nominees to the Haier ZeroDX Awards 2024. Four leading examples with the New Economic Engine:
SINA (Social Innovation Academy) 🇺🇬 w/ Etienne Salborn -> their Ecosystem Case Study
eRevo AG 🇨🇭 energy Revolution w/ Gregor Zust -> their Ecosystem Case Study
Miles AS 🇳🇴 The value-based IT Company w/ Camilla Amundsen -> their Ecosystem Case Study
NET Engineering 🇮🇹 Engineering Agility w/ Silvia Furlan -> their Ecosystem Case Study
We’ll be sharing more details about their submissions in separate upcoming post of this series, so stay tuned!
The nominees were evaluated based on the comprehensive values and principles of the Haier Management Model (RenDanHeYi)—the driving force behind success, rapid growth, and win-win outcomes within a partner ecosystem.
image source: HMI
Let’s keep our fingers crossed and wish the four nominees the best of luck at the upcoming awards! Regardless of the outcome, they are already shining examples for their employees, users, and ecosystem partners, showcasing the power of innovation and collaboration.
Big thank you to Bjarte Bogsnes, Paolo Sammicheli, my colleagues on the judging board panel Junhui (Sylvia) Guan Alidad Hamidi David Witney Emanuele Quintarelli Joost Minnaar Ross MacIntyre Saar Ben-Attar William Malek and the whole Haier Model Institute.
Conclusions
I’m always amazed when talking to like-minded leaders; regardless of the industry, region, culture, or size of the organization, they all reach the same conclusions. The connection between a strong Economic Engine, business success, and the positive impact on people / society, and the environment never fails to fascinate me. It makes me wonder—why isn’t this the standard ways-of-working everywhere?
The Haier ZeroDX Awards and the remarkable examples set by its nominees will hopefully inspire more people to adopt this mindset. After all, don’t we all prefer environments built on a win-win philosophy?
I’m really looking forward to meeting my esteemed colleagues from the judging panel, the Haier Model Institute, and all the like-minded leaders from all the nominated organizations.
Next Post - Learnings from the Haier ZeroDX Awards
Stay tuned for the upcoming posts in this series!
All Posts of this Series
Post 1 - Visiting Haier in Qingdao China
Post 2 - The New Economic Engine
Post 3 - Preview of the Haier ZeroDX Awards
Post 4 - The Haier ZeroDX Awards 2024
Haier - Insights, Learnings and Experiences (Post 2 - The New Economic Engine)
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits and collaboration with Haier, and why I believe the future of business lies in a NewEconomic Engine driven by AI and Business Ecosystems.
Post 2 - The New Economic Engine
Mirko Kleiner - As a Thought Leader in Lean-Agile Procurement and a Registered Scrum@Scale Trainer, my personal mission is to unite various movements—Agile Leadership, Extreme Manufacturing, Scaling Agile, Lean-Agile Procurement, and more—to push the boundaries of Business Agility across organizations.
One company that stands out, and perhaps the only one of its kind globally, is Haier. With over 50 years of history as a white goods manufacturer, Haier has undergone its sixth major transformation, evolving into a network of over 4,700 Micro Enterprises (ME), all interconnected within Ecosystem Micro Communities (EMC).
Each ME operates with its own balance sheet, its own people, and collaborates closely with partners who share in the ECM’s success. This win-win philosophy, implemented on such a massive scale, is truly unprecedented and sets Haier apart as a pioneer in organizational and management innovation.
For over two years, the LAP Alliance has partnered with the Haier Model Institute (HMI), itself a Micro Enterprise within the Haier Group. Its mission is to spread the word about Haier’s New Economic Engine, or RenDanHeYi, which serves as the foundation of Haier's management model. For those unfamiliar with Haier, it is arguably the most disruptive and successful organization in the world, operating with virtually no bureaucracy and achieving an impressive annual growth rate of 20% over the last decade.
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits to Haier, and why I believe the future of business lies in a New Economic Engine driven by AI and Business Ecosystems.
Post 2 - RenDanHeYi the New Economic Engine
In Post 1 - Visiting Haier, I briefly mentioned the New Economic Engine, and in this post, I’d like to dive deeper into its details. This should also demystify how thousands of Micro Enterprises (MEs) are effectively organized within Haier.
It all began over 50 years ago when Haier’s former CEO, Zhang Ruimin, introduced the first wave of groundbreaking improvements. He firmly believed that true transformation must start at the management level and focus on how people are treated, setting the foundation for what Haier has become today.
image source: HMI
RenDanHeYi an overview
After years of continuous refinement, a New Economic Engine emerged, rooted in the Haier Management Model, RenDanHeYi. It’s important to note that the development of RenDanHeYi is still evolving—and may never truly be "finished." This flexibility and constant adaptation are part of what makes it so powerful and future-proof.
image source: HMI
RenDanHeYi is a blend of three elements: Ren (the people), Dan (user value), and HeYi (the combination of employee and user value). At Haier, there are no traditional employees—everyone is treated as an adult or, as they put it, an entrepreneur. At the heart of all their activities is the user and their needs, whether that’s an internal user or the ultimate customer.
While many companies have shifted towards customer-centric models, Haier’s approach stands out. They place equal value on their employees (entrepreneurs) and users (customers), creating a win-win mindset where everyone, including third-party partners, shares in the success. This goes far beyond traditional gain-sharing models, putting shareholders last and focusing on long-term user relationships rather than one-off transactions.
“We are paid by the user”
— ME Owner
The key to this system’s success lies in the alignment of thousands of Micro Enterprises (MEs). Each ME operates completely autonomously, fully empowered, and accountable to the user—literally, as they often say, "We’re paid by the user." Since each ME manages its own balance sheet, this is very much the reality.
This extreme decentralization is unified by the user scenarios. MEs form Ecosystem Micro Communities (EMCs) to ensure maximum alignment and collaboration. The glue that holds these EMCs together is the EMC contract, which ensures clear roles, responsibilities, and shared objectives.
Strategy lies within the ME
I’ve had the privilege of meeting and exchanging ideas with Kevin Nolan, President and CEO of GE Appliances, a Haier Company, on two occasions. What he shared about Micro Enterprises (MEs) might sound unsettling to anyone unfamiliar with full empowerment. He explained that he's no longer the one to direct or overrule the MEs in terms of strategy, objectives, or decision-making. Instead, the MEs—being closest to the market and the users—are the ones who own and define their strategies and goals.
Can you imagine the speed and motivation this level of autonomy unleashes? It’s a radically different way of working, where those with the most direct insight into user needs are fully empowered to act.
image source: HMI
In fact, under Kevin’s leadership and by applying first principles of the RenDanHeYi model, GE Appliances went from being on the brink of bankruptcy to becoming the market leader in the United States in just a few short years. It’s a testament to the power of this approach, where empowering Micro Enterprises and aligning them with user needs has driven remarkable transformation and success.
image source: HMI
Haier itself has now fully transformed into nearly 5,000 Micro Enterprises (MEs), with a total of over 80,000 entrepreneurs. This shift significantly reduced the need for more than 10,000 middle management roles, creating a streamlined and minimum viable bureaucracy. By eliminating excess layers of management, Haier has built a more agile, empowered organization focused on innovation and rapid decision-making.
3 Rights of a ME
For a Micro Enterprise (ME) to be fully empowered, it must possess three key rights:
The Right to Make Decisions
The Right to Assign Resources
The Right to Reward Performance
These rights enable MEs to operate autonomously, driving their own strategies, allocating resources, and rewarding success, which fuels motivation and agility within the organization.
image source: HMI
These three rights are crucial for enabling the independence of Micro Enterprises (MEs), allowing each to operate like a startup. During their setup and beyond, MEs are enabled by shared platforms for finance, HR, and other resources, as well as initial funding. Interestingly, ME owners and their entrepreneurs can also invest their own money if they choose, further aligning them with the entrepreneurial mindset. Haier only provides a base salary, typically below market average, with the opportunity for entrepreneurs to significantly increase their income by sharing in the ME’s success.
Interestingly, in all my conversations with ME owners, colleagues at the Haier Model Institute, and others, money was never the key driver for motivation. However, the opportunity to be treated as a true entrepreneur, with both the risks and rewards, was a major motivator, showing that recognition and autonomy are what really matter.
A ME Isn’t Enough
As I mentioned in Post 1, Haier and its MEs are deeply focused on user scenarios. Let’s take another example: Smart Cooking. Clearly, no single ME can design, manufacture, sell, ship, and maintain something as complex as an oven. This is where MEs form temporary alliances with other MEs, creating Ecosystem Micro Communities (EMCs). In my conversations with colleagues from the Haier Model Institute, they shared that, in the early stages or RenDanHeYi, many of the Micro Enterprises (MEs) were primarily focused on their own interests and success.
The key tool for aligning multiple MEs is the EMC Contract. This mutual agreement is regularly updated, typically on a monthly basis. It lays out joint objectives, investments, and potential wealth sharing, along with a structured performance management system. What’s truly unique is that if an ME underperforms, it can be replaced—quickly and without hesitation. This may sound harsh, but it has a powerful side effect: it ensures that if an alliance isn’t producing the expected results, the EMC and even the MEs can swiftly reorganize themselves.
The EMC Contract served as the inspiration for our new Lean Ecosystem Canvas, which I'll explain in more detail through the eRevo success story. Thanks to the canvas, eRevo was able to set up their EMC in just a single day!
Image Source: LAP Alliance
This dynamic system eliminates the possibility of “riding dead horses,” something all too common in traditional projects. At Haier, if something isn’t working, the system adapts, reconfigures, and keeps moving forward—ensuring continuous progress.
image source: HMI
Haier categorizes Ecosystem Micro Communities (EMCs) into three distinct types:
Experience EMCs – These focus on interacting with users through touchpoint networks, capturing new user needs to continuously upgrade the user experience.
Solution EMCs – These are responsible for developing specific solutions designed for implementation, iterating based on user feedback to meet evolving needs.
Shared Service Platforms – These provide essential enablement to the EMCs, such as finance, HR, IT, and legal assistance.
A crucial element of Haier’s RenDanHeYi model is the principle of Zero Distance to the User. This means that all EMCs—whether focused on user experience, solutions, or shared services—are encouraged to establish direct contact with users or customers. Everyone in the ecosystem is responsible for staying closely connected to user needs, ensuring that the entire organization remains aligned with the ultimate goal: delivering value directly to the customer.
Example: Internet-of-Food Smart Cooking EMC
The visualization below illustrates how Haier is organized. In this example the overall topic is the Internet of Food, that includes a user scenario around Smart Cooking driven by an EMC. The EMC consists of multiple ME's including external partners.
image source: HMI
The colleagues at the Haier Model Institute shared a fun story about how this particular EMC has extended their mission. Haier has a long history in the appliances business, but what truly sets them apart is their relentless focus on user needs. One day, an employee remarked that while Haier made excellent ovens, it was still difficult to cook a perfect Beijing Roasted Duck—a dish beloved by almost every Chinese household.
Inspired by this insight, a new Micro Enterprise (ME) was born. This ME partnered with the existing Haier Smart Oven ME and collaborated with a "Super Chef" to fine-tune the oven settings specifically for this dish. The result? An EMC that not only improved the user experience but also catered directly to a cultural favorite!
In almost no time, this initiative addressed a significant user need and enhanced an existing Haier product, integrating it seamlessly with their IoT Menus platform and beyond. This rapid response not only enriched the product but also reinforced Haier's commitment to user-driven innovation.
Conclusions
As a senior Agile Coach, I’m deeply familiar with concepts like empowerment, customer centricity, and scaling team-of-teams. With Lean-Agile Procurement, we've extended these values and principles across organizations. However, RenDanHeYi truly represents a New Economic Engine, taking the best of existing practices and pushing them to the next level. What I admire most is its win-win mindset, the profound trust it places in both internal people and external partners, and its unwavering focus on user needs.
You might be thinking, “This sounds impossible in my context!”—but it’s not. In an upcoming post, I’ll share how Haier approaches the transformation in acquired companies and how you can start small and gradually build towards implementing this New Economic Engine, with big ambitions in mind!
Next Post - Learnings from the Haier ZeroDX Awards
Stay tuned for the upcoming posts in this series!
All Posts of this Series
Post 1 - Visiting Haier in Qingdao China
Post 2 - The New Economic Engine
Post 3 - Preview of the Haier ZeroDX Awards
Post 4 - The Haier ZeroDX Awards 2024
Haier - Insights, Learnings and Experiences (Post 1 - Visiting Haier)
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits and collaboration with Haier, and why I believe the future of business lies in a New Economic Engine driven by AI and Business Ecosystems.
Post 1 - Visiting Haier in Qingdao, China
Mirko Kleiner - As a Thought Leader in Lean-Agile Procurement and a Registered Scrum@Scale Trainer, my personal mission is to unite various movements—Agile Leadership, Extreme Manufacturing, Scaling Agile, Lean-Agile Procurement, and more—to push the boundaries of Business Agility across organizations.
One company that stands out, and perhaps the only one of its kind globally, is Haier. With over 50 years of history as a white goods manufacturer, Haier has undergone its sixth major transformation, evolving into a network of over 4,700 Micro Enterprises (ME), all interconnected within Ecosystem Micro Communities (EMC).
Each ME operates with its own balance sheet, its own people, and collaborates closely with partners who share in the ECM’s success. This win-win philosophy, implemented on such a massive scale, is truly unprecedented and sets Haier apart as a pioneer in organizational and management innovation.
For over two years, the LAP Alliance has partnered with the Haier Model Institute (HMI), itself a Micro Enterprise within the Haier Group. Its mission is to spread the word about Haier’s New Economic Engine, or RenDanHeYi, which serves as the foundation of Haier's management model. For those unfamiliar with Haier, it is arguably the most disruptive and successful organization in the world, operating with virtually no bureaucracy and achieving an impressive annual growth rate of 20% over the last decade.
In this series of blog posts, I’ll be sharing key insights, learnings, and experiences from my visits to Haier, and why I believe the future of business lies in a New Economic Engine driven by AI and Business Ecosystems.
Post 1 - Visiting Haier in Qingdao, China August 2024.
During one of our regular calls, the Haier Model Institute (HMI) surprised me with the news that I had been appointed as an HMI Expert and Partner—an honor I hadn’t anticipated. As part of this role, I was asked to support the Haier ZeroDX Awards 2024 by nominating leading individuals, organizations, or cases that have developed a New Economic Engine similar to Haier’s. I was deeply honored and immediately began reaching out to my global network and clients. Before long, I had gathered a handful of outstanding candidates—but that’s a story for another post.
Around the same time, I was in the final stages of planning my business trip to Melbourne, Australia. I explored the possibility of altering my return itinerary to include a visit to Haier. Once I got the green light from my travel agency, I quickly contacted my colleagues at HMI. They were thrilled and put together an exciting two-day program for my visit.
Arriving in Qingdao
Despite having traveled to countless countries, this was my first trip to China. I was a bit nervous, not knowing what to expect since I don’t speak the language. I arrived late at night at Qingdao International Airport. Qingdao, considered a small and relatively new city by Chinese standards, still boasts a population of over 8 million. I was immediately blown away by the city's modern infrastructure and quickly fell in love with the rich Chinese culture and cuisine.
1st Day at Haier
On my first day at Haier, I finally had the pleasure of meeting my colleagues from the Haier Model Institute (HMI) in person. We kicked things off with a strategic discussion, sharing experiences, diving into the details of RenDanHeYi, which I’ve explained in more depth in the Post 2 - The New Economic Engine.
After a pleasant lunch, I had the privilege of visiting the Haier Exhibition Center, an experience that truly showcased Haier's innovation and impact.
This is how I was welcomed at Haier—truly awesome! The Haier Exhibition Center is something everyone should experience. Beyond showcasing Haier's rich history, it highlights the four major transformations the company has undergone. A key turning point was the dismantling of the traditional hierarchy, freeing employees and empowering them to act as entrepreneurs—one of the core principles of RenDanHeYi.
This pivotal moment occurred back in 2006, when Haier turned its traditional hierarchy upside down, revolutionizing the way the company operated.
Haier became the world’s first IoT ecosystem brand, and create a new paradigm of global brand in the IoT eary.
As I walked through the exhibition, I struggled to keep up with the overwhelming number of insights, lessons, and success stories. Beyond Haier’s impressive journey of continuous improvement and disruptive changes, I was introduced to their innovative platforms. One standout example is their energy platform, which connects a wide range of energy consumers, producers, and transportation facilities for various types of energy, including gas, oil and electricity.
Imagine a portal capable of managing the energy needs of an entire country—it’s truly mind-blowing. It made me reflect on a recent sourcing project I was involved in for smart meters in gas pipelines, which now seems incredibly small in comparison. What’s fascinating is that Haier’s platforms are designed to empower their Ecosystem Partners, like power producers, allowing them to maintain their independence while benefiting from the platform’s success. It’s a true win-win model, where everyone gets a piece of the pie!
2nd Day at Haier
On my second day at Haier, my colleagues from the Haier Model Institute (HMI) invited me to visit one of their ecosystem partners—a point of sale for consumer goods within the Smart Building user scenario. Just like Haier's platforms and ecosystems, everything is viewed in connection, and their approach to products is no different.
Traditionally, Haier focused on producing and selling individual products, like refrigerators. However, their perspective has evolved. Instead of focusing solely on products, they now design user scenarios, where products are interconnected and work seamlessly together to enhance the customer experience.
An example of Haier’s evolution in the appliance product line can be seen through four transformative waves:
Wave 1: Smart Appliance – Connecting individual products to the internet.
Wave 2: Smart Home – Enabling products to communicate with each other through IoT.
Wave 3: Smart Living – Creating a seamless user experience across all products.
Wave 4: Smart Building – Designing an integrated user experience throughout entire buildings.
This represents just one of Haier's paradigm shifts. Imagine in Wave 4, renting a flat that was fully built, maintained, and equipped by Haier, where all appliances are included in your monthly rent—essentially eliminating competition.
To make this vision a reality, Haier’s Micro Enterprises must collaborate around these user scenarios, continuously adapting and reorganizing based on market demands. In essence, the entire organism consisting of internal and 3rd party ME's becomes fluid, responding dynamically to shifting needs.
The advantage being also a screen manufacturer is that even your point of sale can stand out, creating an inviting and immersive experience for your clients.
In the store, I finally realized just how serious Haier is about their user scenarios. The store was designed like an actual flat, allowing us to walk through and experience different rooms and scenarios firsthand. For example, I could simulate waking up, standing on a smart scale, and receiving my key information directly from the mirror. It was a seamless blend of daily life and technology, showing how deeply Haier integrates user-centric innovation into their products.
By the way, the moment I stepped off the scale, the refrigerator automatically recognized my body metrics and adjusted the suggested menu plan based on the available food. I’m not entirely sure if that’s something I want or if it’s truly necessary, but it was undeniably impressive to see how seamlessly everything works together. Despite being developed by thousands of independent Micro Enterprises, every component is perfectly in sync, showcasing a remarkable level of alignment.
In the afternoon, we had the opportunity to meet with a Micro Enterprise owner for a deeper exchange. What started as a conversation with a few typical questions quickly evolved into a session at the whiteboard, sketching out the organization’s structure and ways of working. That’s a topic worthy of its own dedicated post!
Conclusions
I was already quite familiar with Haier's New Economic Engine and its foundation, the Haier Management Model (RenDanHeYi). However, seeing it in action left me truly blown away. The way it is applied, its profound impact on people, and its commercial success are remarkable.
It’s fair to say that Haier is at least 20 years ahead of any competitor and stands as the most disruptive organization in terms of ways of working. Their unwavering focus on user scenarios, the empowerment granted to Haier’s entrepreneurs and 3rd party ecosystem partners, and the unmatched pace of innovation—both in products and organizational structure—set them apart from the rest of the business world.
Next Post - Learnings from the Haier ZeroDX Awards
Stay tuned for the upcoming posts in this series!
All Posts of this Series
Post 1 - Visiting Haier in Qingdao China
Post 2 - The New Economic Engine
Post 3 - Preview of the Haier ZeroDX Awards
Post 4 - The Haier ZeroDX Awards 2024
"In order to change the rules, you've got to change the mindset."
"In order to change the rules, you've got to change the mindset."
We're excited to share the video recording of Pete Behrens' talk at the World Agility Forum. As part of the "Scaling Agile Across Companies" stream, Pete highlights a crucial aspect: "In order to change the rules, you've got to change the mindset."
Every organization's culture relies on a collection of mindsets, inherited from its history and the dominant beliefs.
Practices, Frameworks and Scaling: A Deadly Combination ?
Practices and frameworks are like recipes—good starting points, but they won’t lead to delivering three-star Michelin cuisine on their own.
These "recipes" are widely influenced by the organization’s culture, like the different spices you could add to achieve very different flavors.
For instance, OKRs* implemented in a company believing that success relies on achieving 100% of objectives might lead to a slow pace and lack of innovation. In contrast, at Google, the culture encourages taking risks and stretching limits, leading to different outcomes from the same framework.
Scaling practices and frameworks without understanding the different teams' or companies' mindset will likely end-up with a lot of misunderstanding and poor results.
The Importance of Culture Fit
Pete emphasizes that we often start by scaling processes and practices, which is the easiest part. He recommends starting by changing the mindset since it will influence all the processes.
At the Lean Agile Procurement (LAP) Alliance, we promote an approach that fosters genuine conversations to address cultural fit between companies, as we believe they are key to overcoming the biggest challenges.
Find more about Agile Leadership Journey
*OKRs Objectives and Key Results is a popular framework to set aligned objectives at all the organization levels
Current Trends & Crisis in Procurement - How to integrate this with Lean-Agile Procurement
The world has become very unpredictable (supply chain disruptions, inflation, ..), new trends arrive every other day (ESG, circular economy, sustainability, diversity, ..) while the demand in procurement is increasing. So how to integrate all this, and do we need to adapt anything in Lean-Agile Procurement?
The world has become very unpredictable (supply chain disruptions, inflation, ..), new trends arrive every other day (ESG, circular economy, sustainability, diversity, ..) while the demand in procurement is increasing. So how to integrate all this, and do we need to adapt anything in Lean-Agile Procurement?
Many procurement organisations and it's professionals are getting overwhelmed by the unpredictability, new trends and increasing demands.
The only thing we can predict: Things are unpredictable.
—- Tim Cummins, President World Commerce & Contracting
Let's take one of the latest trends in procurement - ESG (Environmental, Social, Governance). It is currently one of the top priorities in the c-suite, a head of ESG is often hired, etc. Don't get me wrong, ESG deserves its place and procurement needs to embrace it. However, my observation of the day-to-day work of procurement professionals doesn't really change anything. They are still following their internal procurement process, so that such an important topic never really scales.
So the question is how to scale new trends and integrate current challenges such as supply chain disruptions, rising prices, etc.?
Well, by applying Lean-Agile Procurement we work cross-functional. This allows us to invite experts into the team as needed. While the aim is always to enable the team members in all new topics. This allows any new issue to be scaled across the organisation over time.
In additon, the Lean Procurement Canvas is a nice summary of the key aspects of a strategic sourcing case and drives the right conversations. To take this to the next level we've added some new questions to the "Cheat Sheet" that relate to the current trends/crises such as ESG.
We look forward to your feedback!
Free download here (Bottom of homepage)
Author
Scaling Agile beyond Companies
In this article you’ll learn why Tesla never had a chip shortage, how you could select new strategic partners in DAYS instead of Months and so how to start scaling agile beyond your company with your preferred Agile Framework and Lean-Agile Procurement.
The Covid-19 crisis made it obvious we are at risk if we don’t manage our dependencies to our suppliers and partners along the whole supply chain. They are an essential part of our value stream/s we need to take into consideration to achieve true Business Agility. In other words we are only as agile as our partner ecosystem is.
In this article you’ll learn why Tesla never had a chip shortage, how you could select new strategic partners in DAYS instead of Months and so how to start scaling agile beyond your company with your preferred Agile Framework 1 and Lean-Agile Procurement 2 (Short LAP).
A retrospective - Scaling cross-Company today
If you’re not an agilist you need to know that out of good practices a number of scaling frameworks have evolved in the past years. You might have heard of SAFe1.1, Scrum@Scale1.2, the Spotify “Model”1.3, Agile@Scale DA1.4, LESS1.5 or NEXUS1.6. The purpose of all of them was to scale the benefits of aligning around value with cross-functional teams to the whole organization.
Find out more about the benefits of these scaling frameworks in the Annual State of Agile Report.
Where are the suppliers in the Agile Scaling Frameworks?
The suppliers are basically treated as team members, full cross-functional teams or even integrated services. Depending on the business suppliers might have other important roles e.g. as advisors in the portfolio, etc.
Image source: compare with framework references
In other words, all the frameworks like to apply the same values & principles to our suppliers and partners, which is very good at least in theory :-)
Find out more about suppliers in agile in the article suppliers@SAFe.
Reality check - Top 3 challenges with suppliers while scaling agile?
Challenge 1: Who’s responsible for the suppliers?
In non-agile organizations the commercial functions such as sales, procurement, partner management, etc. have been responsible for the supplier management. To be honest the agile community hasn’t really found a more agile way for most of those tasks and responsibilities yet. They are mainly treated as shared services. In the best case they’ve visualized their work via a Kanban Board or started to experiment with Scrum. If you think of your latest negotiation you’ll agree that they are far away from applying agile values yet.
Image source: scrumatscale.com
To be fair, good Scrum Masters or on higher level Scaled Scrum Masters have taken over some of the tasks to e.g. manage a supplier, the contracts, etc.
“Procurement & Sales are responsible for up to 80% of a Company’s revenue”
The potential is huge if we think of the fact that procurement and sales are responsible for up to 80% of a company’s revenue!-Imagine the direct business impact, if we could improve time-to-market by just some percentage?!
Challenge 2: How to select key partners?
In Portfolio Management where often the need for a new strategic partnership is defined today we’re using e.g. the Business Canvas. The canvas has a section “Key Partners”, but there’s no approach based on agile values & principles to find and select those.
Image source: strategizer.com
Find out more selecting a partner in agile e.g. in the article Strategic Vision & Backlog Prioritization in Scrum@Scale.
Challenge 3: How to align contracts with Agile collaboration?
The global annual State of Agility in Procurement & Supply showed that 78% of professionals in commercial functions have less than 3 years experience in Agile Contracts.
Image source: LAP Alliance
In other words even if the parties like to collaborate in an agile way they most likely suffer from a good legal foundation.
Find out more in the article Agile Contracts in SAFe or download the full report about the State of Agility in Procurement & Supply here.
Scaling cross-Companies with Lean-Agile Procurement!
Let’s find out what we could learn from DevOps, how you’ll improve time to market by 400-800% applying Lean-Agile Procurement to your supplier selection approach and how all of this will help you in scaling agile cross-company.
History
Traditional sourcing approaches are transactional 3, where the buyer side defines the scope and the supplier side offers a solution incl. price for it. This process called Request for Proposal (short RfP) hasn’t really changed in the past 120 years. If applied to complex cases such as e.g. introducing a new ERP system with a new partner it delays time to market by 6-12+ months on average 4. The main reason is that all the details in scope e.g. new business processes, technical integrations, etc. can’t be foreseen in a reasonable amount of time or will change as we go.
Lean-Agile Procurement in a Nutshell
Lean-Agile Procurement (short LAP) was invented to introduce an approach to find and select a key partner based on agile values & principles in DAYS instead of months. The selection is highly collaborative, similar to a PI-planning having all the right people from all parties -even competitors- in the same room co-creating their proposals and an agile contract together. LAP has become the global standard, winning in 2020 the World Procurement Awards with the success story “Sourcing an ERP System in just 2 DAYS” 4 and is currently changing the view on Business Agility.
Of course will the sourcing of all the simple to complicated staff such as e.g. stationary be digitized. Those so-called operational tasks are up to 90% of such centralized services. In other words the sweet spot of LAP is complex or strategic sourcing 3.
The Agile Team redefined
After more than 5 years experience applying LAP in every industrie it became obvious that in a truly agile organization consisting of team-of-teams e.g. procurement, sales and partner management will become additional capabilities every agile team needs to have. Some people call LAP “DevOps on Steroids” or just the next logical evolution of it.
“Lean-Agile Procurement is like DevOps on Steroids!”
In practice this means we add all capabilities we’ll need to define strategy, customer needs, sourcing strategy, delivery, operation and even to contract to an agile team. In other words the agile team gets full ownership over the product livecycle. While applying LAP e.g. in Banking it turned out that compliance is a huge roadblocker, so we added somebody from compliance to the team too.
Image source: LAP Alliance
A further advantage of such an end-to-end agile team or team-of-teams is that we overcome the transactional nature of e.g. sourcing. As we all know handovers are always a risk, delaying time-to-market, etc.
The Lean Procurement Canvas
LAP doesn’t make the existing sourcing process more efficient. Instead the focus lies always on being effective – doing the RIGHT things. In an uncertain environment this also means saying goodbye to detailed specifications, and accepting that anything can change at any time. In today’s smart business development scene the Business Model Canvas 5 is a living document and 100-page business cases are a thing of the past. LAP demands the same for defining a partnership, and the Lean Procurement Canvas 2 provides it.
Image source: LAP Alliance
The canvas is divided in the right / left side, where on the right the customer or buyer side is represented and on the left we gather the information about the partner or supplier. The four main sections are about the WHY <> WHAT <> HOW. As an integral part of the canvas we also define the WHO or the people from both parties that will collaborate. A social- and cultural fit turned out as a very important success criteria for any collaboration.
For more details download the cheat sheet or start with it in your favorite tool Mural.co / Miro.com.
““By focusing to the customer needs Tesla never ran into a Chip shortage””
During the Covid-19 crisis the big German car manufacturers ran and are still running into huge shortages e.g. in Computer Chips. Main reason was that their sourcing strategy was based on lean principles only. They in fact had prefered suppliers for each component and the component was exactly defined with focus to the HOW and the lowest price. With LAP we focus on the buyer side on the WHY and WHAT and wanna stay as agile on the HOW and with that also on the supplier. Following this principle Tesla never ran into that problem until today.
“The Lean Procurement Canvas is an Agile Contract”
it turned out that the Lean Procurement Canvas is to most lean Agile Contract beside a verbal agreement.
The Canvas can be used by startups, corporations who would like to:
Setup and align a new internal, mixed or outsourced 3rd party agile product delivery team
Co-create an agile agreement with multiple vendors in the same room simultaneously
Assess and manage existing teams or partnerships with 3rd parties
Close a deal more effectively as a vendor
It has been used by Air France KLM, Gazprom, BNP Parisbas, Auckland Council and many more from the private and public sector.
SAFe / Scrum@Scale / etc & LAP Approach - Source a key Partner in Days!
Let’s see how all fits together and how you could source a key partner in DAYS too!-The LAP Approach has four generic steps that need to be implemented in every context differently. The Lean Procurement Canvas is our guiding tool, while it is by definition a living document throughout a partnership and can always just be a summary. We usually end up with a ton of attachments to it such as e.g. personas, a user story map, collaboration model, contractual framework, etc.
To make it more clear, find the following four generic steps of the LAP Approach and some explanation how this could fit into SAFe, Scrum@Scale and the Spotify “Model”.
Image source: LAP Alliance
Find out more about the Big Room Workshop/s in LAP in the Article Big Room Workshop.
Business Outcomes with Lean-Agile Procurement
CKW a swiss Energy Company together with flowdays, won the 2018 CIPS-Europe award 7 at the Budapest ProcureCon event. Find some empirical data from that success story to get an idea about the business outcomes with LAP in comparison to traditional sourcing approaches.
Time-to-market was radically improved from 4 months to 4 weeks while the efforts could be cut in half. Through focusing to prioritized customer needs and talking about any risk / concern, etc. while the big room workshop we’re able to improve spent by 80%. The agile team assessed not just the best product, but the full package including the best social- & cultural fit. 9 out of 10 recommended the LAP Approach, even the shortlisted vendors that didn made it.
In terms of delivery the project was a success too. The jointly agreed objectives have been overachieved within the initial budget and time. In fact the team was faster as expected and could add more to the initial plan.
Beside the success of the project with LAP we deliver value faster and create the business outcomes earlier, which often means millions depending on the case.
Conclusion
Lean-Agile Procurement extends the point of view of Business Agility to the external partners and fosters a thinking of Adaptive Partner Ecosystem 6 instead of a static supply chain. Where the agile team is the core of an agile organisation and needs to extend their capabilities with procurement / sales / partner management skills to own the whole product life cycle.
Also it gives an answer to the 3 challenges with suppliers in scaling Agile frameworks and applies the same principles of co-creation as in e.g. a PI-Planning to sourcing and partner management, while an agile contract is more seen as the result of the agreement developed in the Big Room Workshop.
Agilists applying any of the existing Scaling Frameworks have the potential to become pioneers by creating much bigger business impacts faster by scaling agile cross-company with Lean-Agile Procurement.
More than that, a pilot with LAP is also a very good starting point for a company becoming agile. In most of our success stories the company wasn’t agile yet, or not yet in the leadership and for sure not in Procurement nor Sales. The urgency of a strategic sourcing case helped to get the management support and as with an end-to-end agile team we’re introducing a flavor of agility in every function LAP turned out as a very good catalyst!
Autor
References
(1.1) Scaled Agile Framework by Scaled Agile
https://www.scaledagileframework.com
(1.2) Scrum@Scale by Scrum Inc. Jeff Sutherland
(1.3) Spotify “Model” by Spotify
https://engineering.atspotify.com/2014/03/27/spotify-engineering-culture-part-1/
(1.4) Agility@Scale by Disciplined Agile - PMI
https://www.pmi.org/disciplined-agile/agility-at-scale
(1.5) Large-scaled Scrum by The LeSS Company B.V.
https://less.works/less/framework
(1.6) NEXUS by Scrum.org
https://www.scrum.org/resources/nexus-guide
(2) Lean-Agile Procurement & Lean Procurement Canvas by LAP Alliance, https://www.lean-agile-procurement.com
(3) Strategic sourcing process outlined via https://en.wikipedia.org/wiki/Strategic_sourcing
(4) “SwissCasinos case study”, SwissCasinos & flowdays, 2020 https://mailchi.mp/flowdays.net/procurement-award-winner
(5) Business Model Canvas, Alex Osterwalder https://www.strategyzer.com/canvas/business-model-canvas
(6) Adaptive Partner Ecosystem by Mirko Kleiner 2018
(7) CIPS Supply Management Awards Europe 2018 - Best Procurement Consultancy Project
https://www.cips.org/en/supply-management/news/2018/october/dwp-triumphs-in-cips-sm-awards-europe/, https://flowdays.net/de/blog-de/2018/10/22/medienmitteilung-ckw-amp-flowdays-gewinnen-supply-management-award-2018-europe
“Lean-Agile Procurement is like DevOps on Steroids”
Shorter & readable Contracts - Disruption or just faster horses?
UK government lawyers have created a shorter, more user-friendly public sector contract to encourage smaller businesses (SMEs) to bid for £12m worth more easily. Is this really a disruption or just faster horses?
UK government lawyers have created a shorter, more user-friendly public sector contract to encourage smaller businesses (SMEs) to bid for £12m worth more easily. Is this really a disruption or just faster horses?
As reported in the supply management news 2 days ago the Government Legal Department (GLD) said Chris Stanley, a lawyer from its commercial law group, spent the past year reducing around 50,000 words of the existing Crown Commercial Service (CCS) contract terms to produce the new slimline public sector contract (20 pages long). Furthermore they
- made the contracts readable, even if you’re no lawyer could understand it
- like to become a benchmark for good business ethics by integrating some new corporate social responsibility obligations.
A lot of companies stopped bidding in public sector
Motivation of this was to encourage encourage smaller businesses (SMEs) to bid again for £12m worth more easily. From my own experience (compare with the blog post the facts about RfP) I can say, that a lot of companies stopped bidding in public sector as of too much effort/costs through a too complex bid process and contracting.
Is this a useful evolution or don't we need a revolution?
However, looking at this changes by the UK government with an outside perspective it’s looks to me like Henry Ford used to say.
“If I’d asked people what they wanted, they would have said faster horses.”
Don’t get me wrong. They had definitely the right intention and got a really good achievement from a legal point of view. However, I believe if we ask just the lawyers to simplify "there“ part we won’t get the full potential and just get faster horses instead of e.g. a „self-driving car".
The right people have to answer the right questions
For a real disruption we’ve to bring together all stakeholders of the whole value chain (customers, government, procurement, sales, lawyer, etc). Together we have to answer the „real“ questions, such as:
- why do we need a contract at all?
- how could we increase trust even before we’ve started cooperation?
- what can we do to increase time-to-market and so deliver business value to our customers earlier?
While development of lean-agile procurement we’ve asked this questions e.g. "what if we have to decide in one day?“ and together we've found applicable answers.
Learn more under Approach, we’re keen on your feedback.
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How Karlstad Hospital accomplished Objectives through Partnering and Agile Contracts
Karlstad Hospital has procured new construction and extension in order to conduct effective care with a budget of about €105 million. The new construction was built on time, on budget and was ready for business on Day 1. The hospital has also saved Värmland County Council €300 million. The secret?-Agile contracts, partnering and fully focusing on the target. So what created the conditions for success? We interviewed Lars Nilsson, the Head of Procurement at Karlstad Hospital.
Karlstad Hospital has procured new construction and extension in order to conduct effective care with a budget of about €105 million. The new construction was built on time, on budget and was ready for business on Day 1. The hospital has also saved Värmland County Council €300 million. The secret?-Agile contracts, partnering and fully focusing on the target. So what created the conditions for success? We interviewed Lars Nilsson, the Head of Procurement at Karlstad Hospital.
Big thanks to agilakontrakt.se for sharing and translating this awesome case from Swedish into English!
Interview with Lars Nilsson, Property Manager @ Värmland County Council held and translated by members of the conference board, published on agilakontrakt.se
Lars Nilsson, Head of Procurement at Karlstad Hospital.
Tell us a little about Karlstad Hospital
The Central Hospital in Karlstad suffered from severe indoor environment problems and huge overcrowding since the early 90's. To address these problems, we needed both renovation and new construction. For reasons of capacity, healthcare operations could not simply be evacuated from the existing buildings. We needed to find new ways to ensure that health care operations could be continued safely in parallel with the construction.
The first rebuilding/refurbishment phase comprised about 25,000 sq. meters. We have used the same approach for the construction of facilities for medical services and internal medical care of about 24 000 sq. meters, new psychiatry premises of approximately 13,000 sq. meters, a new surgery building of 26,000 sq. meters and we continued rebuilding and refurbishing about 30,000 sq. meters of care premises in Karlstad.
The construction projects entailed huge economic investments, that is why it required a careful quality assessment of the economic circumstances in order to make all involved parties feel reassured.
What made you choose the “partnering” model for procurement?
It seemed absurd to us that the problems we were facing could be unique to us. Surely we were not alone. We have seen precedents in England where hospitals have started to work in a new and different way in new construction projects. The clients agreed with the contractors upfront about the profit they would need to make to take on a building project. The care business, the contractors and planners then work closely together to seize all opportunities to create maximum patient benefit within the financial constraints. With our Swedish law as a starting point, we tried to create conditions for something similar in Karlstad. Sure, some think it was a gamble, but we were convinced that we had no alternative and we did not really know what "partnering" was all about.
You did not choose the traditional fixed-price contract, why not?
For the rebuilding project, it was not possible to provide the clear conditions needed for a fixed-price contract. Given the poor condition of the buildings, we were not sure of the best order in which the projects should be implemented. Once we were able to determine which sub-projects were the most acute, we wanted to take advantage of all opportunities to create the best conditions for health care operations. So we allowed those who were to physically do the work of designing this as closely as possible, to have a dialogue with the people who would operate in the premises. We wanted every project participant's focus to be 100% directed towards creating the most optimal care in our new hospital, rather than seeking to maximize one’s own economic gains. All of this would take place in an environment where everyone felt safe. We met both our financial objectives and our delivery dates.
Looking back, what was the outcome?
Operationally,
If we look at the operational outcome, there are three points I want to emphasize:
- We succeeded in creating two new and innovative solutions that made the premises well suited to the care that would be conducted and to have a low maintenance cost. For example, by using smart materials, we have minimized the maintenance disruptions to the care business.
- We have also found good solutions to energy issues that have reduced our need to purchase energy. As a reference, in 1999, Värmland County Council purchased the most energy of all county councils in Sweden per square meter of floor space. In 2011, Värmland County Council bought the least. This saved Värmland County Council some €250 to €300 million over a 10-year period when compared with other similar local stocks for care (similar hospitals). We have a registered patent in heating as a result of the project. This change is not merely the result of having made good decisions in construction projects. Rather, it is the culmination of the efforts of many people in focusing on efficient energy use. Värmland County Council now has low local costs compared to other premises in which care is conducted to a similar standard.
Time and Budget
We have kept all our schedules and we have also saved quite a few million Euros compared to initial budgets. The Operation building was completed four months before actual scheduled use (built between 2011 and 2016). The execution phase only took 40-70% of the normal time for comparable projects.
Quality
We chose our materials wisely to minimize the use of chemicals in sensitive areas such as the Neonatal Department (for premature babies). The Operation building which has just been put into use was awarded the “Lead Healthcare Gold” building classification.
We would not have been able to achieve this had we taken other approaches such as using contractor forms. The difference was due to the fact that we always chose materials that have characteristics best suited to the situation, rather than purely based on economic incentives for the supplier.
Design and Construction
We have also innovated in the development of new construction techniques over time. A small but concrete example is how we solved the logistics of fastening pipes and conduits for water, gas, electricity and heat when the new rooms were being built. Since pipes are usually mounted a bracket at a time, it can be harder and harder for the contractor down the line to access the wall or ceiling to attach the next pipe or conduit. In our case, we innovated a new way of work which allowed the first contractor to create mounts that would work for all types of pipes and conduits, which makes it both faster and smoother for subsequent construction workers to do their jobs.
An important factor for this was that we were able to make decisions on the spot, as soon as we discovered that conditions have changed. If we find on inspection that the existing walls were in worse condition than we believed, the staff in place could make decisions on the spot about the changes that the project needed to make. No need to wait for decisions to be made in steering groups, we could move to action on the spot.
The time between completing half of the quality assured space is usually extremely short, like 1-2 days. In a typical project, the time between the completed building and inspection can take anywhere from 6 to 12 months.
As you can see, we innovated in several areas, from the way health care business is conducted to energy and building technology.
What are the key factors behind the success?
I want to highlight three factors:
1st
The first important factor is that we have been able to choose appropriate skills, partners and materials most suited to solve the business problems at hand, without anyone having a personal interest in the choices made. It has been made possible because suppliers know what they will earn on the project upfront and that both parties have found it reasonable. As for financial compensation, all participants in the project can put 100% of their energy on solving business problems instead of pushing for their own more expensive solutions in order to maximize gain.
2nd
The second factor is our power control. We set up clear business goals we want to achieve early on and we continuously monitor how we were reaching our goals during the project. This allows us to adapt the solution to business problems instead of the other way around. It may sound obvious, but in reality, it’s very difficult to achieve. For the goals to be effective, they had to be formulated to be easily comprehensible, actively followed up and acted upon.
3rd
The third factor is the use of prototyping and the fact that the buildings were built step by step. We did not build all of the buildings all at once, but one at a time. It enabled us to benefit from what we’ve learned from building one building to the next.
We used prototyping for many types of rooms, from the operating room to the restrooms. Step 1: we model the building throughout and the rooms in 3D. Step 2: we create prototypes of the rooms in full scale, equipped with the intended equipment. This allows doctors and nurses to try out real life scenarios and make adjustments to the room in order to find the optimal setup for smooth operation. In the final step, the real room is built.
But don’t you know how to build a toilet?
To build a toilet is quite simple. But how do you adapt that to the space outside or to a number of different care situations? Usually, such a room is designed by an architect with limited experience of care situations. This means that they may not always be optimal when used in real life.
Let's talk a little about procurement. What did you procure in terms of performance, skills and abilities?
In practice, we procured resources and knowledge in several areas. In parallel, we made sure to build up the client's skills so that they could have meaningful dialogues with contractors and manage the project.
Can you describe the criteria for selecting vendors? How much weight was attributed to economics and how much to other factors?
The financial part is about 20%. The other 80% is made up of knowledge, quality and competence.
What did the economic model look like?
It’s a twofold economic model. The first was to eliminate all economic and short-term incentives. We simply removed the issue of economics from the table. The second was to ensure that the vendors (construction companies) remained within the framework laid out.
Compensation is broken down into fixed and variable. For the moving part, we pay the net cost for all expended time and materials, without mark up. Examples would be all of the participant's salary or purchase cost of materials net of contractor discounts. To ensure transparency, it is a requirement that all parties work with open books.
The fixed part is a supplement to the moving part. It covers central administrative overhead costs and the profit margins of contractors. Contractors would bid on the profit margin percentage. To avoid frivolous bids, we specified a percentage range based on the industry average. The result is that the contractor knows what they will earn on the project upfront and that it is reasonable.
How did you estimate the financial framework for the project?
The project is divided into phases. The contract covers the supplier for both Phase1 and Phase2. Legally however, the order letter (range) has to be on hand for Phase2 to be launched.
Phase 1 - Effect
Here the business objectives and the solution is designed in 3D. It gives us a rough estimate of the time and the material scope.
We validate the solutions we come up with to see if the client's goals are met or not. For us to move on to the next phase, we need to be confident that we can meet the business requirements as well within our time and financial constraints.
Options and Obligations
Phase 1 provides an opportunity for the client to implement Phase2, but not an obligation.
To move to the next phase, an Order Letter is created.
Order Letter
The Order Letter indicates the final range for Phase2.
Here we get a more detailed picture of the total cost and project planning.
The purchaser has the option to terminate the project if the deviation proves to be too great.
The supplier does not however have the option to pull out.
Phase 2 - Implementation
Purchaser’s goals are broken down into project goals, and then further into targets for each construction partner participant in the project.
The solution is implemented during this phase.
The economy is monitored continuously.
The project objectives are monitored as part of the project plan 2 times per year.
There is also a built-in risk sharing model for all participants. If the variable costs have a variance of more than 5% (which in turn impacts central administration costs and profit), this variance is then deducted from the profit margin.
Are there other clauses of importance in the tender documentation?
Here are some clauses worth mentioning:
- The first is that the contractors agree to use open books to ensure financial transparency and that all forms of discounts that are somehow linked to the project business is returned to the project.
- The other is that the turnkey contractor must procure their suppliers with the same contract terms. The whole supply chain, from the general contractor to smaller building shops (architects, craftsmen, planners), must follow the same rules.
- The third is a bit more quirky. We have a loyalty declaration the CEO of the contractor must sign. In short, it says that the CEO agrees that his employees are expected to make choices that benefit the project, even if these conflict with the wishes of the employer. It may sound drastic, but the project puts great trust in the participants' ability to make decisions and it is important that they feel secure that they can be loyal to the goals of the project. The supplier’s willingness to sign the declaration of loyalty is a criterion in the tender documentation.
The loyalty declaration clause was necessary to solve a practical problem. We observed that knowledgeable people whom we trust to find the right solutions hesitated to make the right choices for the project for fear of being at odds with their employers.
The financial incentives for delivering on time is not very strong. What then is the incentive for participants to overcome difficulties and to innovate during the project?
We must not forget a very strong incentive for every participant in the project - to make a difference. We put a lot of work into making sure that everyone in our project understood the effect of the goals we set and how they contribute to making this happen. This allowed every participant to feel proud that they made a difference.
Part 2 - "Project organization, decision-making forums follow-up and future"
This part is coming soon at agilakontrakt.se. Follow us on Twitter @agilakontrakt and we’ll let you know when it goes live.