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[RDHY Case] How Rendanheyi Broke Impossibilities in Russia

On August 28, 2019, Haier Russia Industrial Park and the interconnected factory of roller washing machine open magnificently. Haier's CEO Zhang Ruimin signed on the time slider during the ceremony. The successful introduction of Rendanheyi model overseas means Haier's development in Russia will rise against the trend, offsetting the chill in the early autumn of Naberezhnye Chelny. This project, covering 1,000 kilometers and extending to 8 major cities in Russia with a planned total investment of 314 million US dollars, will drive a one-billion-dollar industrial investment. It is the only intelligent interconnected industrial project among a number of bilateral cooperation documents signed by the heads of state of China and Russia in this June. The opening ceremony was attended by distinguished guests, including Zhang Ruimin, Chairman and CEO of Haier Group, and Rustam Minnihanov, President of The Republic of Tatarstan.

Haier's rapid development in Russia in recent years reflects the prosperity at this moment. From 2016 to 2018, Haier's refrigerator has maintained a continuous growth rate of more than 40% in Russia, with the average retailing price index reaching 161. The high-end multi-door refrigerator has kept the top position with a lion’s share of 50%. Haier's kitchen appliances in Russia grew 24.5% last year, four times faster than the local industry. Against the backdrop of "zero growth" in Russian electric water-heater market, Haier's annual growth reached 29% and market share reached 7.1%, making it the only Chinese brand among the TOP4.

Rendanheyi Models Advantages Were Proved Again

Haier, through exporting Rendanheyi model, rising against the trend in overseas market is not excluded to Russia. In 2016, Haier acquired GEA from the US and achieved double-digit growth in the following year against the backdrop of negative growth in the US national home appliance industry. The acquisition of Candy, a European brand, in 2019 witnessed an over 100% budget completion in the first quarter. Although the European market was weak, Candy achieved positive growth at the beginning of the acquisition.

Sergey Franmegeoff is a strong believer of Rendanheyi model in Russia. He used to be the sales executive at Haier’s rival company. Later, he was attracted to Haier to start his own maker business because of Rendanheyi. Sun Zhenhua, the ME owner in Russia, promised that he could enjoy full power in planning, selling and sharing as long as he had the right strategic direction and achieved the goals. This was quite different from Sergey's previous working experiences. Some of them are similar to Korean brands, where power is heavily concentrated, and employees could not leverage their autonomy. Some of them are similar to European brands, where they have very complicated decision-making mechanism. Sergey has done a lot of market research and set his position on the high-end market, targeting high-end consumers, opening up and integrating resources to leverage the largest local sales channels. "Only those who agree with the concept of Rendanheyi are eligible to join Haier Russian team." That was his feeling after the initial success.

The stimulation of Rendanheyi to creativity has made Haier realized many "impossibilities" to build factories in Russia. The winter temperature in Naberezhnye Chelny, the Lake Kamar, reaches 20 degrees below zero, and the cement can't be set up. Therefore, the construction period is usually only six months a year. It usually takes two to three years to build the plant. Benz spent 41 months building the factory. Haier's washing machine factory set a high goal of 13 months in advance, and the team bet more than 800,000 yuan on it. This was a great breakthrough. Driven by the VAM, the employees tried their best not to interrupt the construction period through closure based on sections and heating. What’s more, they connected all sections to avoid over-budget. Finally, they completed the project even 1 month prior to the pre-set goal.

Sergey Shettikh, the quality contact staff for the Russian factory, used to bet half a year's salary on the construction. The investment to him was not only about money, but also the optimism towards the future. This investment motivated him to make the factory profitable and provide users with the most needed products. On the wall of Haier's Russian Interconnected Washing Machine factory is the words of one employee: "It's hard for me to say what is the Rendanheyi model, but I can feel such culture here all the time which is about getting more income by working hard."

This can explain why on the 28th, when Haier Washing Machine factory opened, Zhang Ruimin, standing in front of a brand-new and modern factory, said he realized that management was never about managing assets or facilities based on his management experience in the past 4 decades. He said management was all about people. Because "as long as you build a platform where everyone can play a role, the whole unit is more powerful than the sum of each individual."

Invisible Ideas and Boundless Mindset

"I hardly take part in such opening ceremonies, but I have to take part in today’s activity. Because from the beginning of this project, China and Russia solved many difficulties together. In 2016, the ruble exchange rate fluctuated greatly, and we decided to stop it. But the team was willing to bet 1 million on it, so this is the difference from other projects. From the construction, production, to the completion and listing of this project, it was a miracle. We could achieve profits in the same year of putting it into production. Haier has established a global business model called "Rendanheyi", which has been highly recognized by the international management community and exported to many countries. This model allows every employee to create user value.

Zhang Ruimin identified the motivation of Haier’s development in Russia at the opening ceremony. The equation of value-added sharing can be seen everywhere on the wall of Haier’s factory in Russia. This informs employees that as long as they input what they have done into this equation, they can easily know how much they have earned. The explanation of Rendanheyi in Chinese and Russian can be seen everywhere.

Promoting a disruptive idea requires strong wills and decisive actions. During a visit to the Romanov obelisk in Moscow, Zhang Ruimin mentioned the history of Peter the Great's reforms in Russia. To show his determination to learn from the West, Peter the Great wanted to change the lifestyle in Russia, among other things by having men shave their beard and imposing a beard tax on those who refused.

The implementation of Rendanheyi model overseas does not rely on collecting tax, but on bringing real benefits to employees. According to local factory managers, sales of Russian MEs can earn 120% of their fixed salary since the introduction of Rendanheyi.

The idea is invisible, and the mindset is boundless. No matter how great the external cultural differences are, people's inner driving forces are the same. Speaking at the opening ceremony, the Russian Federation's deputy minister of industry and trade, Osimakov Vassily Sergeyevich, said the management philosophy that Haier brought to the republic of Tatarstan was a very important starting point. The greater value Haier brings to Russia lies in the invisible concepts instead of plants and equipment which can be seen.

At the end of the ceremony, CEO Zhang and Minnihanov signed a time slider to the future and sealed it in the time capsule. "A century-old enterprise begins with a single step," the scroll says.

The motivation of “step” is Rendanheyi, which is similar to salad sauce that can be mixed with different cultures. CEO Zhang said when he visited the factory, he was impressed by employees’ words on the Wishing Tree, which said “this is my home”. A project can defeat everything when it can make employees feel this way.

Minnihanov presented guests with a Tatarstan proverb: "Good times, promising future" in his celebration speech, which was bound to herald Haier's development in Russia.

3 June 2021 : 04:15 am

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