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[RDHY Case] Transformation of Tianbao: Rendanheyi Ecosystem Tripling Performance

Since Tianbao started its transformation, it only took over half a year to see the tripled performance, which made Mr. Zhang Chuanfa, chairman and founder of Tianbao Group, feel glad to have chosen Rendanheyi Model to drive the transformation.

Established in 1996, Shandong Tianbao Group engages in iron and steel trade. Its plight in the VUCA era is the epitome of what many traditional companies are going through. Tianbao has taken shape over more than twenty-year development, but the issues of iron and steel industry are out there to deal with, making things increasingly difficult for Tianbao caught between upstream steel mills and downstream manufacturers. In the upstream, most iron and steel manufacturers are bad at operation and maintenance; their business is too scattered to form synergy; they are slow to respond to changes in the environment and have long launching cycles and limited reliability and security for business and data. In the downstream, SMEs with production value of 30-50 million yuan are the majority, but they do not have a say over upstream sectors. They also lack bargaining power and struggle to access finance. Mr. Zhang knew well that if Tianbao still stocked up on inventory to pocket the difference, it wouldnt go far.

The transformation is imperative, but where to start? Mr. Zhang analyzed the traits of the industry and the trend of the era. He believed that the breakthrough for transforming iron and steel industry lied in opportunities of the era of IoT, which was to adopt the business model that adjusted to the era of IoT. With such ideas, Mr. Zhang found Rendanheyi Model suitable. Faced with pain points of Tianbao, Haier Model Research Institute (HMI) worked with Dr. Wang Jinggang who researched in Rendanheyi Model for years to help Tianbao implement the model. More than half a year passed, and what Rendanheyi achieved was beyond Mr. Zhangs best imagination. Rendanheyi brings fundamental reforms to businesses, indeed reshaping Tianbao and empowering Kuaigang Cloud to build a new ecosystem for the iron and steel sector.Mr. Zhang sincerely remarked.

 

Kuaigang Cloud: A New Template for Rendanheyi Ecosystem

Tianbao started its transformation not so early as its competitors. Some rivals began to map out industrial networks as early as a few years ago. Tianbao had to think out of the box to catch up with them, and it was the ecosystem thinking in Rendanheyi Model that provided crucial insights. People used to trade on the scene, and later some businesses started to build platforms and moved trade to online places. But like those e-commerce platforms selling consumer goods, the online trade was still about fighting price wars, turning a Blue Ocean into a Red Ocean. The Uncharted Waters Strategy proposed by Mr. Zhang Ruimin was quite enlightening -- Tianbao could not focus only on online platform trading but create an ecosystem brand to go far. The past trade in Tianbao was like waters having no oxygen” where fighting price wars was no longer sustainable, so the company had to step out and join the Uncharted Waters. The iron and steel output was large but the quality was low. The industry relied on much technological support and was not very applicable to scenarios. Aiming at these pain points and guided by Rendanheyi Model, Tianbao was about to be the planner, participator and promoter of iron and steel industry ecosystem.

After defining the issues and figuring them out, Tianbao decided to study the Rendanheyi ecosystem model and started its transformation with ecologicalization of the iron and steel industry. Tianbao rolled out a new platform named Kuaigang Cloud where they connected the upstream with the downstream within the industry through intelligent IoT terminals, helped SMEs access the cloud and the platform, and created the new ecosystem of manufacturing factories + customers + cloud platforms.

That was how Tianbao made its first step from conventional iron and steel trade to an industrial ecosystem model. It took only over half a year for Kuaigang Cloud to be connected with over 100 upstream suppliers and over 10,000 downstream end-users, which formed an ecosystem closed-loop that involved warehousing, processing, delivery, logistics, finance and services. Tianbao reshaped the industry ecosystem by adopting Rendanheyi Model, establishing Kuaigang Cloud, a new ecosystem brand.

Rendanheyi Model is user-centered that entrepreneurs and goals are closely related. Such a philosophy enabled Tianbao to realize that if it did not value downstream customers but merely did simple transactions, it would ultimately lose its advantages in the industrial chain. Kuaigang Cloud established a system at a preliminary level to empower downstream manufacturers. If a downstream user needed farm machinery parts that were very small-sized, upstream steel mills would not customize them exclusively. Kuaigang Cloud platform would collect the demands of several users and make purchasing requests for upstream steel mills. If the companies could not afford the payment, the platform used its supply chain financial system as support to speed up financing. In addition, Kuaigang Cloud built a shared management platform to help factories with on-site 6S management, entrepreneur-goal-payment management and other services. It also connected different operations and adopted Rendanheyi Model to empower more upstream and downstream companies. The idea of an all-round empowering ecosystem was a lesson from Haiers Rendanheyi Model.

Since Mr. Zhang Ruimin pioneered in Rendanheyi Model in 2005, the model has iterated and upgraded to become a well-established and sophisticated system along with Haiers development for over 10 years. When companies study Rendanheyi Model at different stages of their development, they should adopt the parts that work for them the best. Some companies started with restructuring, some began with incentive mechanisms, while Tianbao considered the ecosystem the starting point. On balance, what to take away from the model should be in line with the trend of the era, the pain points of the industry and the current user demands. In this way, the takeaways can be internalized for the company other than being some empty talk.

During the implementation of Rendanheyi Model, Tianbao made a template of creating an ecosystem. In Mr. Zhang Chuanfas view, learning the model set a sound foundation for Tianbaos transformative development. The tripled performance for the present was initial success. The goal for the next three months was to build a more fruitful template. Mr. Zhang said,  I believe that Tianbao is expected to see an explosive growth.

 

All-round Empowerment Promoting In-depth Transformation

Mr. Zhang said, Rendanheyi Model enabled Tianbao in many ways. For one thing, the ecosystem thinking deepened his understanding about the industry, enabling him to look at the changes in the sector at a higher dimension. For another, he highly recognized the idea that the model inspired employees creativity, as it is highly consistent with Tianbaos principle of fulfilling peoples dreams and meeting peoples needs, so I am eager to learn from it.

Trusting in the power of templates. Organizational transformation is no easy thing. The essence of Rendanheyi is self-organization in forms of ME and EMC that disrupt the conventional hierarchy, so it is a big shock to Tianbaos system which was established since 1996. Employees are not used to the shift from superior-subordinate relationships to horizontal partnerships. Mr. Zhang observed. Tianbao started with employees closest to customers.

In order to create role models for Rendanheyi Model transformation, Mr. Zhang led management cadres to participate in closed training for strategic bidding and analysis in southern mountain area. To ensure fruitful results, HMI customized learning materials for Tianbao and Dr. Wang assisted them all along. With the support of primary competitiveness and the mechanism involving budgets, plans and prepayment, soon there emerged talents like Lin Lufeng, Gao Jianqin and Jiao Guijuan who became leading geese for practicing Rendanheyi.

Tianbao took these young people that performed well in bidding as examples, and encouraged their colleagues to make changes. They adopted the EMC contract mindset that the one whose proposal was recognized took the charge. The company provided resources and investment in the first place, and set the goals and pushed the team forward with the value-added sharing mechanism.

There was still a big gap between these practices and Haiers self-organized, self-driven and self-evolution operations. Mr. Zhang knew that transformation takes steps and what is important is to focus on the pillars, To help them believe in it means half the battle. The biggest lesson from Rendanheyi for him was the power of examples. People find it the most difficult to change their ideas or beliefs, but once they do change, things just start to make sense.

Believing in peoples infinite potential. Now matter how Rendanheyi Model iterates and evolves, it has an unchanging core that is to believe in peoples value and potential and that Humans are purposes. Tianbao understood it well, so they encouraged every employee to propose improvement plans, ask questions and seek for solutions. There was a department for purchasing scrap steel. Because things were complicated for scrap steel and the sorting process was not refined enough, they proposed an improvement plan to remove impurities from scrap steel, which increased the yield by one percentage point. The purchasing price rose accordingly and thus generating an increase of 50,000 to 60,000 yuan of profits per month. That was how employees made their own contributions at work, which made Mr. Zhang feel that people have infinite potential.

Putting user demand first. After the emergence of first-tier entrepreneurs, how do you inspire more to follow? Tianbao chose to focus on user demand. As Kuaigang Cloud kept running, they engaged in more customer pain points where they could innovate and mobilize employees to compete. If you arrange them to be entrepreneurs by administrative orders when they dont feel any market pressure, that will be counterproductive, Dr. Wang remarked. As Tao Te Ching said, The reason why heaven and earth are able to endure and continue thus long is because they do not live of, or for, themselves. This is how they are able to continue and endure.Entrepreneurs will emerge as external market opportunities and internal mechanisms achieve synergies.

Not long ago, Tiambao formulated the general management policy for 2021: Putting customers first, making breakthroughs, gathering strength, transforming and upgrading. Putting customers first means to offer services that are customer-centered, which is inspired by Rendanheyi. Customers will choose us among all the companies and we can stand out against the fierce market environment only when our services save costs and improve efficiency for them. Mr. Zhang said, Gathering strength means that we enable our employees to become entrepreneurs to form EMC, make joint efforts and make the most of the potential.

 

Way over Skills -- The Game of Infinity

The empowerment of Rendhanheyi Model had instant results. The steel prices were growing this year, making it difficult for SMEs to purchase raw materials and circulate the funds. With regard to the problem, HMI and Dr. Wang worked together to provide a new solution for Kuaigang Cloud based on its strength in the industry ecosystem chain. That was to vitalize industrial transformation through the supply chain finance. Kuaigang Cloud knew well about how downstream businesses were doing. Hence, the platform could invest capital and talents in them and help banks reach them so that they had access to cash flow and banks could invest in industries. In this way, the overall digital cycle went well and values of all parties were fulfilled.

In the meanwhile, Tianbao knew that the current platform advantage could not last long and had to change quickly after the industrial high ground was formed. "It is imperative to transform at ones peak." It is required to use efficient supply chains, optimized organization based on Rendanheyi and creativity of employees to build "uplifted area" quickly. "Self-criticism is a takeaway from Haier. We need to transform at our peak and can't wait until something goes wrong. As Chief Zhang Ruimin used to say, Replace the engine on a high-speed flight. The biggest value of Rendanheyi lies in the "Way", which enables Tianbao to truly understand the difference between finite and infinite games. Tianbao's past competitors are still fighting price wars and playing finite games. Tianbao expects Kuaigang Cloud to participate in an infinite game. When the rivals are stocking up, Kuaigang Cloud is already leading the industry ecosystem with capabilities of demand diversion and supply allocation.

At the end of May that just passed, Mr. Zhang led all the management cadres to pay a special visit to Haier, and had in-depth exchanges with researchers from HMI on issues in the implementation of Rendanheyi Model. Having received detailed explanation, Mr. Zhang said that Tianbao hopes to help more companies in the ecosystem, because thousands of downstream SMEs have their own problems and need to transform and grow. If more people are learning the idea of Rendanheyi and coming together with altruistic thoughts, that will be playing the real infinite game.

3 June 2021 : 06:33 am

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