In this series, I break down the Haier business and explore what it means to organise as an ecosystem. This article focuses on how Haier orchestrates its ecosystem.
- Part 1 – The RenHanDeyi approach
- Part 2 – The Haier Business Model
- Part 3 – How Haier Delivers Scenarios: Smart Solutions
- Part 4 – The Orchestration Engine of Haier (this article)
- Part 5 – Culture, Purpose and Strategy
- Part 6 – How Haier Harnesses AI
- Part 7 – How To Transform To Ecosystem Organizing (coming soon)
- Part 8 – Strategies and Tools For Ecosystem Organizing (coming soon)
Table of Contents
How Haier Coordinates an Ecosystem Without Managing It
In this series, I break down the Haier business and explore what it means to organise as an ecosystem.
There is a paradox at the centre of Haier.
As organisations become larger and more complex, they normally add management. More functions create more managers. More dependencies create more coordination meetings, processes, approvals and reporting.
Haier has spent decades moving in the opposite direction.
It dismantled much of its conventional hierarchy and distributed authority to autonomous microenterprises. These units can make decisions, assemble resources and work directly with users. They can also combine with other microenterprises and external organisations to deliver solutions that no single unit could provide alone.
This creates an obvious question.
If thousands of relatively autonomous participants are free to act, who coordinates the system?
The answer is not that Haier has eliminated management.
It has changed what management does.
Instead of relying primarily on managers to coordinate work vertically, Haier uses outcomes, contracts, platforms, data, incentives, standards and shared rules to coordinate work horizontally.
The organisation manages less through supervision and more through orchestration.
That orchestration capability is what allows the scenarios described in Part 3 to work at scale.
A smart kitchen may combine appliances, software, kitchen design, food providers, logistics, installation and specialist services. The user sees one experience. Behind it sits a complex system of organisations that must work together.
The competitive capability is therefore no longer simply making excellent products.
It is making many different capabilities behave like one system.
Why Orchestration Matters
A scenario changes the problem an organisation needs to solve.
A conventional appliance business can optimise around a relatively clear chain of activities. Design the product. Manufacture it. Distribute it. Sell it. Service it.
A scenario is different.
Consider a customer who wants a complete smart kitchen.
The desired outcome may require refrigerators, ovens, ventilation, cabinetry, lighting, connectivity, software, installation, food services and ongoing support.
- No single product delivers the outcome.
- No single department owns all the capabilities.
In many cases, no single company owns them either.
Haier’s Three Winged Bird scenario brand reflects this logic. Haier describes it as moving from products towards complete scenario solutions across areas including kitchens, bathrooms, balconies, household water and air quality. Its smart home cloud platform connects users, enterprises and ecosystem participants so that solutions can be configured around different customer requirements.
This means that value increasingly depends on interdependence.
- The oven may work perfectly while the total kitchen experience fails.
- The software may work while installation fails.
Every partner may hit its own target while the customer still receives a poor outcome.
This is the fundamental orchestration problem.
Traditional management assumes that coordination can be created by placing activities underneath a common authority.
Ecosystem organising cannot rely on that assumption.
External participants retain their own ownership, economics and priorities. Internal microenterprises also possess considerable autonomy.
Haier therefore needs mechanisms that produce coordinated behaviour without requiring every contributor to report to the same boss.
That is what orchestration provides.
What Is an Orchestration Engine?
I use the term orchestration engine to describe the system that enables multiple independent or semi independent participants to create a coherent outcome together.
It is not a formal Haier term.
It is a way of making the underlying management system visible.
The orchestration engine combines:
- Structures that determine how participants organise.
- Rules that define how they interact.
- Platforms that make resources and capabilities accessible.
- Contracts that establish commitments.
- Data that creates visibility.
- Incentives that align economic interests.
- Standards that make different components work together.
- Governance that protects the performance of the overall system.
The distinction matters.
Removing hierarchy does not remove the need for coordination.
In fact, autonomy often increases it.
If ten units are simply instructed by one manager, coordination sits with that manager. Give those ten units freedom to make their own decisions and they suddenly need another way to agree on priorities, responsibilities, timing and rewards.
Haier’s answer is to move much of that coordination into the architecture of the organisation.
The system increasingly tells participants what needs to align, while allowing them considerable freedom over how they achieve it.
Management therefore becomes less about directing every action and more about designing the conditions within which coordinated action can happen.
The Coordination Problem
Autonomy has an uncomfortable side effect.
It can fragment an organisation.
- A microenterprise responsible for refrigerators can optimise refrigerators.
- Another responsible for ovens can optimise ovens.
- A software partner can optimise its application.
- An installer can optimise installation efficiency.
Every participant can perform well according to its own measures while collectively producing an average customer experience.
The same problem exists inside most conventional organisations.
- Marketing optimises leads.
- Sales optimises revenue.
- Operations optimises efficiency.
- Procurement optimises purchasing costs.
- Finance optimises financial control.
Each function can hit its targets while the total system disappoints the customer.
Haier’s solution is not simply to replace departments with smaller teams.
That would merely create smaller silos.
The critical change is the creation of mechanisms that connect those autonomous units around common user outcomes.
Haier executives describe this as horizontal collaboration. Microenterprises do not operate alone. They combine through ecosystem microcommunities, or EMCs, around the user experience they are trying to create.
This changes the organising logic.
Instead of asking:
Which department owns this work?
The organisation can ask:
Which capabilities are required to deliver this outcome?
The first question begins with the organisation.
The second begins with the customer.
That inversion is fundamental to ecosystem organising.
The Five Jobs of Orchestration
The orchestration engine has to perform five different jobs.
I describe them as:
Discover. Connect. Coordinate. Govern. Learn.
These are not Haier’s formal categories. They provide a practical way to understand what the system actually needs to accomplish.
1. Discover
Orchestration begins by discovering two things.
What does the user need?
Who has the capability to help solve it?
The second question becomes increasingly important as solutions become more complex.
A firm cannot assume that the capabilities required for the next opportunity already sit inside its organisational structure.
Haier therefore developed mechanisms for searching well beyond its corporate boundaries.
Its HOPE open innovation platform was established to connect product development teams with researchers, universities, companies, technology providers and other innovation resources. Haier describes the platform as an ecosystem that supports the matching of innovation needs with external resources.
This changes the meaning of organisational capability.
- Capability is no longer limited to what the company owns.
- It increasingly includes what the company can discover, access and mobilise.
The strategic question shifts from:
What resources do we have?
To:
What resources can we bring together?
2. Connect
Discovery has little value unless the right participants can be connected.
A scenario may need several Haier microenterprises, a technology specialist, a service provider and an external producer.
Orchestration creates the architecture that allows those parties to find one another and form around an opportunity.
This is why Haier’s platforms matter.
HOPE connects innovation problems with technical resources.
COSMOPlat connects users, manufacturing resources, suppliers and industrial capabilities.
Three Winged Bird connects users with products, services and ecosystem contributors around smart home scenarios.
Each serves a different purpose, but all reduce the friction involved in finding and accessing capabilities.
The platform is therefore not merely a technology layer. It is part of the organisation’s coordination infrastructure.
3. Coordinate
Connecting participants is the easy part.
Making their contributions work together is harder.
Participants need to know:
- What outcome are we creating?
- What does each participant contribute?
- When is that contribution required?
- What dependencies exist between contributors?
- What constitutes acceptable performance?
- What happens when something changes?
- How will the resulting value be divided?
Within Haier’s EMC system, agreements between participating units help establish these commitments.
Research into Haier’s industrial internet model describes chain groups in which participants form around user requirements and establish agreements specifying common goals, responsibilities and value sharing.
This is coordination through mutual commitment rather than managerial instruction.
The distinction is subtle but profound.
A boss normally coordinates by deciding what different people must do.
An ecosystem coordinates by making the dependencies between participants explicit and giving them reasons to fulfil those commitments.
4. Govern
Autonomy does not mean the absence of rules.
An ecosystem without governance rapidly becomes a collection of competing interests.
Haier therefore needs mechanisms that protect the performance of the whole while preserving considerable freedom within each unit.
One of the most important is economic alignment.
Research on Haier’s value sharing system shows how financial and non financial measures can be used to connect the contribution of different ecosystem participants with the value eventually produced. Sharing arrangements can be agreed before the work begins and adjusted according to results.
This matters because traditional performance measures often encourage local optimisation.
If an internal supplier is rewarded simply for reducing its costs, it has little economic reason to care whether the overall scenario succeeds.
If its rewards depend partly on the value created by the complete solution, its incentives change.
Gary Hamel and Michele Zanini documented a similar principle in their analysis of Haier. Market facing microenterprises can select internal suppliers or use outside providers, while the economics of supporting units are connected to the success of the units they serve.
Governance therefore does not disappear. It moves closer to the transaction and the outcome.
5. Learn
The final orchestration job is learning.
A scenario cannot remain fixed because user needs, technologies and participant capabilities change.
The system therefore has to capture what happens after the solution reaches the customer.
- Which elements created value?
- Where did the experience fail?
- Which partner performed well?
- Which assumption proved wrong?
- What new need appeared?
Haier Smart Home has described platforms that collect user feedback and use it to improve areas such as production and logistics while enabling participants to share resources and develop improved solutions.
This turns orchestration into a repeating cycle.
Discover → Connect → Coordinate → Govern → Learn → Discover again
The ecosystem does not merely execute.
It evolves.
The Haier Orchestration Stack
The orchestration system can also be understood as a stack.
The structure developed for this article describes it as:
Customer Outcome → Scenario → Partners → Platforms → Data → Governance → Microenterprises → RenDanHeYi
Read from left to right, it moves from what the customer experiences back towards the organisational foundations that make that experience possible.
Customer Outcome
Everything begins with the result the user wants. The outcome provides the common reference point for the system.
Scenario
The outcome is translated into a complete solution. The scenario defines what must work together.
Partners
The scenario determines which capabilities are required. Some come from Haier. Others come from external contributors.
Platforms
Platforms make those capabilities easier to discover, access and combine. They reduce the cost of interaction across organisational boundaries.
Data
Data allows participants to understand demand, monitor performance and learn from actual use. Without shared visibility, distributed decision making quickly becomes distributed guessing.
Governance
Contracts, measures, standards, incentives and value sharing mechanisms define the rules of participation. They provide coherence without requiring constant managerial intervention.
Microenterprises
Microenterprises provide the entrepreneurial units that sense opportunities and mobilise resources. They give the system its adaptability.
RenDanHeYi
At the foundation sits RenDanHeYi.
Its basic principle connects the value created by individuals with the value created for users. Without that philosophy, the other mechanisms risk becoming another layer of process.
Together the layers explain something that can otherwise appear contradictory.
Haier is highly decentralised. Yet it is not simply decentralised.
Its autonomy sits inside a deliberately designed coordination system.
The Mechanisms Behind the Orchestration Engine
The strength of the Haier model does not come from one mechanism.
It comes from several reinforcing mechanisms working together.
Ecosystem Microcommunities
EMCs bring together microenterprises and other contributors around a user opportunity.
They provide a structure for collaboration across conventional organisational and industry boundaries.
Haier executives describe the EMC as a self organising arrangement focused on delivering a user experience. Experience EMCs remain close to users while Solution EMCs combine the capabilities required to deliver the response.
This creates a bridge between sensing demand and mobilising supply.
Contracts
Autonomous units need explicit commitments.
In documented Haier ecosystem arrangements, participating groups use agreements that specify common goals, contributions and sharing arrangements.
Contracts therefore perform part of the work traditionally performed by management.
They make expectations explicit before execution begins.
Value Sharing
Collaboration weakens when one participant creates value while another captures it.
Haier addresses this through mechanisms that link rewards with the value created through collaboration.
Zhang Ruimin has described EMC participants sharing upside when they jointly create user value and receiving no such benefit when that value is not produced.
The principle is simple.
If Haier wants people to optimise the total outcome, their economics must reflect the total outcome.
Internal Markets
Haier also introduces elements of market discipline inside the organisation.
Research documented by HBR found that market facing units could choose between internal suppliers and outside alternatives. Internal providers therefore had to create sufficient value to remain attractive.
This changes the relationship between support and control. A conventional central function can survive because departments are required to use it.
A service operating within an internal market has to remain useful. Authority is replaced, at least partly, by earned relevance.
Open Innovation Platforms
No ecosystem can rely entirely on capabilities it already knows.
HOPE expands Haier’s search space by giving teams access to external technical and innovation resources.
Haier’s current innovation system describes HOPE as an open ecosystem linking innovators and resources around product innovation.
That search capability becomes strategically important when opportunities cross established industry boundaries.
Industrial Platforms
COSMOPlat performs a different orchestration role.
Haier describes the industrial internet platform as supporting interaction, value sharing, user participation and mass customisation across multiple industries. It provides applications covering areas such as research and development, procurement, manufacturing, warehousing and logistics.
Digital infrastructure therefore supports coordination that would otherwise require extensive manual negotiation and administration.
Experience Platforms
Three Winged Bird adds the customer facing layer. Its smart home cloud connects users, enterprises and ecosystem participants around customised home solutions.
This closes an important gap.
The orchestration system does not simply connect suppliers with each other. It keeps the ecosystem connected to the demand that justified its existence in the first place.
Why Orchestration Is Difficult
The Haier model can look deceptively simple from the outside.
- Break the hierarchy.
- Create small teams.
- Give people autonomy.
- Connect some partners.
- Build a platform.
That interpretation misses the difficult part.
Decentralisation removes one coordination mechanism before another one is ready to replace it.
Take away managerial authority without creating strong horizontal coordination and the likely result is not an ecosystem.
It is fragmentation. Haier itself recognises this tension.
Zhang Ruimin has acknowledged that self organised units can disagree and that consistency becomes difficult when participants possess substantial autonomy. His argument is that common user goals and shared economics help pull the different parts back towards the same outcome.
Several tensions remain.
Autonomy Versus Coherence
Teams need freedom to respond quickly.
However, customers still expect the total experience to work consistently.
- Too much control kills autonomy.
- Too little coordination damages the outcome.
Local Performance Versus System Performance
- Each participant has its own economics.
- The ecosystem has a different objective.
Orchestration must prevent individual participants from improving their own position by damaging the total solution.
Openness Versus Control
External collaboration expands the pool of available capabilities.
It also creates questions around intellectual property, data access, security and dependency.
Recent research on Haier’s EMCs specifically identifies data protection and intellectual property as important issues for further investigation as digital business ecosystems become more open.
Speed Versus Standards
Autonomous teams can move quickly.
- Integrated customer solutions also require compatibility, reliability and quality.
- The faster the ecosystem changes, the more important clear interfaces become.
This reveals a broader management principle.
Ecosystem organisations require less control over individual actors but more discipline at the points where those actors connect.
The interface becomes more important than the hierarchy.
What Orchestration Is Not
Understanding Haier also requires separating orchestration from several familiar management practices.
Orchestration Is Not Outsourcing
- Outsourcing transfers an activity to another organisation.
- Orchestration combines complementary capabilities around a shared outcome.
- A supplier can remain a supplier without becoming part of an ecosystem.
The difference lies in interdependence and joint value creation.
Orchestration Is Not Supply Chain Management
Supply chains coordinate the flow required to produce and deliver something. They are crucial, but the product and value proposition are usually already defined.
Ecosystem orchestration can operate earlier.
Participants may jointly determine what the solution should be, what capabilities it requires and how the resulting value should be created.
Haier’s smart home strategy illustrates this distinction. Its scenarios can bring together products from multiple vendors and industries because the desired customer experience cannot be produced by one appliance business alone.
Orchestration Is Not Partnership Management
A partnership normally describes a relationship between organisations.
An ecosystem can involve many relationships operating at the same time.
The challenge is therefore not merely managing each partnership. It is ensuring that all the relationships collectively produce the required outcome.
Orchestration Is Not a Platform
Platforms can make interaction easier.
They can help participants discover resources, exchange information and coordinate activity.
But technology does not determine who should participate, what they should contribute, how value should be divided or what happens when participants fail.
Haier’s COSMOPlat illustrates the point. Its importance lies not simply in the technology but in the combination of user participation, interaction, manufacturing capabilities, microenterprise mechanisms and value sharing.
The platform supports orchestration. It does not replace it.
Orchestration Is Not Decentralisation
Giving teams autonomy is only one part of the system.
Without a common outcome, strong interfaces, transparent information and aligned incentives, decentralisation can simply produce competing local interests.
Haier’s distinctive feature is therefore not that it broke the organisation apart.
It is that it developed ways of putting the pieces back together differently.
Five Lessons From Haier’s Orchestration Engine
Haier is difficult to copy because its mechanisms have evolved together over many years.
However, the underlying principles have much wider relevance.
1. Start With the Outcome, Not the Organisation
Traditional organisations begin with existing boundaries.
- Which division owns the customer?
- Which product line owns the revenue?
- Which department has the capability?
Ecosystem organising begins with another question.
What outcome are we trying to create?
Only then does the organisation determine which capabilities are required.
This prevents the existing structure from defining the opportunity too early.
2. Govern the Interactions, Not Every Actor
As autonomy increases, leaders cannot coordinate every decision.
Nor should they try.
The focus moves towards the interfaces between participants.
- What must be shared?
- What must be compatible?
- What commitments are required?
- Who owns which decision?
- How will performance be measured?
- What happens when one participant fails?
This is a very different form of management.
The organisation becomes an architect of interaction rather than a supervisor of activity.
3. Align Economics With the Customer Outcome
Collaboration eventually follows incentives.
If every unit is rewarded for its own performance, people will protect their own performance.
If rewards also depend on the value created collectively, collaboration becomes economically rational.
Haier’s approach to shared upside makes this connection explicit. This may be one of the most transferable lessons from the model.
An organisation cannot ask people to optimise the customer outcome while paying them to optimise something else.
4. Build Platforms That Reduce the Cost of Coordination
As ecosystems expand, coordination can become expensive.
- Finding partners takes time.
- Negotiating access takes time.
- Sharing information takes time.
- Connecting systems takes time.
Platforms can reduce these frictions by making resources, information, standards and capabilities easier to access.
Haier’s HOPE, COSMOPlat and smart home platforms serve different purposes, but each expands the range of resources that participants can discover and coordinate.
The strategic purpose of a platform is therefore not simply digitisation. It is to make coordination easier at greater scale.
5. Build Learning Into the System
The final lesson may be the most important.
- An ecosystem is never finished.
- Users change.
- Technology changes.
- New partners appear.
- Old capabilities lose relevance.
- New combinations become possible.
- The orchestration engine therefore needs feedback.
Haier’s model repeatedly returns participants to user needs. EMCs form around emerging opportunities, platforms collect information and new configurations can emerge as requirements change.
This means the organisation does not simply coordinate existing capabilities.
It continually recombines them.
That is what makes orchestration a source of adaptability rather than merely an operating mechanism.
From Managing the Firm to Orchestrating the System
Haier’s deeper innovation is not the microenterprise.
Nor is it Three Winged Bird. Nor is it COSMOPlat.
Each is part of a larger system.
The more fundamental change is in the logic of coordination. A traditional company coordinates through hierarchy.
Managers divide responsibilities, allocate resources, resolve conflicts and monitor performance.
Haier increasingly distributes those functions across a broader operating system.
- User outcomes provide direction.
- Microenterprises provide entrepreneurial action.
- EMCs provide temporary structures for collaboration.
- Contracts establish commitments.
- Platforms connect resources.
- Data creates visibility.
- Value sharing aligns incentives.
- Governance protects the integrity of the system.
RenDanHeYi provides the underlying organising philosophy.
This is why Haier can be highly decentralised without simply becoming fragmented.
The hierarchy has not merely been removed.
Some of the work previously performed by hierarchy has been redesigned into the system itself.
That distinction matters far beyond Haier.
As customer outcomes increasingly require data, technology, specialist capabilities and resources distributed across multiple organisations, competitive advantage will depend less on how much a company owns.
It will increasingly depend on how effectively it can coordinate what it does not own.
The firm becomes part producer and part orchestrator.
And management shifts from controlling resources inside an organisation towards synchronising ecosystems of value around customer outcomes.
But mechanisms alone cannot explain why people accept this degree of autonomy, accountability and exposure to market outcomes.
Nor do they explain why leaders would willingly surrender so much conventional managerial power.
For that, we need to look beneath the operating model.
Part 5 examines the culture, purpose and strategy that make the Haier system possible.
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