Chen Li, editor-in-chief of "Electrical Appliances" magazine
When accelerating the development of new quality productivity has become the main theme of the transformation and upgrading of the manufacturing industry, how to use science and technology to empower manufacturing and products has become a proposition that every enterprise must face. In the tide of transformation and upgrading of traditional manufacturing enterprises, Midea Group is undoubtedly one of the leaders. Founded in 1968, Midea has become one of the world's outstanding enterprises. By 2023, Midea has been included in the Fortune Global 500 list for eight consecutive years, with revenue of 373.7 billion yuan in 2023, a year-on-year increase of 8%, and a net profit attributable to the parent company of 33.7 billion yuan, a record high...... More importantly, in essence, Midea is no longer the well-known home appliance company, and has formed a new development layout of "1+3+N". Among them, "1" refers to smart home, "3" refers to the three TO B services of industrial technology, building technology, robotics and automation, and "N" refers to innovative business. The expansion of revenue and business layout is eye-popping, and behind these is no longer the simple scale and cost advantages, but the continuous investment in R&D for a long time and the new quality productivity brought by Midea's global innovation layout - this is also the core of Midea's third transformation process.
(1) Start the third reform
In 1968, Mr. He Xiangjian sowed a seed of entrepreneurship in the difficult years, and for more than 50 years, Midea has been leading the continuous innovation of Midea Group with the courage to change, entrepreneurial spirit and pragmatic style. Today, Midea Group has grown from a small-town handicraft workshop to a Fortune 500 company.
Since Midea was founded in 1968, Midea has undergone a total of four major changes. The first time was in 1980, when Midea started with electric fan products and entered the home appliance industry. The second time was in 1997, when Midea promoted the reform of the business unit system and determined the foundation of the organizational and management structure that continues to this day. The third time was in 2012, after Fang Hongbo became the chairman of Midea Group, he established "product leadership, efficiency driven, and global operation" as the three strategic axes of the group's future development. The fourth time was in October 2020, Fang Hongbo proposed to upgrade the three strategic axes of "product leadership, efficiency driven, and global operation" to the four strategic axes of "leading technology, direct user access, digital intelligence driven, and global breakthrough" that are being implemented today.
Every change is the premise and foundation of the next change. Let's focus more on the third change. Midea is the third change that has been initiated on its own initiative. At that time, the background was that in 2010, Midea's annual revenue exceeded the 100 billion yuan mark, creating a miracle of tenfold growth in ten years. In 2011, Midea's revenue reached 126 billion yuan. However, behind such performance, behind the Midea that seems to the outside world to be soaring all the way, is Fang Hongbo's hidden worry: "Since 2009, the large-scale, low-cost business model of China's home appliance enterprises has failed, how to cultivate new competitiveness and new business models?" Fang Hongbo's hidden worries are based on facts, and later Midea's public information shows that behind Midea's revenue in 2011 reached 126 billion yuan, the total number of Midea product models reached 2.2 at that time 10,000, the business is bloated, the organization is fat, and the profit is lower than expected.
Obviously, Fang Hongbo hopes that the establishment of the three strategic axes can give birth to new competitiveness and business models for Midea. Among the three main strategic axes, product leadership refers to investing resources in real science and technology and products; efficiency-driven is to promote the change of systemic models and methods through technological progress; and global operation refers to participating in global industrial competition and globalizing income structure.
Among the three strategic axes, "product leadership" is the core. In this regard, Fang Hongbo had a very precise description in his speech at Midea Technology Month in October 2018. He said: "We say that Midea has three major strategic axes. But if there is only one strategy for Midea, it is product leadership - efficiency drive and global operation are two green leaves, and product leadership is safflower. This is the foundation of the development of beauty, and it is also the only way out for the development of beauty. ”
Product leadership means that in the market, we will no longer rely on low prices, scale, and lengthy product lines to gain advantages, but rely on technology, innovation, and high added value to win users and markets. Therefore, Midea's third transformation is to enhance its technical strength and lead the market with innovative products. This is also the reason why Fang Hongbo defines "product leadership" as the core strategy among the three strategic axes.
(2) Transformation of R&D system: change the engine in the process of high-speed flight
The success of the "product leadership" strategy is based on the success of the transformation of the R&D system. However, the success of the transformation of the R&D system does not depend solely on the R&D system itself. It requires support and collaboration at multiple levels and links to successfully embed the new R&D system into the entire enterprise operation. Fang Hongbo has mentioned many times that Midea's change is "to change the engine in the process of high-speed flight". There are two key points in this sentence: one is that change cannot affect the current operation of the enterprise, and the other is that good engines are often available, but it is difficult to integrate good engines into the entire flight system in flight. The R&D system is the engine that Midea wants to replace in this change.
In 2011, when He Xiangjian officially announced that Fang Hongbo would take over as the chairman of Midea Group, Fang Hongbo began to look for R&D talents for the practice of the three strategic axes. Dr. Hu Ziqiang, who later became the vice president of Midea Group, CTO and president of Midea's Academia Sinica, met with Fang Hongbo at this time and decided to join Midea. In 2012, he was invited by Fang Hongbo to join Midea and began Midea's R&D transformation practice.
In 2012~2020, Midea implemented the corporate transformation with "product leadership, efficiency driven, and global operation" as the three strategic axes. The R&D transformation that supports the "product leadership" strategy has also been launched, and Hu Ziqiang is the chief architect of this R&D transformation.
In this transformation, Fang Hongbo is a thinker and strategist, and Hu Ziqiang is a strategist and tactician. Hu Ziqiang uses a four-level R&D system and a "three generations" innovation model to realize the strategic ideas of "product leadership" and "technology leadership" put forward by Fang Hongbo.
Midea's four-level R&D system refers to the separation of R&D and R&D at the business unit level, forming a two-level system of development and technology research. Among them, the development level mainly responds to the development needs of new products that need to be launched, and the technology research level mainly focuses on the breakthrough of next-generation platform reserves and next-generation core module technologies. The Academia Sinica is also divided into two levels. The first level focuses on medium and long-term common technology research and basic technology research, and makes technological breakthroughs for products launched within 3~5 years. The second level focuses on cutting-edge technology research and disruptive technology breakthroughs, with a view to achieving technology implementation in products after 5 years. The various technical committees are the key force to eliminate the "departmental wall" problem that may be brought about by the four-level R&D system.
The "three generations" innovation model refers to the three-year R&D plan, "development generation, reserve generation, research generation", which affects the planning and specific implementation of R&D driven by the market. The "three generations" must be constantly revised and improved, and product innovation and technological innovation must be continuously iteratively upgraded every year.
The book "Midea's R&D Transformation", written by Chen Li, editor-in-chief of "Electrical Appliances" magazine, describes in detail the construction and improvement process of Midea's new R&D system, including: building the Central Research Institute from scratch, building a two-level R&D system of the Central Research Institute, promoting the construction of a two-level R&D system in Midea's major business divisions, building Midea's R&D innovation process and the "three generations" innovation model, how Midea carries out a global R&D layout, how Midea promotes the R&D collaboration of major business divisions, and so on. They are exactly the sub-projects that Hu Ziqiang put forward for the big project of "product leadership" proposed by Fang Hongbo, and the layout, promotion and landing. These sub-projects are like every step we take in the process of climbing, practicing every step of the way to get closer to the goal, and also guiding the direction to achieve the ultimate goal.
At the end of 2020, Fang Hongbo proposed to further upgrade the three strategic axes of "product leadership, efficiency driven, and global operation", which have been implemented for 8 years, to the four strategic axes of "leading technology, direct user access, digital intelligence driven, and global breakthrough". At the 2021 Midea Science and Technology Month, just as Fang Hongbo emphasized that "product leadership" was the core among the three strategic axes, Fang Hongbo once again emphasized that among the four strategic axes of the new upgrade, the "only red flower" is "leading technology".
On the occasion of the 10th anniversary of the establishment of the Academia Sinica (Midea CRC) on April 12, 2024, Wei Chang, vice president and CTO of Midea Group, said: "Ten years is really young, and we still have a long way to go. What we want to do is to consolidate the technical foundation in accordance with the established strategy, support the business growth of the group through technological innovation, achieve business traction, and achieve technological leadership. ”
(3) Two key figures from strategy implementation to tactical implementation
Behind this transformation of Midea, there are two crucial figures. One is Fang Hongbo, the supreme commander of the United States, and the other is Hu Ziqiang, the operator and chief architect of the R&D transformation of the United States.
Fang Hongbo's importance in this transformation is self-evident. This not only refers to his strategic thinking as an entrepreneur, who can put forward new goals and strategies for the development of the enterprise at the right time, but also refers to the firmness in the implementation and implementation of the strategy. As Hu Ziqiang himself said: "The R&D transformation of every enterprise is a 'first-class project'. Without the persistence of the 'number one', it is difficult to persist even if it is only to transform the R&D system. ”
This is Hu Ziqiang's personal experience in the management of this R&D transformation. "Changing the engine in high-speed flight" not only requires the performance of the engine itself and the ability to integrate into the company's operating system, but also tests the ability of the company's original operating system to accept the new engine, and the ability to change itself in order to accept the new engine. None of this can be done by simply transforming the R&D system. However, if this is not done, it will be difficult for the new R&D system to integrate, survive and grow in the entire enterprise operation. If we want to do this, it is difficult to achieve the goal without the support and determination of the "top leader".
In the process of R&D transformation, Fang Hongbo withstood the pressure that others could not understand, and only then did he achieve the final success and guide Midea to carry out the fourth transformation and upgrading. In 2017, when the R&D transformation had just been launched for three years, when the new R&D system began to have results, Fang Hongbo confessed his heart at an internal meeting of Midea's R&D system: "Fortunately, it withstood the pressure at that time. It's scary to think about it today. The "pressure" that Fang Hongbo said is precisely from the forces within the United States that refuse or are not optimistic about this R&D transformation. In just three years, Midea's new R&D system has been able to produce on a large scale, which is not easy, but it has put the top commander of Midea Group under great pressure. The difficulties encountered in the process of transformation can be imagined. The confidence and determination that the "number one" needs can also be imagined.
With the support of Fang Hongbo, Hu Ziqiang not only completed the reconstruction of Midea's R&D system, but also promoted Midea's transformation from scale-driven to technology-driven at the R&D level.
He is the vice president and former CTO of Midea Group, and is the first president of the current Academia Sinica. As the chief architect of Midea's R&D transformation, in April 2014, when Midea's Academia Sinica was established, he undertook the important task of building Midea's large R&D system and building a world-class R&D system for Midea.
The practice of Midea's R&D transformation has condensed almost all the experience in Hu Ziqiang's career. It is the tempering of time and experience that has made Hu Ziqiang's accumulation in the United States. His past career illustrates how a R&D person manages and plans his career as if he were managing a project, and completes the progression from an excellent R&D person to a R&D manager. From the fields of power generation, aerospace, medical equipment to the home appliance industry, from engineer, project manager to chief engineer, and then to the vice president and CTO of Midea Group, he began to get involved in the home appliance industry at GE Central Research Institute in 2000 and joined Midea in 2012, and devoted what he has learned in his life to building a world-class R&D system for Midea, leading Midea Group to implement the R&D transformation under the "product leadership" strategy, building a four-level R&D system for Midea, and promoting the "three generations" He has taken every step clearly and decisively.
Of course, the most important thing is that the efforts of him and this R&D force have made the culture of Midea change dramatically. This company, which once attached the most importance to economies of scale and maximized profits with a follow-up strategy, began to have the confidence and dream of innovation leadership, and began to taste the fruits of victory brought by product leadership.
As China's home appliance industry and even China's manufacturing industry continue to make breakthroughs on the road of becoming bigger, stronger and leading, and as China's manufacturing industry continues to achieve high-quality development by building new quality productivity, we need more Fang Hongbo to go through the upward cycle with the strategic determination of excellent enterprises, and we also need more Hu Ziqiang to direct R&D transformation.