Manufacturing needs to embrace the internet to break through the encirclement

“Internet + Manufacturing” is a key issue in the current transformation of all traditional manufacturing industries. Germany proposed Industry 4.0, and the United States subsequently proposed advanced manufacturing, making advanced manufacturing a national strategy. China proposed “Made in China 2025.” All of this shows that if manufacturing cannot be internet-enabled, there is no way out.

Recently, Haier was once again included in the Harvard Business School case library and received praise from Harvard teachers and students. This shows that Haier's exploration represents a direction, the path to internet transformation that all major global companies are seeking. Specifically, in terms of “Internet + Manufacturing,” Haier's exploration is the interconnected factory, but it is not a factory transformation, especially not simply understood as “replacing people with machines,” nor is it a smart factory, but rather the creation of an ecosystem, with the entire enterprise's entire system and processes undergoing disruption.

Specifically, this disruption focuses on three aspects: First, the disruption of the enterprise, that is, the enterprise transforming from a traditional pyramid-shaped hierarchical organization into a platform-based organization; second, the disruption of the customer concept, from customer to user, meeting the personalized needs of users; third, the disruption of employees, transforming from original employers and executors into entrepreneurs and partners. This disruption is summarized as Haier's three transformations: “Enterprise platformization, user personalization, and employee makerization.”

These changes are not whether enterprises want to change or not, but the internet will inevitably force change. Because in the traditional era, it was a one-sided market, as long as products were made, someone would buy them, and the sale would end after the product was sold. However, in the internet era, it is a two-sided market, not requiring customers to pay for products, but user traffic, which requires enterprises to break away from traditional hierarchical structures and become platform-type enterprises.

Therefore, enterprises adapting to the internet era must achieve two transformations: decentralization and de-intermediation. Decentralization means that the leadership and superiors of the enterprise are not the center, but the user is the center; de-intermediation means removing the “intermediate layer,” eliminating departments specifically responsible for evaluating employees. After this transformation, there are currently only three types of people within Haier: platform owners, micro-owners, and makers. Platform owners provide platform resources for entrepreneurs, micro-owners are entrepreneurial teams, and previous employees need to transform into makers.

Speaking of user personalization, we must first change a concept: customers and users are different. In the traditional era, there was a saying that “payment is the end of sales.” Customers pay the enterprise, and after that, they have no relationship with the enterprise. But in the internet era, payment should be the beginning of sales, and users not only buy things but also participate in front-end design. To achieve this, the factory must become an interconnected factory to meet the personalized needs of users.

Therefore, the factory must first become a dark factory. Haier currently has four factories that can become dark factories, without lights, without heating equipment, and no one inside. After the personalized needs of society are met, what is needed is virtual design, plus intelligent manufacturing, at which point manual input is no longer needed in the workshop.

Now, when many personalized user needs come in, the process of user-customized products from design to manufacturing and packaging can be sent to the user's mobile phone, allowing the user to be completely “visualized.” This is also Haier's “transparent factory” that is currently being developed. Currently, the volume of personalized customization is not large. When 100,000 users have 100,000 needs, what we need to do is not to make 100,000 different products, but to use the interaction of user circles, interacting until a relatively concentrated model is achieved, even if it is a new product.

Germany's measurement standard for Industry 4.0 is the “two-dimensional strategy”: the horizontal axis is enterprise value, that is, how much the financial statements can be improved; the vertical axis is the value of the entire value chain, benefiting from upstream to downstream. Haier's exploration of the interconnected factory's “two-dimensional strategy” is slightly different. The horizontal axis is also enterprise value, but the vertical axis should be the value of user personalized customization. That is, the biggest feature of the interconnected factory is that it must bring greater user value, only in this way can it bring greater value to the enterprise.

The current global internet development trend is like what is said in philosophy: affirmation, negation, negation of negation. The industrial workshops at the beginning of the industrial revolution were self-sufficient. Later, they became mass production, with production and sales separated. However, in the internet era, it has returned to self-sufficiency, that is, when user needs arise, the factory can immediately manufacture them.

Some people say that interconnected factories may subvert e-commerce. But this is not the ultimate goal. The ultimate goal should be as Jeremy Rifkin wrote in “The Zero Marginal Cost Society”: the future development of the internet will bring about a collaborative sharing economy. Everyone is both a producer and a consumer, such as a 3D printer, I am both a producer and a consumer. For example, using solar power generation at home and transmitting electricity to the power grid, I am both a producer and a consumer.

Economics tells us that there is no value without exchange. But in the later stages of internet development, this theory will be subverted. At that time, people will pursue shared value.