Being the second largest economy, China must be disappointed to learn of its 35th rank on the Global Innovation Index in 2103. Even so, innovation plays an important part for Haier to become the largest home appliance manufacturer in the world in 2012 with US$ 30 billion revenue in 2013. Haier is viewed by many as an innovative company and its innovative ideas come from its customers, employees, and suppliers and not from its R&D team.
To encourage open innovation, Haier’s CEO Mr. Zhang recognizes the importance of fast innovation in order to sustain profitable growth especially when Haier competes with GE and Whirlpool on one end of the spectrum and Chinese local brands on the other end. To become more innovative, he eliminated the firm’s entire middle management in 2013, encouraged workers to from self-managed teams, and provided incentives for workers to engage customers and suppliers to develop new ideas.
As Haier workers are encouraged to develop new ideas with customers and suppliers, something magical did happen. For example, after learning customers in China were using washing machine to wash vegetables as well as clothes, Haier developed a washing machine capable of washing both clothes and vegetables. This machine is welcomed by many Chinese customers especially when they are concerned about vegetables may be laced with pesticides. No wonder Haier is getting higher!
 “Haier and Higher,” Economist, October 12, 2013.