Even if you haven't heard of Zhang Ruimin, you've probably heard of the Haier Group, where Ruimin has served as CEO since 1984. Based in Qingdao, China, Haier is the world's fastest-growing appliance maker. Ruimin took over the then-troubled company when he was just 25. He is now receiving global recognition as a management thinker of extraordinary depth. As Art Kleiner observes on strategy business

Each year, the Academy of Management recognizes one of the world's most influential chief executives by inviting that person to keynote its annual meeting. When Zhang Ruimin gave the address in 2013, it was a signal that China had produced its first philosopher-CEO. Like Jack Welch and A.G. Lafley, Zhang is recognized not just for leading a high-performing and truly entrepreneurial global business, but also for organizing that company around a conceptual framework that has guided its development for years. 

In his interview with strategy business, Ruimin reveals several books whose management insights have helped him guide Haier to its current heights--including last year's $364 million investment from Jack Ma's Alibaba Group. Here are the five books Ruimin cites:

1.  Built to Last: Successful Habits of Visionary Companies (1994) by Jim Collins and Jerry Porras. Ruimin mentions this book in response to a question about long-term success. From Ruimin's point of view, the chief challenge is for leaders to maintain their entrepreneurial spirit, year after year. He admits it isn't easy: "As regulations multiply and companies control their employees more tightly, everyone becomes really good at following orders."

To elaborate on the point, he uses a metaphor from Built to Last. Collins and Porras refer to many CEOs as "time tellers"--that is, the value of their products and services lasts only as long as the CEO is working at the company.

But the best CEOs, says Ruimin, continuing to mine Built to Last's metaphors, should be more like "clock builders." That is, they should build companies that still behave entrepreneurially when the founder or guiding leader is gone. "An enterprise must evolve into a system that stands on its own, and does not depend on the whim and fancy of its current leader," he said. 

2. and 3. The Long Tail: Why the Future of Business Is Selling Less of More (2006) and Makers: The New Industrial Revolution (2012) by Chris Anderson. Ruimin names Anderson's books in response to a question about the management theories which have most influenced Haier's current direction.

It's not the first time Ruimin has cited The Long Tail. In a 2009 interview with Knowledge@Wharton, he explained how Anderson's ideas were helping Haier transition from traditional manufacturer to information-based service provider. "In the internet age, every company should provide goods at a low cost, and make it easy for customers to get their hands on them," he said. 

You could even argue that Ruimin is cannily using Anderson not only to guide Haier's current direction, but also to bolster its branding as a nimble, service-providing "maker" (as opposed to a sessile, old-school manufacturer).

To wit: Anderson's visit to Haier headquarters, earlier this year, is now listed as a signature moment in the company's official history. The history's entry for March 17, 2014, reads verbatim: "The creator of the word 'maker' and the 'maker movement' sponsor Chris Anderson visited Haier and had a speech: Maker--the new industry revolution. In the speech, he shared stories and inspirations of makers, then talked about 'period for everybody being a maker.'"

4. Here Comes Everybody: The Power of Organizing Without Organizations (2008) by Clay Shirky. Ruimin cites Shirky's book as another example of contemporary thought leadership influencing Haier's direction.

In the book, Shirky offers examples of companies which have thrived in the absence of traditional organizational structures. The ideas have clearly influenced Ruimin. He tells strategy business:

We used to have a pyramid-style structure for our sales in China. The people in charge of sales had to manage business at the national, provincial, and city levels.

After the arrival of the internet age, we realized that under this triangular hierarchical structure, people had a difficult time adapting to the requirements of the times. So we reorganized ourselves as an entrepreneurial platform. We flattened everything out, taking out all the middle management. We decentralized the structure to one with more than 2,800 counties. Each county organization has seven people or fewer.

5. Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process (1939) by Joseph Schumpeter. Ruimin mentions Schumpeter's classic in the course of explaining Haier's philosophy on innovation. In a sentence, Ruimin says, that philosophy is: "Never follow only a single road."

Diving deeper, Ruimin refers to Schumpeter's definition of innovation in Business Cycles: "The reorganization of the factors of production." Here's what that means, from Ruimin's perspective: Generally speaking, your company and your competitors have access to the same resources. So the ongoing challenge of innovation is finding new ways to differentiate yourself, given the comparable access to those resources (talent, cash, raw materials). 

"It's like poker. Everyone has the same number of cards," Ruimin tells strategy business. "It's how you play your hand that matters."

Published on: Nov 20, 2014