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Power Sheet – January 21, 2015

A salutary effect of last Monday’s news that Haier Group will buy General Electric’s appliance business is that maybe, finally, Americans will get acquainted with Haier’s longtime CEO and one of the great business leaders of recent decades, Zhang Ruimin. Leaders of every kind have a lot to learn from him.

A few basics you may not know about Haier: Despite its German-sounding name, the company is Chinese. By market share it’s minuscule in the U.S. but No. 1 globally. Revenue in 2014 (most recent available) was $31 billion. GE doesn’t report its appliance revenue, but its appliances and lighting group had 2014 revenue of $8.4 billion.

More important is how Zhang has built this behemoth as CEO since 1984. Back then it was Qingdao Appliance Co., a maker of shoddy refrigerators. Zhang gave an early sign of his managerial goals by ordering his workers to haul all the defective refrigerators out of the warehouse – there were 76 – and destroy them with sledgehammers, on the street in public view. This was shocking beyond words in 1984 China, and Zhang has continued to surprise ever since.

This product of Maoist collectivism became an avid student of Western management literature, especially the work of Peter Drucker. Mindful of Drucker’s warning that a failure to “say goodbye to yesterday” was the downfall of many businesses, Zhang resolved that his company would change continually, saying goodbye to yesterday every day.

He began by revolutionizing quality in his plants and setting a new standard for China. He simultaneously achieved unheard-of efficiency in China’s then-backward manufacturing sector. He organized employees into teams and pitted them against one another for performance-based bonuses, and he began evaluating every employee every day on objective criteria, with the results posted publicly. More than just shattering Chinese norms, he was beginning to devise management practices that even most Western firms would reject as too radical.

Then he realized that Haier, as it became known in 1992, needed to develop a new competency, responding to customer wishes faster and more insightfully than any competitor. Even today, reports Strategy + Business, Haier’s U.S. r&d engineers are required to talk with consumers about the products the engineers are working on, and their pay is based in part on the eventual sales of those products. He has since reorganized the company into self-managing teams, more than 4,000 of them the last time I talked with Zhang, a few years ago in Beijing. “If the members of a unit don’t like the way their manager is performing, they can vote him out,” he told me.

And now he’s revolutionizing the company again to make Haier appliances not just products but Net-based platforms for which others can write apps. “Haier is not interested in becoming the GE of China,” IMD business professor Bill Fischer told Bloomberg recently. “They want to be the Apple of China.”

Zhang’s next objective is clearly to make GE Appliances the Haier of America. Even today, at age 67, he’s as driven as he was 32 years ago. Watch and learn.

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What We’re Reading Today

Yahoo rebuffs buyers for Internet business

Sources tell Reuters that private equity firms are among prospective buyers that have told Yahoo they’re interested in its core Internet business. But CEO Marissa Mayer will put off any decisions until after announcing quarterly results on  Feb. 2, when she will describe her strategic vision and can gauge investor reaction. Mayer wants to spin off the core business, while investors including Jeff Smith at Starboard Value Fund  favor an outright sale, which would be faster. Reuters

Upstart cloud providers face buyout pressures

With the market pummeling business technology companies, firms such as Aaron Levie‘s Box and Aneel Bhusri‘s Workday could receive buyout offers as their cash reserves dwindle. Established players in the field, like IBM, HP Enterprise, and Cisco, face similar market pressures but have the cash to buy smaller players and strengthen their cloud efforts. IBM’s Ginni Rometty has already taken a small step, buying Ustream for $130 million.  WSJ

Los Angeles mayor wants just one NFL team 

Mayor Eric Garcetti said that the NFL’s San Diego Chargers should stay where they are in order to create a rivalry with the Rams, moving back to L.A. from St. Louis. The NFL has given Chargers owner Alex Spanos a year to decide if the team will join the Rams in L.A. Garcetti added that cities shouldn’t put themselves in debt for years simply to keep or add a professional sports team. Fortune

Flight cancellations mount amid snow storm 

As Washington, D.C., faces the prospect of 30 inches of snow today and tomorrow, American Airlines’ Doug Parker cancelled all flights to the city starting at 3:30pm EST today and all day tomorrow. JetBlue, Southwest, and United have announced similar cancellations in Washington, Charlotte, Philadelphia, and New York City. Weather Channel

Building a Better Leader

To survive a snow day as a working parent… 

…manage your day strategically. Take the kids out to play in the morning to wear them out, then work when they rest. Fast Company

Being black in corporate America

Many African-American execs say they have two jobs: the one they’re paid for and the other to represent those who haven’t reached the C-suite yet. Fortune

After 10 years of study, one successful CEO trait stood out

It’s the ability to build relationships. Quartz

Worth Considering

Philips’ sale of LumiLEDs gets nixed by U.S. regulators… 

…and no one knows why. The deal would have allowed Frans van Houten‘s Dutch company to shed the low-margin U.S. business, which makes lights for the auto industry, to a group of Chinese investors, but the Committee on Foreign Investment in the United States won’t allow it to move forward. The CFIUS, an inter-agency committee under the auspices of the Treasury Department, is sensitive to high-tech firms passing into Chinese hands, but LumiLEDs doesn’t seem particularly high-tech. Fortune

Chris Christie’s shrinking N.J. ambitions

As the presidential efforts of Gov. Chris Christie heat up, he has turned his focus away from New Jersey. He has asked for only one law to be passed this year and has held just two public events in the state. It’s not uncommon for candidates to spend less time at home when running for president, but this is a drastic drop-off from his past efforts. Christie has criticized Florida Senator Marco Rubio for not showing up to work.  NYT

Hyperloop efforts pick up

When Elon Musk said he wanted to build a transportation system using vacuums and magnets to send someone from San Francisco to L.A. in 35 minutes, most thought it was a pipe dream. Now two engineering groups have stepped up competition to make it real, and one says it could begin a scaled down version in L.A. in three years. WSJ

Up or Out

Radioshack CEO Ron Garriques has resigned less than a year after taking the role. CFO Gordon Briscoe will serve as interim chief until a replacement is found. Fortune

Anne Stausboll, CEO of CalPERS, the nation’s largest pension fund, will step down on June 30. Sacramento Business Journal

Fortune Reads and Videos

Facebook launches new feature for sports

Sports Stadium is a real-time commentary and game-score spot, and a big shot at ESPN.  Fortune

Nespresso sues Israeli competitor… 

…for using a George Clooney lookalike in a commercial poking fun at Nespresso.  Fortune

Tinder adds links to local STD testing locations 

It’s in an effort to end a feud with the AIDS Healthcare Foundation. Fortune

Apple tries to kill more patents than any other company 

It’s way ahead of second place Samsung’s efforts. Fortune

On this day…

in 1984, Apple ran its famous Super Bowl ad introducing the Macintosh.  EDN

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Produced by Ryan Derousseau
@ryanderous
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