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Power Sheet – June 9, 2016

If I’d told you a decade ago that a Chinese company known in the U.S. for making dorm-room refrigerators, to the extent it was known at all, would one day buy General Electric’s appliance business, I suspect you would have laughed. But on Monday it happened: Haier Group closed on its purchase of the business for $5.2 billion. And if that seems incredible, it isn’t nearly as incredible as what else Haier CEO Zhang Ruimin is doing with the company he has run for over 30 years. I have long been spreading the word that he’s one of the most fearless and revolutionary managers of our era. After sitting down with him again yesterday, I’m even more convinced.

Ruimin was in New York for the GE deal closing and to accept a Legends in Leadership award at the Yale CEO Summit. Even many CEOs don’t know that Haier is the world’s No. 1 appliance brand, and most have no idea how he has done it – by fundamentally remaking the company at least three times, always thinking further ahead than his big competitors.

Here’s what he’s thinking now: “In the old economy, competition is between products or between brands. But in the Internet age competition is between platforms. You either become the platform or you end up owned by the platform.” Zhang is therefore creating an Internet-of-things platform for refrigerators and ovens, among other products. “The concept is not new,” he says, “but in this business there’s not one product that really embodies it.” In addition to Haier and its customers, which he prefers to call users, the platform would attract food makers or sellers; “advertisers can use this platform,” he says, as can others he hasn’t imagined. As a result, “the company won’t be an independent organization, but rather a node on the Internet.”

So far this is innovative, not revolutionary, thinking. But then Zhang pushes it further. “All large business organizations are plagued by the big company disease. Bureaucracy sets in, and they tend to be very slow. You have to be very bold,” he says. Next step in his reasoning: “Only the frontline employees know the users and their needs. So we need to destroy the hierarchy. Now we have no departments anymore; instead all employees are part of entrepreneurial teams” – about 3,000 of them – “like in-house startups, which I believe is unprecedented.”

They’re more like in-house startups than you would ever imagine. Each team must attract venture capital funding from outside the company, and then each team member must personally contribute capital. If the team can’t attract outside capital, then it must be dissolved. And who are the team members? “One of the principles is that these teams are open to society, not just existing employees,” Zhang says. “It’s fully dynamic.”

As for where this leaves him: “I am no longer the boss. At the most, I’m a shareholder in the teams.”

Now he’s sounding like an out-there business futurist. But he isn’t one; he’s running the world’s largest appliance brand, with 60,000 employees, or 73,000 after the GE acquisition. He doesn’t force the companies he buys to manage exactly like this, but, he says, “we are asking the local managers to apply this philosophy to their operations” based on their own countries’ cultures and laws.

Zhang holds no illusions about what comes next: “We have implemented so many reforms with the goal of creating something truly revolutionary,” he says. “Now we have to produce the revolutionary changes we’re talking about.” You’d say it was a long shot, but it’s exactly this kind of thinking that has taken him where he is.

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What We’re Reading Today

Bernie Sanders to meet with Obama
Now that Hillary Clinton has apparently locked up the delegates needed for the Democratic nomination, calls for Sanders to suspend his campaign are growing louder. President Obama has promised to talk to Sanders but reportedly won’t directly ask him to quit. Obama is expected to endorse Clinton for president as early as this week. Sanders may have fallen prey to a disease many bad CEOs suffer from:  listening only to himself.  CNN

Justice Department asks Supreme Court to overturn…
…a ruling in favor of Apple in its fight against Samsung. Tim Cook‘s company won a patent infringement case that began in 2011, when Apple sued Samsung over iPhone patents. A jury awarded Apple $930 million, but Samsung has appealed to the Supreme Court. The Justice Department has asked the court to overturn an appeals court ruling and send the issue back to the trial court.  Fortune

Adidas brings manufacturing back home to Germany…
…as wages rise in Asia and machines grow more capable. Other companies, including Mark Parker‘s Nike and Cook‘s Apple, are considering or implementing similar moves.  WSJ

Israel rescinds Ramadan permits following attacks
After gunmen opened fire in a Tel Aviv market, killing four, Israeli Prime Minister Benjamin Netanyahu revoked 83,000 permits for Palestinians in Gaza and the occupied West Bank to travel abroad and attend Ramadan prayers in Jerusalem. Israel also added troops along the West Bank. The shootings are the latest in an eight-month wave of violence. NBC News

Building a Better Leader

Incubators aimed at promoting diversity in the tech sector grow
One has helped businesses raise $20 million in five years. NYT

Warren Buffett says you shouldn’t just satisfy your customers…
…but delight them. It’s something he thinks Amazon CEO Jeff Bezos does really well. Fortune

If you wonder whether we’re in an asset-price bubble…
…look backward for perspective, which suggests that we just might be. But  entrepreneurs rarely believe it. Management Today

Untapped Potential

Fiat Chrysler in talks with Uber…
…about a partnership. While details are sparse, a deal could potentially be finalized by year-end. Sergio Marchionne‘s Fiat Chrysler is already partnering with Google. Travis Kalanick‘s Uber may also be in discussions with other automakers. Fortune

Saudi Aramco IPO could be a boon for bankers
Long considered the “white whale” in investment banking circles, the state-owned oil giant is estimated to be worth between $2 trillion and $3 trillion. The IPO could yield over $1 billion in fees, leading to a fight just to meet face-to-face with CEO Amin Nasser or Chairman Khalid al-Falih. Jamie Dimon‘s JP Morgan Chase, along with McKinsey and Boston Consulting Group, have been part of early discussions.  WSJ

Elon Musk revises battery plans
He said Tesla would use only Panasonic batteries for its Model 3 cars but may use Samsung SDI batteries for its energy systems in homes, companies, and utilities. Shares in Cho Nam Seong‘s Panasonic fell 8% after Musk tweeted the news. Reuters

Up or Out

JustFab, a fashion e-commerce company, has named Todd Tappin president and CFO.  BusinessWire

Kerry Trainor has stepped down as Vimeo CEO.  Variety

Fortune Reads and Videos

Federal judge upholds Google’s victory…
…in its copyright fight with Oracle. The ruling won’t likely end Oracle’s fight over the definition of “fair use.” Fortune

Larry Page has been secretly funding…
…two flying car startups. The companies aren’t affiliated with Alphabet or Google. Fortune

Uber’s Travis Kalanick reiterates his desire…
…to delay an initial public offering for as long “as humanly possible.” Fortune

Millions of Twitter users have been hacked
But the 32 million user credentials didn’t come from Twitter’s data, according to Jack Dorsey‘s social site. Fortune

Quote of the Day

“I’m not going to speak and elaborate on…the steps we intend to take, but I’m sure I’m not going to settle for just talking.” — Israeli Defense Minister Avigdor Lieberman responding to questions about how Israel will respond to the recent attack in Tel Aviv.  NBC News

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Produced by Ryan Derousseau
@ryanderous
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