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Advances Newsletter, April, 2014
1
Vol. 4, #3, April 2014, No. 37
Laundry Division Teams up with Samsung
Another heavyweight has signed a cooperation agreement with Midea
Advances Newsletter, April, 2014
2
ADVANCES Newsletter
Contents
Midea Advances Newsletter is published monthly
by the International Strategy Department of
Midea Group. We welcome all comments,
suggestions and contribution of articles, as well as
requests for subscription to our newsletter. You
can reach us by email at: [email protected]
Address:
ADVANCES, International Strategy Department
Midea HQ
No. 6 Midea Road
Beijiao, Shunde, Foshan, Guangdong
P.R.C. 528311
Tel: +86-757-2360 4714
Web: www.midea.com/global
Managing Editor:
Kevin McGeary
Regular Correspondents:
Chen Minshan
Anggie Cai
Liu Xi
Wu Meiyun
Shen Qingye
Crystal Lun
Chen Shuting
Tony Miao
Mandy Wang
NEWSLINE
Activities Boost Wuhu Factory
Workers Morale PAGE 5
Midea Grosses 38 Billion
RMB in First Quarter PAGE 3
Midea CAC in the Limelight
at Heat Pump Exhibition PAGE 4
Midea Holds “Six Sigma”
Management Training
Session PAGE 6
Midea Ranks 3rd in the In-
dustry in Sales of Gas Water
Heaters PAGE 5
www.midea.com
PAGE 18
IDEA
SNAPSHOT
PEOPLE
A Maker of M-Smart PAGE 15
Midea Bids Successfully for
Film City Project PAGE 9
6 Midea Commercial Air-
conditioners Named High-
tech Products PAGE 7
Midea RAC Exhibits at CRH
Expo PAGE 10
Midea RAC Products Make
Waves at Canton Fair PAGE 9
Midea CAC at Beijing
Refrigeration Expo 2014 PAGE 12
Idea of the Month: A Happy
Workforce PAGE 14
HQ Holds Inaugural
Interdepartmental
Basketball Match PAGE 6
M-Smart Debuts at the 115th
Canton Fair PAGE 11
Laundry Division Signs
Cooperation Agreement with
Samsung PAGE 10
What Does Slowing Growth
Mean for China and Those
Investing in It? PAGE 13
BIG PICTURE
Advances Newsletter, April, 2014
3
Midea Grosses 38 Billion RMB in First Quarter
By Chen Minshan
M idea grossed 38.35 billion RMB (US$6.12 bil-
lion) from January to March, according to the quarterly finan-
cial report which was published on April 29. This was a year-
on-year increase of 22%.
The holding company was responsible for 2.54 billion
RMB in net profit, a year-on-year increase of 53%. Earnings
pre share were 1.51 RMB, a year-on-year increase of 54%.
Meanwhile, the consolidated gross profit margin was 25.31%,
an increase of 2.15 percentage points.
These figures are even more encouraging than the year-
ly financial report, which was published a month earlier. It
showed that the company made gross revenue of 121 billion
RMB in 2013, an increase of 18% year-on-year.
The holding company itself made a net profit of 7.3
billion RMB in 2013, which was an increase of 38% year-on-
year and exceeded the earlier forecast of 6.93 billion RMB.
Earnings per share were 4.33 yuan, an increase of 37%.
Domestic revenue was 67.3 billion RMB, an increase of
26.37% year-on-year. Export revenue was 45.83 billion RMB.
E-commerce generated nearly 4 billion RMB, in 2013 an
increase of 160%. Large home appliances such as air-
conditioners, fridges and washing machines saw sales of 78.4
billion RMB, an increase of 23.15% year-on-year. Small home
appliances saw sales of 27.8 billion RMB, an increase of 8.08%.
The principles of leading in quality, focusing on efficiency,
and thinking globally appear to have paid off. Also in 2013,
Midea was named one of China’s top 10 most innovative com-
panies, the only electrical appliances business to win the acco-
lade.
How will Midea build on this success? Highlights of 2014
will include the new M-Smart range of intelligent appliances, a
partnership with internet giant Alibaba, and embracing Internet
of Things technology. These campaigns were already under way
in 2013, coming to fruition at the recent Canton Fair.
Midea Group Chairman Fang Hongbo explained in April
that the company underwent certain transformations in 2013 in
terms of assets and financial conditions, and the changes are
starting to pay dividends. Mr. Fang added that the companies
motto for 2014 would be “Transform deeply, change coura-
geously, grow anew.”
The key strategies this year are “Business strategy, internet
strategy and globalization strategy.” With its unique product
range, Midea is particularly well placed to make the most of the
coming age of smart, interoperable appliances.
In this edition, we will bring you some more news and
information about this and other projects . We couldn’t be more
excited.
NEWSLINE
Advances Newsletter, April, 2014
4
By Anggie Cai
Midea CAC in the Limelight at Heat Pump
Exhibition
C hina Heat Pump Exhibition 2014
took place from March 12-15 in Shanghai. Near-
ly 100 top Chinese heat pump water heater
(HPWH) organizations attended the fair. At the
heat pump fair, exhibitors spared no effort in
showing off the newest products and technolo-
gy. As a leader in the HPWH industry, Midea
CAC showcased a full range of products for
both residential and commercial use. Midea
CAC’s high-end products and superior quality
put the brand firmly in the spotlight.
New domestic products were unveiled,
including HPWH “Yuquan” series, “Meiquan”
series and “Lequan” series and commercial cate-
gory involving cycle heating, direct heating and
ultralow temperature type. A particular highlight was Midea
CAC holding a new product launch for HPWH “Yu Quan”
Series. “Yuquan” has several major attributes. First, its classical
appearance makes it a work of art. Second, it applies enamel
tanks with a long lifespan, durable for 15 years. Third, the outlet
water temperature can reach up to 70℃ . Additionally, its precise
temperature control and anti-bacteria function offer cozy water
experience. Moreover, it is nation-certified energy saving with
COP 4.10. Besides, broad operation range from -20℃ to 46℃ .
Above all, it is the first HPWH to obtained European ErP Cer-
tificate global wide. With “Yuquan”, you can enjoy fresh water
at home freely and joyfully.
“Yuquan” caused such a stir that it might have been the
talking point of the whole show. This star product owes a great
deal to the efforts of Midea’s engineers
who work tirelessly to stay at the cut-
ting edge. Midea CAC now owns over
230 HPWH patented technologies with
elite technical experts and R&D teams
from home and abroad. It is worth
mentioning that Midea CAC made a
huge investment in introducing a full-
automatic production facility from
EISENMANN Germany and setting
up domestic leading production lines
for enamel tanks. All of these develop-
ments augur well for the future of
Midea CAC.
NEWSLINE
Advances Newsletter, April, 2014
5
Activities Boost Wuhu Factory Workers’
Morale By Liu Xi
W orkers at Midea’s domestic air-conditioning factory
in Wuhu are being taught how to
“be happy in their work and enjoy
their lives.” They are learning this
through a series of activities with
the theme: “Love your team, love
your colleagues, love your family,
love yourself.”
Activities include daily read-
ings of translations of the ancient
Sanskrit text “The Upanishads.”
Workers are also required to give
each other daily shoulder and
head massages. In one activity,
the workers stand in lines of four,
rubbing each other’s shoulders
and reciting the lines (which
rhyme in Chinese): “If I give you a pinch on the shoulder, you
struggle for the day. If I give you a slap on the back, you’re hap-
py for a lifetime.”
Workers are also allowed to
play badminton during their
lunch breaks and have a man-
datory games session every
week. New employees have
mingling activities where they
each give a self-introduction
and gatherings are regularly
held where they pump each
other up.
When long-term
employee Yu Xiaoping left
Wuhu to take care of her sick
mother, a farewell celebration
was held in which colleagues
spoke of how much they
loved her.
NEWSLINE
Midea Ranks 3rd in the Industry in Sales of
Gas Water Heaters
Wu Meiyun
M idea products have
risen to third in the industry in
retail sales of gas water heaters,
according to a report released by
Touchstone in late February.
Midea jumped four places
with sales rising by 103.88%. This
development takes place at a time
when energy efficiency and car-
bon emissions are a major issue.
In this environment, Midea is lead-
ing domestic competition and
catching up with overseas competi-
tion.
With its focus on high per-
formance and high capacity, Midea
has done particularly well in prod-
ucts ranging between 1500 yuan
and 3000 yuan in price. Those cost-
ing around 1500 Yuan have in-
creased sales by over 50%.
Advances Newsletter, April, 2014
6
Group Holds “Six Sigma” Management
Training Session By Shen Qingye
M idea Group
held its third interdepart-
mental “Six Sigma Man-
agement Style” training
session in Shunde on
April 9-10. The first two
sessions were held last
year. The fourth will be
held in Hefei in June and
July and the fifth will be
held in Shunde in Septem-
ber and October.
Six Sigma is a set of
techniques and tools for
process improvement. It
was developed by
Motorola in 1986. In
1995, it was made central to the business strategy of General
Electric, which is now one of Midea’s clients.
Six Sigma doctrine includes the
assertions that continuous ef-
forts to achieve stable and pre-
dictable process results (i.e.,
reduce process variation) are of
vital importance to business
success and that manufacturing
and business processes have
characteristics that can be meas-
ured, analyzed, controlled and
improved.
By the late 1990s,
about two-thirds of Fortune
500 organizations had begun
Six Sigma initiatives. In 2005
Motorola attributed over US$17
billion in savings to Six Sigma.
NEWSLINE
By Chen Minshan
HQ Holds Inaugural Interdepartmental
Basketball Match
T he inaugural
interdepartmental Midea
basketball match was
held in Shunde on the
evening of April 15. In it,
a team made up of the
human resources, legal
and public relations de-
partments ran out 45-40
victors over the finance,
overseas and auditing
departments.
Two days later, a
team consisting of the
strategy and operations
departments took on a
team made up of the tech-
nology and quality control
departments, and in the
same evening the domestic
marketing department took
on the I.T. department.
Such activities are
a healthy way of building
up friendly competition
between departments and
fostering a sense of cama-
raderie.
Advances Newsletter, April, 2014
7
6 Midea Commercial Air Conditioners
Named High-Tech Products By Anggie Cai
I n the 2013 high-tech product confirmation carried out
by Provincial Science & Technology Bureau, Midea Commercial
Air Conditioner Company entered seven products, six of which
met the criteria and were authorized as Guangdong high-tech
products. Here is an introduction to the six successful products:
All DC Inverter VRF MDVX Series
Midea’s latest generation VRF product MDVX series
boasts several outstanding attributes. The diamond cutting tech-
nique perfectly blended with thread hidden design gives it an
elegant appearance. It is the work of a leading French designer.
The product contains a high-efficiency DC inverter compressor
and DC speed variable fan motor; both of which conserve ener-
gy. Next, it possesses advanced functions including ultra-silence
technology, alternate operations among modules, double backup
operations, auto addressing, and non-polar communication.
There is also a broad capacity range from 8HP to 88HP in 2HP
increment, which is widely used in office buildings, hospitals,
and other large public spaces.
HPWH with Enamel Tank
Currently, the enamel water tank is largely applied in split
and combo ATW heat pump water heaters. Midea HPWH with
enamel tank
has phenome-
nal water-
heating capaci-
ty in both nor-
mal tempera-
ture and low
temperature. It
is efficient,
reliable and
eco-friendly.
The enamel
water tank
boasts several
advantages:
strong pressure-proof capability, long lifespan,
and good quality water, stable and steady water
supply.
All DC High Efficiency VRF TR Series
VRF TR series also involves an attractive new
design. Compared to its predecessor, the TR
series
has
20%
higher
effi-
ciency
with
integrated COP of 7.0.
This is thanks to the
application of high-
efficiency inverter
compressor control
technology, heat ex-
changing strengthen-
ing technology, fast
cooling and heating
NEWSLINE
Advances Newsletter, April, 2014
8
6 Midea Commercial Air Conditioners
Named High-Tech Products (Cont.) By Anggie Cai
technology, and fan air channel optimization techniques. Fur-
thermore, the noise is 3dB lower than that of its counterparts.
Last but not least, the compact design facilitates installation and
maintenance. All of these contribute to higher stability and bet-
ter customer experience.
High Efficiency All DC Household Water Cooling
Unit (Combo Type)
This product is of combo construction. This means it is
compact, easy to install, and versatile. It can be used in villas,
small office buildings and other small to medium-sized spaces.
Water cooling technology combined with all DC inverter tech-
nology leads to higher efficiency with cooling EER reaching 3.9
and heating COP up to 4.1 which meets Europe tax refund re-
quirement. Wide operation range: -10℃ -50℃ in cooling and -
15℃ -27℃ in heating. The water side adopts high efficiency
plate heat exchanger and triple freezing-proof technology,
shooting the trouble of plate frost crack under low temperature.
H Type Modular Chiller
Midea H type modular chiller contains a 360 degree air-
return heat exchanger. It is elegant in appearance and is aimed at
the medium to high range of the market. The unit utilizes multi-
ple patented technologies and innovative designs, wider opera-
tion range, stronger reliability, capac-
ity of one single unit reaching
2080kw. Fewer components and
welded junctions lead to higher man-
ufacturing capability. Reduced foot-
print makes project installation and
maintenance easier and more flexi-
ble.
US Style Ducted Unit
The top efficiency ducted unit for
North America meets the efficiency
of 16SEER and the configuration
complies with the architecture style
of North America. By way of optimi-
zation of structure, flow path, and air
passage, the unit is more compact.
The circular arc-shaped fan is a noise
reducer. Application of constant air-volume DC motor which is
able to adjust the air volume according to environmental pres-
sure makes for cozier sensations and feelings.
NEWSLINE
Advances Newsletter, April, 2014
9
By Crystal Lun
Midea Bids Successfully for Film City
Project
M idea domestic
air-conditioner sales com-
pany in Weifang, Shan-
dong Province won the
project to become the ex-
clusive supplier of air-
conditioning equipment to
the world’s largest film
production area. Midea
overcame several competi-
tors to win the bidding
procurement for the Qing-
dao Wanda Oriental Studio
City Project. The studio
apartments require air con-
ditioners for more than 7,300 sets.
The Qingdao Ori-
ental Studio City
has an area of
55,000 square kilo-
meters. In this bid-
ding process, Midea
air conditioning’s
quality, full range of
delivery assurance,
and service ad-
vantages proved
decisive.
NEWSLINE
Midea RAC New Products Make Waves at
Canton Fair By Crystal Lun
M idea RAC exhibited a range of new products at the
115th Canton Fair from April 15-
19, impressing traders from around
the world. It was a follow up to the
successful MCE show which was
held in Italy in March.
At the fair, Midea group dis-
played its M-Smart cloud system for
the first time. Midea RAC, as one of
the sectors integrated into the M-
Smart system, showed two hi-end
representing models: Helios Split,
and YA100 floor standing. Both of
the products can realize Wi-Fi con-
trol and voice control as well.
Midea RAC exhibited a complete product line-up at the
fair from split, portable, dehumidifiers, to commercial ACs. In
the Midea RAC sector, three brand new split series caught the
eye: Perla, Toscana, Aurora. And among them, Aurora splits
showed 6 bodies with 6 different
capacities. At the theme area, Perla
splits were used to promote Eco
technology in the form of low
power consumption. We also
showed our environmental tech-
nology of new refrigerant R290 or
R32 applied in Midea split and
portable ACs. Solar inverter tech-
nology explained the smart energy
system which can store extra solar
power and take priority to use it.
The swift pace of new product
development and the intelligent
technology application show
Midea’s tendency to take the lead.
Advances Newsletter, April, 2014
10
Midea RAC Exhibits at CRH Expo
By Crystal Lun
T he 25th CRH Expo was held in Beijing from April 9
to April 11. Inaugurat-
ed in the year of 1987,
the International Ex-
hibition for Refrigera-
tion, Air-conditioning,
Heating and Ventila-
tion, Frozen Food
Processing, Packaging
and Storage (CRH
Expo) is reputed to be
one of the leading
exhibitions you can’t
miss in HVAC&R
industry for over 25
years of persistent improvement and innovation.
Midea Residential Air-Conditioning exhibited its brand
new products at the fair: these include the Aurora split series
which is distinguished by its elegant design and low power con-
sumption. The series has been available in the domestic market
for months and has proven to be a great success. Now it will
begin its march into the
world market.
Apart from that, the light
commercial AC Duct with a
lifting panel was much
talked about by guests. The
grille can be lowered auto-
matically to a maximum of
4m, making it easy for users
to clean the air filter. Regu-
lar cleaning of the filter is an
important factor in saving
energy.
This year has been signifi-
cant for RAC’s product force enhancement project in which
Midea RAC overseas sales company will continue to upgrade
our product ranges to create better value for customers around
the world.
NEWSLINE
By Chen Shuting
Laundry Division Signs Cooperation
Agreement with Samsung
before Mr. Cui was shown
around the factory. During the
ceremony, they signed an agree-
ment.
The agreement firstly consisted
of increasing investment in re-
search and development accord-
ing to Samsung’s standards and
consumer demand, secondly to
maintain rigid quality control in
design, sourcing and manufactur-
ing and thirdly to ensure reliable
delivery and to cooperate in staff
training.
M idea’s Laundry
Division held a ceremony to
mark its cooperation agree-
ment with Samsung on April
24. Yin Bitong, head of the
division, attended the cere-
mony which was held at its
factory in Hefei.
Mr. Yin held a meeting
with his counterpart Cui
Guiran to discuss coopera-
tion over research & develop-
ment, quality, and innovation
Advances Newsletter, April, 2014
11
NEWSLINE
M-Smart Debuts at the 115th Canton Fair
C hina Import and Export Fair, also known as the
Canton Fair, is held in Guangzhou every spring and autumn.
Originating in 1957, it is one of the largest and most varied
business fairs in the world.
As the VIP exhibitor at the 115th session of the Can-
ton Fair, Midea Group displayed a variety of product categories
from large household appliances to small ones. With the theme
of innovation, Midea first exhibited its newly published M-
smart system, which turned out to be one of the most popular
spots at the Fair.
What is M-Smart?
The smart household strategy will involve the imple-
mentation of a plan known as “1+1+1.” That is, it will contain
a smart household system + an M-Smart networking communi-
ty + an M-Box management center. This will provide the con-
sumer with the most comprehensive interoperable household
appliances system to date.
Based on the advantages of Midea’s almost uniquely
broad product range and focusing on core-consumer demand,
Midea is dedicated to providing the most professional experi-
ence of Smart home appliances solutions. With smart devices
like ipads or iphones via WI-FI connection, users can control
all Midea household appliances in unison.
How M-Smart works:
In 2013, Midea Launched Smart Terminal (M-Box)
which can realize the connection of cloud and users’ termi-
nals, and then start the interoperation of different product
catergories. Up to now, four key manager systems : air system,
nutrition system, water cleanliness system and security & ener-
gy system are included in the interoperation, according to the
user’s habits.
Each management system covers relevant products.
For example, the air system includes air conditioners,
fans ,heaters, and air purifiers. The nutrition system includes
refrigerators, cookers, and ovens. Water systems include
washing machines and gas heaters. The Security/Energy sys-
tem includes lighting, and central air conditioning.
In the near future, the consumer will find more
Midea products included in the M-smart system. It has already
foreseen a US$2 billion R&D investment and another US$500
million investment for building the Midea Global R&D Cen-
ter in Shunde to improve M-smart during the next three years.
We look forward to the M- smart system to being the most
complete platform, most numerous user community, most
professional, and most intelligent management system in the
world.
By Crystal Lun
Advances Newsletter, April, 2014
12
By Tony Miao
Midea CAC at Beijing Refrigeration Expo
2014
T he 2014 China Refrigeration Expo was held in Bei-
jing on April 9-11 and Midea CAC was the main sponsor. Fully
named The 25th International Exhibition for Refrigeration, Air-
conditioning, Heating and Ventilation, Frozen Food Processing,
Packaging and Storage Exhibition, it took place in the New Chi-
na International Exhibition Center.
In its role as main sponsor, Midea CAC displayed its latest
technology and new products with the theme “Technology In-
spires the Possibilities”. The air bearing DC inverter centrifugal
chiller and the latest generation VRF system offering heating at -
30℃ was the
highlight of
this year’s ex-
hibition.
The in-
novation of
the “air bear-
ing” technolo-
gy used in DC
inverter cen-
trifugal chillers
has the highest
IPLV
(Integrated
partial load
value) in the
industry with
11.14. The air
bearing is an oil free technology which uses high pressure gas to
support the rotation shaft and its load. Compared with the mag-
netic bearing, which is another oil free technology developed by
DanFoss, the air bearing offers easier control and is more com-
petitively priced. Midea initially used the air bearing technology
in DC inverter type centrifugal chiller to reach a high COP of
6.59. It is an innovation to spread the oil free centrifugal chiller
in the industry to improve the efficiency, especially the partial
load efficiency. On the other hand the chiller used an environ-
mentally friendly refrigerant called R1234ze with a very low car-
bon footprint.
On April 9, Midea CAC also launched the intelligent
household solution. Based on wide range of product categories
and cloud technology, Midea CAC provides the consumer with
a professional smart home experience which integrates air-
conditioners, hot water, lighting, CCTV, and energy manage-
ment with Midea M smart controller. This new system of smart
home appliances works in the following ways:
Leaving home mode: If there is nobody home, an infrared
sensor will detect it and the air conditioners, water heater and
lighting will all automatically go on standby to save energy.
Back home mode: M-smart will control all the AC temper-
ature and air speed
based on the user’s
habit of setting the
time. The hot wa-
ter and lighting
also will be ready.
Sleep mode: The
lighting will turn
off and the air
conditioner will go
into sleeping
mode, meeting the
user’s preferences.
Wake up mode:
When the new day
starts, the air con-
ditioners and water
heater will be
ready.
At this exhibition, three products of Midea CAC were
named innovative products:
DC inverter household mini VRF system TR series’ ca-
pacity range from 8kW to 18Kw can be widely used in a villa,
house or small office area.
Super high efficiency air bearing DC inverter centrifugal
chiller
Air cooled modular chiller with gas R32. The global po-
tential factor for gas R32 nearly to 0 and the product can work
for heating under -30℃ ambient temperature with the applica-
tion of EVI technology.
NEWSLINE
Advances Newsletter, April, 2014
13
What Does Slowing Growth Mean for China
And Those Investing in It? By Kevin McGeary
T he figures are in for the first quarter of 2014, showing
that China’s economic growth slowed to 7.4% on a year earlier,
an 18 month low. This is higher than the 7.3 percent forecast in
a Reuter’s poll but lower than the 7.7 percent of the previous
quarter. Moreover, exports fell for the second month in a row
and imports dropped sharply in March.
Experts from Linda Yueh of Oxford University and the
BBC to Andy Rothman, a China macro strategist at brokerage
CLSA, say we need to get used to the fact that the boom is over.
Should we be worried? Well, unlike in the aftermath of the glob-
al financial crisis of 2008, Beijing is refraining from making any
major stimulus packages, and there is a reason for this.
The End of Investment-Driven Growth
Although this change will take some getting used to, it is
inevitable given the stage of development China is currently at,
according to Sheng Laiyun of the National Bureau of Statistics.
“The slowdown of China’s economy is a reflection of a transfor-
mation of the economic mode,” Sheng told Reuters.
The age of breakneck growth driven by investment from
state-owned banks and exports of cheap goods is at an end. It
was never sustainable anyway. Instead, according to Andy Roth-
man, China will become the “world’s best consumption story.”
Consumption is still a small percentage of GDP, largely because
investment is so high.
The limitations of investment-driven growth are evident in
some of China’s less successful projects of recent decades. The-
se include the uninhabited “ghost towns” that are dotted around
the nation and the New South China Mall in Dongguan City
which has been largely disused since it opened in 2005.
Of course, such pockets of inefficiency are inevitable in
any economy and are not in themselves a damning indictment of
investment-driven growth. But the bigger picture of history also
suggests that China is right to be moving away from this model.
The Need for Innovation
According to Linda Yueh, China’s leaders are now focused
on escaping the “middle-income country trap.” That is the trap
in which countries escape poverty but slow down so much they
never become rich. How can China escape this?
Last year, an article in The Wall Street Journal titled
“Behind China’s Switch to High-End Exports” noted that, alt-
hough exports from China to the U.S. of textiles was still in-
creasing, exports of electronic products are increasing faster.
This is a much-needed development as in China, cities are
required by the central government to raise their minimum wage
every two years, meaning the nation is being undercut in its
ability to offer cheap labor.
Given these obstacles, how does China escape the middle-
income country gap? In a word, innovation. One particularly
inspiring example China can follow is that of South Korea,
which has gone from being synonymous with cheap exports to
boasting world-famous quality brands such as Samsung.
The days of “Made in China” are transitioning to the days
of “Made by China.” Shi Lirong, president of ZTE, told the
BBC last month that his firm spends 10 percent of its revenue
on R & D. This is paying dividends as ZTE has been the most
innovative company in the world over the last three years based
on international patent filings, totaling some 50,000 patents last
year.
Is China Still the Place to Invest?
In the 1990s China was unquestionably the place to invest
as the reform and opening up policies, first proposed in 1978,
began to come to fruition. Now, as Andy Rothman says, the
days when we could roll out of bed and make money are over.
Of course, growth and improvement are not the same
thing. Now that China is no longer focused on the crude pursuit
of GDP growth, it is shifting its attention to even more im-
portant concerns such as the environment. An opinion piece in
Shenzhen Daily last month called for more efforts to preserve
the city’s stunning and historic coastline.
As for the economy, the next big challenge for China is
creating reputable brands that will last. Economist Will Hutton
of Oxford University wrote in The Guardian in 2007 that there
were no world famous Chinese brands or products. But with
well-directed investment in R & D, this is beginning to change
and the winners will be those with a long-term vision.
BIG PICTURE
Advances Newsletter, April, 2014
14
IDEA
Idea of The Month: A Happy Workforce
By Kevin McGeary
W hen I worked in the United States in 2005, my
employer required our team to do an “executive exercise” every
morning. The most famous example of an executive exercise is
the “Hakka,” a vaguely sinister dance which the New Zealand
rugby team does before matches. Ours was the somewhat less
threatening exercise of singing James Brown’s “I Feel Good.”
This type of exercise is not just the terrain of the ec-
centric Tennessean company I worked for but common in
American corporate culture in which “service with a smile” is
considered essential to giving customers a good experience of a
brand. The now defunct airline Pan Am even trained its staff to
have a standardized smile when dealing with customers.
Though service with a smile is a good idea, there is a
reason why the Pan-am smile is considered the opposite of the
“Duchenne smile,” which involves the muscles around the eyes
and is the only genuine type of smile. Service with a Duchenne
smile is better because it cannot be faked or enforced.
The Negative Side of Positive Thinking
Self-help is a $1 billion industry in the United States
and one of the key ideas it is mired in is that of “positive think-
ing.” In “The Secret” by Rhonda Byrne, one of the most popu-
lar self-help books of the past decade, it is claimed that positive
thinking alone can increase wealth, health and happiness.
Similar ideas are increasingly popular in China. The
Global Chinese Positive Psychology Association (GCPPA) was
founded on February 14, 2010 (the first day of the Year of the
Tiger) and it has been the subject of features in Forbes, Fortune
and The Harvard Business Review. Tsinghua University hosts
the China International Conference on Positive Psychology.
Author Barbara Ehrenreich thinks the culture of posi-
tive psychology is not just unhelpful but damaging. In “Smile
Or Die: How Positive Thinking Undermined America and the
World,” she cites delusional optimism as a major cause of the
global financial crisis. Ehrenreich recounts how in 2006 Mi-
chael Gelband, head of the real estate division at Lehman
Brothers, was fired for warning CEO Richard Fuld of a real
estate bubble.
Former New York Times war correspondent Chris
Hedges argued that positive psychology was not so much about
happiness as about conformity and that there is callousness to
this insistence on being happy all the time. In “The Secret,”
Rhonda Byrne even suggests that the victims of the 2004 tsu-
nami in southeast Asia could have survived by being more
positive.
More Important Than Happiness
The right to the pursuit of happiness is listed in the
American Declaration of Independence. In “Man’s Search for
Meaning,” Victor Frankl criticized this aspect of American
culture, in which people are constantly commanded to be hap-
py. Frankl believed happiness cannot be pursued, it must en-
sue.
In Mandarin, the most lyrical word for happiness is
“幸福,” which is etymologically connected to the word for
“luck.” This suggests an understanding that happiness is not a
natural state but something that happens by chance.
So how do we increase the likelihood of being happy in
our work? Sigmund Freud believed that humans were pleasure-
seeking animals but a generation later Victor Frankl refuted
this claim, saying that what we most craved was meaning.
In “Man’s Search for Meaning,” Frankl uses the Nie-
tzsche quote “Those who have a why can live with almost any
how,” meaning that people can endure just about any form of
hardship as long as they see a good reason for doing so.
Workers need a sense of self-worth and an understanding
of how their work fits into the bigger picture. This is why giv-
ing some autonomy is better than forced executive exercises.
Positive action
This experience in the United States was certainly
educational. One of the better things the company taught was
“You can act your way into healthy thinking more easily than
you can think your way into healthy acting.” This means if you
just get on with things you will be more productive than if you
focus on positive thinking.
Harvard psychologist William James knew that not
only does emotion cause behavior (e.g feeling sad makes you
cry), but behavior causes emotion. If you frown for no particu-
lar reason then you will start to feel sad.
This is known as the “As If” principle. If you act as if
things are going your way then you will start to feel more con-
fident. And if you do this, next time you see a client you might
have a Duchenne smile on your face.
Advances Newsletter, April, 2014
15
A Maker of M-Smart
By Mandy Wang & Kevin McGeary
Mao Hongjian
M-Smart Research Institute
In his role as the head of The Research
and Development Institute for M-Smart,
Mao Hongjian does work that is central to
the future strategy of Midea Group.
Focusing on the development of intelligent,
interoperable technology, M-Smart will
receive billions of yuan in investment in the
coming years. After causing a stir at the
recent Shanghai Expo and Canton Fair, the
M-Smart team now aims to integrate 20
product types this year before focusing more
on marketing in 2015.
ADV: Last month, Midea Group held a press
conference about M-Smart. Can you explain to
us the concept of intelligent home appliances?
What is the thinking behind M-Smart? What are the advantages
and what does it mean for the consumer?
Mao: M-Smart involves bringing The Internet of Things, which
includes smart technology and interoperable devices, to home
appliances. It will make electrical appliances operate in unison
to create the environment that residents want.
But what exact groundwork needs to be done to make
this possible? This is what the M-Smart project is all about. M-
Smart is a support system for living. It is a new way of
approaching daily issues, air quality, water and food safety, the
safety of home appliances, etc. Electrical appliances can be part
of overcoming all of these problems. Our objective and
direction is for Midea to create a service system for entire
homes.
Midea is currently a manufacturer of electrical
appliances and related products, this won’t change. What will
change is the service of our appliances, which will go from
passive to active. In passive service, if an appliance is broken,
the consumer calls the company and reports it and the company
will send a repairman. If we have a monitoring system, we can
use the internet to make appliances act autonomously and act
on feedback from the consumer 24 hours a day. For this
program to be successful, after-sales service is essential.
However, after-sales service is just one example of
what will be important. Nowadays, a lot of people live away
from members of their immediate family. Knowing how to take
care of elderly parents is an issue for a lot of people who can’t
be with them all the time. You can use devices to monitor the
routines of loved ones, and on days when their actions are
particularly unusual, you can call to see if they are okay. For
example, if one of your parents tends to get up at 7 a.m., open
the fridge at 8 a.m., and go to the bathroom at 9 a.m., this is a
routine. If one day they don’t follow this routine, this either
means they are not there or are ill. Enabling people to monitor
their own family members makes M-Smart a kind of invisible
nanny. This is part of what M-Smart will mean for the
consumer.
It is a campaign to affect the purchasing habits of the
consumer. An awful lot of work and technology is needed to go
into it. Although it is quite a radical idea, M-Smart has to exist
within the realities of the electrical appliances business. It is
central to the company’s strategy and will greatly increase
Midea’s brand recognition. Midea will not just be a large
electrical appliances company; it will be an essential part of
people’s homes.
PEOPLE
Advances Newsletter, April, 2014
16
A Maker of M-Smart (cont.)
By Mandy Wang & Kevin McGeary
ADV: How will M-Smart be introduced to the world? In the
short term, what will be Midea’s strategy to market it?
Mao: The first step is to ensure that M-Smart can work with
WIFI, Bluetooth and similar services. In this way, users will be
able to control their appliances on their phone. This means that
the consumer can control them anytime or anywhere, making it
much easier to manage a home. You can also limit the things
that children are able to control, which will also make the home
safer. This is the first step, remote control and security, as well
as integration with
existing wireless
technology.
The
second step is to
increase reciprocity
between people and
their devices.
Interaction and
communication
between them is
essential. For
example, when you
are driving home
from the airport,
your appliances
know you are on
your way and can
adjust to your preferences, creating the environment you want
to come home to.
The third step is to do e-commerce based on the user
data we periodically collect. Tobe more specific, I will give you
a similar example. If you place rice into a package that the
customer buys in bulk, paying 5,000 or 10,000 RMB and throw
in a 500 RMB rice cooker as a gift, there are four ways to make
a profit from doing this. 1. The 5,000 or 10,000 RMB received
can be used for other investments. A well-run business should
make a 15-18% profit doing this. 2. The rice or other foods are
future goods, which has the spread. 3. The revenue of the rice
cooker factory increases. 4. Competitors room to grow is
choked because customers are already using your company’s
products.
ADV: What kind of difficulties will M-Smart have to face?
Mao: Our biggest problem now is thinking of the quickest way
to get these products into the market. What we are worried
about is not our competitors, but internet companies. Internet
companies think faster and they’re ability to integrate is greater
than ours. We have advantages in terms of resources, but our
ability to integrate our resources is no better than our
competitors. If we can introduce their type of thinking to
Midea, we will increase our speed.
Our appliances have
always had a traditional
development model.
Developing an appliance
takes a lot of time. We
hope that one day it will
be possible to upgrade
appliances the way we
upgrade software. If we
can get electrical
appliances onto
networks, we will be able
to get into the market
more quickly. If we can
use the kind of thinking
that web developers use,
our ability to improve
our products and services
will be greatly increased. But creating a network is not easy.
ADV: What strategies does Midea have to deal with these
problems?
Mao: Midea needs to speed up in integrating its resources; this
means both its internal and external resources. We have
alliances with Huawei, Callcon, jd.com and other companies.
We need to use these alliances to improve our products,
showing focus and playing to our strengths.
ADV: Some of our competitors have similar programs to M-
Smart, what advantages does Midea have over its competitors?
PEOPLE
Advances Newsletter, April, 2014
17
A Maker of M-Smart (cont.)
By Mandy Wang & Kevin McGeary
Mao: We have two major advantages: 1. Our product range is
already broad enough and doesn’t need to be expanded. 2. We
are already well established in the industry, from electrical
appliances to real estate, from logisitics to service systems; the
right infrastructure is already in place. We are much better
placed than our competitors.
ADV: You say Midea’s product range is a big advantage. But
when it comes to intelligent appliances, the most important
thing is the system, what if one of the competitors beats Midea
to creating a good system? Will this weaken Midea?
Mao: In any form of competition, there is always doubt. For
example, if a company creates
a system and opens it to other
companies, the other
companies won’t necessarily
be able to use it. This is a
paradox. Companies want to
cooperate with each other, but
there are always risks involved
in cooperating. Smaller
companies with smaller
factories can benefit from
cooperating with Midea,
companies of a similar size
may be reluctant to.
A household
appliance may contain
components from a lot of companies, but whichever company
controls the entrance to the system ultimately controls the
whole process. I hope our servers are able to be interactive. In
that way, people will be able to use the same technology to
control products from other companies.
ADV: Currently, at what stage of development is M-Smart’s
Research & Development Insitute?
Mao: It currently has eight members of staff in place and a total
of 20 people are involved in it. This year’s target is to integrate
20 product categories by January 1, 2015. A headquarters for
the institute will be built and be even more representative of the
company’s future than the current Midea Group headquarters.
The company is very much putting its money where its
mouth is. It is investing 3 billion RMB in the building and 15
billion yuan in research and development.
ADV: If you are integrating 20 types of product, will this affect
every department in the company? Will there be a big change?
Mao: If you use the aviation industry as an allegory, the institute
is responsible for building airports; the departments are
responsible for making planes. M-Smart itself is the air that the
plane flies through. The basic role of the departments will not
change.
ADV: What kind of talent does M-Smart look for when it is recruiting? Mao: Three areas: 1. IT skills, mainly in the development of intelligent mobile services and user-friendly technology. 2. Knowledge of servers. Everything a mobile user sends is managed by the server. 3. A grasp of big data analytics, namely how to analyze a database related to users’ habits. ADV: How was M-Smart received at the Canton
Fair and the Shanghai Expo? Mao: I attended the Shanghai Expo in March. M-Smart won a lot of attention and praise. I heard that there was a similar reaction at The Canton Fair. Next year it will be a much bigger brand. ADV: What will the research institute’s building be like? What type of work environment will it be? Mao: There will be four centres: 1. The Learning Centre. 2. The Technology Centre. 3. The Innovation Centre. 4. The Enthusiasm Platform. When an employee has an idea about products or technology that they are excited about, they will be given room to explore it.
PEOPLE