Laundry Division Teams up with Samsung -...

Advances Newsletter, April, 2014

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Vol. 4, #3, April 2014, No. 37

Laundry Division Teams up with Samsung

Another heavyweight has signed a cooperation agreement with Midea


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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


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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


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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


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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%.


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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.


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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


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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


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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.


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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


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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


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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


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


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.


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


16

A Maker of M-Smart (cont.)


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


17

A Maker of M-Smart (cont.)


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


18

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