ZERO DISTANCE AWARD WINNERS SURVEY
The Business Ecosystem Alliance was formed with the aim of encouraging knowledge sharing about business ecosystems and to provide practical advice for organizations wanting to embrace ecosystem thinking. Originated by Thinkers50, the BEA has attracted leading figures from the world of business and academia, including Zhang Ruimin, CEO and chairman of the Haier Group, Professor Bill Fischer from IMD, and Professor James F. Moore, author of a seminal Harvard Business Review article, which introduced the ecosystem idea into the business world.
Professor Moore’s original article states that: “A business ecosystem, like its biological counterpart, gradually moves from a random collection of elements to a more structured community… Business ecosystems condense out of the original swirl of capital, customer interest, and talent generated by a new innovation, just as successful species spring from the natural resources of sunlight, water, and soil nutrients.”
Closely linked to the theory and practice of business ecosystems, “zero distance” is an idea introduced by the Haier Group, which emphasises the connection between the business and the end-user or customer, and which has become central to the management model of the Internet of Things era.
Rendanheyi, the name Haier uses to describe its business model, is a Chinese word, which fuses the words for employee and user value. With its emphasis on giving people responsibility, using technology to eliminate distance to consumers and developing mutually beneficial ecosystems, zero distance aims to make the connection between the end-user or customer and the point at which value is created as seamless as possible – ideally reducing the distance to zero. In this way, customer requirements are instantly communicated to the business unit responsible for creating value.
In Japan in the 1980s, the quality-efficiency revolution revolved around producing products with “zero defects”. But, with Haier championing “zero distance, the focus has shifted from product to customer. Superior customer experiences, the argument runs, bring with them increasingly higher commercial value.
In September 2020, the BEA launched the Zero Distance Awards (Z-Awards) to recognize organizations that put end-users at the heart of their operating systems. Stuart Crainer, co-founder of Thinkers50 and co-director of the European Rendanheyi Centre, commented: “In keeping with our mission to share the leading business ideas of our age, Thinkers50 is delighted to support the Zero Distance Awards.”
Crainer, who curated the book, Ecosystems Inc: Understanding, harnessing and developing organizational ecosystems, in collaboration with ECSI Consulting and the Haier Model Research Institute, added: “We see our role as helping to cross-pollinate the different parts of the ecosystem of ideas.”
The inaugural Zero Distance Awards recognized ten organizations from around the world for their learning and enrichment of the zero distance concept. The Indian company Jaipur Rugs, for example, embodies zero distance by putting artisan rug weavers in India directly in contact with customers in the western world. In presenting the company with the Zero Distance Award, the BEA recognised that it was the culmination of a 42-year journey that transformed the lives of 40,000 women weavers. Other winners included the UK-based training firm Happy, the Ner Group from the Basque region, and the Think Tank Unit in the Sultanate of Oman.
Following up on the success of the new awards, in December 2020, the BEA surveyed the winners for best practice. The survey showed that there was wide support for the new awards, which were seen as timely, coming in the midst of a global crisis caused by the Covid-19 pandemic when companies needed fresh thinking.
What does it mean to win the Zero Distance Award?
“It’s a great moment for Jaipur Rugs to win the Zero Distance Award and a testimony to our philosophy of connecting the weavers directly with the end consumers,” says Nand Kishore Chaudhary, the founder and CEO of Jaipur Rugs. “I feel more confident than ever that our vision of democratizing the carpet value chain, by eliminating the middlemen to empower both the weavers and the end consumers, has been recognized by the Business Ecosystem Alliance.”
The London-based training company Happy is another Zero Distance Award winner that participated in the survey. The company has a management philosophy that allows it to proactively react to newly identified user needs.
Says Henry Stewart, the company’s founder and Chief Happiness Officer,
“It is a great honour to win an award that is associated with Haier, who have probably the most exciting workplace culture on the planet. For us, zero distance means having no barriers for front-line staff to interact directly with our clients and being able to respond as they wish without needing any approval.”
Stewart sees his role not as the expert, making decisions, but to create the framework for others to make those decisions as close to the front line as possible and eliminate the need for upward approval. At Happy, the experience of end-users is the responsibility of all staff.
GE Appliances was recognized by the Zero Distance Awards for implementing the Rendanheyi philosophy, which incorporates zero distance, into the company. According to GEA’s CEO Kevin Nolan, Zero Distance has unlocked business opportunities that are propelling the company’s growth, through its “owner is boss philosophy” paired with its “House of Brands approach.”
“Winning the Zero Distance Award means that our transformation is working,” adds Nolan. “It was only four years ago when we read for the first time about Rendanheyi and its zero distance principle. In 2020, we confirmed the power of zero distance as a business driver that’s enabling our very successful performance. We have taken the zero distance concept to a totally new level, applying it to every single angle of our work.”
Fujitsu Europe won the Zero Distance Award for pioneering the micro-enterprises model in a large corporation, which the company sees as a “decisive action to create and drive a customer-obsessed mindset in the organization.”
Explains João Domingos, Fujitsu vice president and head of Western Europe:
“Winning the Zero Distance Award is a source of great pride. External recognition is always a boost for confidence and a sign that our organization is moving in the right direction. We have been pushing for a customer-obsessed mindset in our organization. Zero distance means that we are putting the customer at the heart of our organization and that we are more agile and more responsive to the customer’s requests and needs.”
And proving that the principles of zero distance and ecosystems can apply to the public sector as well as business, the work of the Think Tank Unit, at the Diwan the Royal Court of the Sultanate of Oman, was also recognized by the BEA awards.
The Think Tank Unit spearheads the PPP (Public, Private, and People) initiative in Oman, which aims to reduce the distance between the three main parts of the national ecosystem - government, business, and citizens.
Led by Dr Ali Qassim Jawad, the initiative, which began in 2014, takes a three-fold approach, using: dialogue - to build a collaborative spirit and mindset between the three parts by aligning their misaligned agendas; real projects - to build tangible win-win-win situations on the ground; and initiatives - to nudge the government toward competitiveness, the private sector toward innovation, and citizens toward entrepreneurship.
“Government needs to improve the way it engages with citizens, taking the lead from business best practice. Ideas such as zero distance from customers, organisational agility and the lean start-up movement all have lessons for government,” says Dr Jawad. “Taken to its logical conclusion this might even mean that every citizen has their own account manager – even if that account manager is an algorithm or AI-inspired bot or avatar.”
“Seeing bureaucracy as a competitive liability, Zhang Ruimin has built a company where everyone is directly accountable to customers, something he describes as zero distance; employees are energetic entrepreneurs; and an open ecosystem of users, inventors and partners replaces formal hierarchy.
“In writing my book, Government Reimagined, I reached out to Zhang to get his insights on the sort of radical entrepreneurship required to create a ground-breaking organization in this volatile climate. His insights on ecosystems and zero distance have profound resonance for reimagining government.”
Applying zero distance principles
So how have the award-winning companies applied the zero distance concept? “We made a key shift towards zero distance around three years ago when the senior leadership team decided to make no decisions,” says Henry Stewart of Happy. “Instead, decisions would be taken as low down the organization as possible. After a previous three years of static growth, sales increased by over 25 percent for each of the three following years and we went from loss to a significant profit.”
“We have removed any need for upward approval. Instead, all our people at Happy are able to respond directly to any need from the customer. Instead of rules or decisions from above, they are encouraged to work within our five core values:
- Help people feel good about themselves.
- Believe the best and trust others.
- Create customer delight.
- Celebrate mistakes.
- Make the world a better place.”
Adds NK Chaudhary of Jaipur Rugs: “In the context of Jaipur Rugs, zero distance is achieved by connecting the weavers directly with the end consumers to allow the weavers to serve the underserved customers - ‘end consumers’ - with zero defects, zero wastage, and 100 percent on-time delivery. This not only makes the entire supply chain more agile but creates an emotional bond between the weavers and the end consumers, driving Jaipur Rugs from a luxury brand towards an ecosystem brand.”
Following the example of micro enterprises introduced by the Haier Group, Jaipur Rugs started an initiative dubbed “Each Artisan an Entrepreneur”, advocating self-management by weavers to co-create products with the customers. “This has transformed the lives of our artisans working from their homes in 600 villages of India and makes our products more relevant for the customers than ever,” says NK Chadhary.
GE Appliances also has lessons for other companies wishing to apply and embed the principles of zero distance. The company created a narrative and a video to illustrate this point, a practice that other organizations can learn from:
Zero Distance Narrative
What happens when the distance between a company and its consumers is zero?
When the distance between an idea and an innovation is zero?
Or, when the distance between the front line, the back office, and the neighbourhood around them is zero?
When there’s no distance between a company and its consumers, there’s incredible understanding and trust.
When there’s no distance between one person’s idea and a whole team’s innovation, there’s game-changing disruption.
When there’s no distance between the people who make a company great and the neighbours who welcome a company home, there’s tremendous collaboration and pride.
Achieving “zero distance” is no easy feat. And we don’t claim to have it all figured out.
But it’s the aspiration that’s driving the transformation of our company.
We’re getting closer to owners, closer to the edges of our industry,
closer to the future of our categories, and closer to one another.
Because when the distance that separates us is zero, the potential for breakthrough is infinite.
Explains Kevin Nolan: “Zero distance is an ongoing process that started with the declaration that our only boss is our owner/user. This immediately clarified our focus, our accountability, and reduced the mental distance to owners. The second important intervention was the transition from product lines and functions to micro enterprises and platforms, with the micro enterprises at the centre of our business. They are the direct connection to those we serve; and they are in charge.”
In its operations in western Europe, Fujitsu has also implemented the principles of zero distance through micro enterprises. “Inspired by Haier and other like-minded organizations we have implemented agile and empowered structures called micro enterprises. This has enabled us to get closer to the needs of our customers and its now our main go-to-market approach for the new areas of our portfolio.”
Practical benefits of zero distance
What does Kevin Nolan at GEA see as the practical benefits of applying zero distance principles?
“From the product distribution perspective, we’ve redesigned our network, strategically locating new distribution centres, to be able to deliver appliances to almost any state in the USA in 24 hours or less. From the customer perspective, we are working hard to become the easiest company to do business with, by working zero distance with every single customer we serve: understanding and anticipating their needs and partnering to better serve owners and users.
“From the owner/user perspective, the micro enterprise leaders are the conduit who connects the company to the owners. Having this role clarity and the accountability attached to it have delivered great results for the company and the organization. Finally, from the brand perspective we became a House of Brands, with specific brands that connect directly with the different consumer profiles. This is another way zero distance enables our organization to be more relevant to different audiences.”
Jaipur Rugs’ CEO NK Chowdhary adds: “Zero Distance enhances the intrinsic value of our product making it harder for our closest competitors to compete with us and creating greater value for all the stakeholders.”
Fujitsu’s João Domingos agrees: “Through the application of the zero distance principles we are now able to respond much faster to our customers’ needs, and we have further adapted our portfolio and seen a significant boost in employee satisfaction.”
2021 and beyond
The Zero Distance Award winners were also asked about their plans to extend the zero distance concept in the coming year.
“During 2021, Fujitsu will be extending zero distance through our micro-enterprise structures,” says Domingos. “We are going to deploy them now outside of Western Europe and into other countries, and we are going to further invest in giving them increasing autonomy and extending their influence on other parts of our portfolio.”
This year, Jaipur Rugs, too, aims to reduce the distance to customers still further. “With the changing nature of business, the only way to be sustainable is to have zero distance and we are fully committed to bring it in our entire business,” says NK Chaudhary. “We are constantly learning and implementing it within the entire organization. In 2021 we plan to integrate technology, develop the world’s best artisan proposition, expand our retail presence and collaborate with more likeminded partners to achieve Zero Distance.”
Says GEA’s Kevin Nolan: “Zero distance is an infinite game, an unachievable vision that inspires and drives us forward. Our plan is simple: We believe in zero distance and we’ll continue looking for better ways to delight owners, serve customers and engage employees.”
At Happy, Henry Stewart knows zero distance is the best way to keep staff and customers happy. “We certainly plan to continue to ensure there are no organisational barriers that separate our people from our clients,” he says.
The origins of zero-distance
In 2015, Professor Dennis Campbell published "Zero Distance to Users" as a Harvard Business School case. He taught the case in the "High Performance Organization and Cultural Design" class. From the case, the principles of Zero Distance are clear:
- Having a management philosophy that allows the organization to proactively react to newly identified user needs
- An organizational design and processes that eliminate organizational barriers that separate employees from end users
- The use of user-focused and independent teams that can move fast and smoothly within the organization
- End-to-end accountability for the experience of end users is taken by the company and/or independent teams
- The systematic collection, storage and use of end user data in order to increase value for end users
- Commitment to the ecosystem principles of openness, equality, co-creation and co-sharing.
As a result, the company can constantly create value for its end users through innovative and customized solutions, see figure 1 below.
Figure 1. Illustration of principles behind zero-distance to end users
More than 20 organizations and experts from 11 different countries have already signed the Business Ecosystems Alliance Charter. They include:
- Michael Jacobides, London Business School (UK)
- Bill Fischer, IMD (Switzerland)
- Isaac Getz, ESCP (France)
- Fabrizio Salvador, IE Business School (Spain)
- Alessandro Di Fiore, ECSI Consulting (Italy)
- Simone Cicero, Boundaryless (Italy)
- Antonio Nieto Rodriguez, Strategy Implementation Institute (Belgium)
- Amit Kapoor, Institute for Competitiveness (India)
- Pim de Morree & Joost Minaar, Corporate Rebels (Holland)
- Annika Steiber, Menlo College (US)
- Alf Rehn, University of Southern Denmark (Denmark)
- Nathan Furr, Insead (France)
- Karolin Frankenberger, University of St Gallen (Switzerland)
- Dan Toma (US)
- Stuart Crainer, Thinkers50 (UK)
- Des Dearlove, Thinkers50 (UK)
- Zhang Ruimin, Haier (China)
 ‘Predators and prey: a new ecology of competition.’