Product disruptors are not that uncommon, especially in the digital age. There are a number that quickly come to mind in this regard. Today, we stream music on Pandora or Spotify, which would have never been considered a few decades ago. Staying at an Airbnb instead of a hotel during travel is another prime example. Even mailing DVDs to consumers to their homes by Netflix was a type of disruptive innovation back in the day. But one industry that was so mature that disruption was unlikely was the window air conditioning unit sector. But believe it or not, Midea AC units have done just that as they are doubling down on innovative appliances. In a very short time, the Chinese appliance manufacturing giant has captured a sizable segment of the U.S. market.
While many Americans may not have heard of Midea, most consumers in China certainly have. Midea dominates the appliance industry there, and in 2016, made the decision to set up subsidiaries in the U.S. Part of this expansion was notably for growth. But at the same time, Midea wanted to invest more heavily into innovative appliances. The company saw this as a potential for significant growth, especially given the expected rise of smart appliances. As it turns out, Midea AC units have been among the first of these innovations. And its market performance has even impressed Midea executives. It simply goes to show that opportunities for innovative disruption always exist…even in dinosaur sectors like AC units.
“There was no meaningful performance difference from [air conditioning] unit to unit. Everything was a rectangular heavy box.” – Liam McCabe, seasoned window-AC product reviewer
The State of the Industry and the Issues
If you’ve ever been shopping for a window AC unit, you can appreciate the challenge in telling one from another. In short, each one comes in a rectangular box with few variations except in the size of the room cooled. In addition, all involve some agonizing effort for installation, often requiring windows to be affixed. And once this is done, there is the noise aspect that persists no matter how much noise-dampening insulation exists. Given the situation, it’s not surprising few consumers got excited about purchasing, installing, or even turning on their AC units. But that changed with the introduction of Midea AC units. There innovative appliances were a clear game-changer.
(Indoor air quality is an important topic lately–read up on it in this Bold story.)
In 2016, Midea began investing in some serious R&D, about the same time they expanded into the U.S. Midea American project managers and product designers began exploring potential changes that might disrupt the AC unit industry. Their initial efforts involved conducting consumer focus groups, collecting online surveys, and site visits to New York apartments. If Midea AC units were to be truly innovative appliances, key customer needs had to be met. Consistently, complaints centered around noise, energy efficiency, and functionality in design and installation. Using this as a guide, Midea’s team set out to create a new version of the AC unit that would make all others eventually obsolete.
“I don’t think people want an AC with an LCD screen. They want an AC that works better as an AC.” – Rodrigo Teixeira, Midea America’s Product Marketing Director
The U-Shaped Inverter Compressor Midea AC Unit
The design and AC unit that product managers created for Midea were indeed innovative. The most obvious design change involved leveraging the window itself as a noise reduction mechanism. By making U-shaped Midea AC units, engineers were able to place the noisy components on the outside of the glass. This configuration also permitted customers to still open and close their windows if they wanted. Rather than bolting or nailing them shut, customers could still slide the window up and down into the unit’s “U-shaped area.” Meanwhile, cooled air was emitted from inside the window with hardly a sound. It’s not surprising that these innovative appliances quickly became a consumer favorite.
While the U-shaped design was a major shift for Midea AC units, others are also notable. The innovative appliances also used SmartSavE Technology that used 60% less energy than other AC units. The variable speed invertor compressor introduces energy efficiency that saves customers up to 70% on their electric cooling bills. The units also have a deep self-cleaning function that eliminates 99.9% of all bacteria after two passes of circulated air. And its 3D air flow on the indoor side is capable of cooling a room within seconds. These features plus a 7-year warranty make Midea AC units even more inviting above and beyond their innovative designs. These are the features that resulted in 5 times the anticipated demand for these units when finally released in 2020.
“There are a lot of people who make a refrigerator or a range but not the whole [home appliance] suite. There’s obviously a cost advantage {to that.]” Kurt Jovais, Midea America President
Midea’s Innovative Vision for the Future
In terms of a company, Midea is indeed focused on innovation and leveraging technologies accordingly. Though founded in 1968, Midea has become a global leader in innovative appliances. Global sales in recent years topped $26.2 billion with a noted $50 billion market within China alone. Comparatively, Whirlpool has roughly $7 billion in annual sales. Clearly, Midea is one of China’s tech titans. Understanding this, Midea sees its primary growth potential moving forward in Europe and in the U.S. As is now evident by the success of Midea AC units, this potential is definitely real. This was the reason Midea chose to pursue U.S. subsidiaries that it controlled on its own rather than pursuing joint ventures. This move could prove to be significant in coming years.
In addition to these geographic expansions, Midea sees smart appliance technologies as a key growth area as well. A few years back, smart appliances made up about 8% of its portfolio. Today, that figure has grown to 25% with Midea AC units leading the way. Through innovative appliances that use smart technologies, energy efficiencies and consumer conveniences can be enjoyed. And Midea is able to do this at affordable pricings because of its size and capacity to scale. In this regard, Midea AC units are just the beginning when it comes to innovative disruption. Consumers can expect many more in the years to come from this company.
