HUAWEI's Secret to Success

Today Huawei is the only one of 91 Chinese companies in the international Fortune 500 ranking, whose overseas turnover exceeds domestic. For the first time, Huawei's turnover from overseas operations exceeded domestic Chinese in 2005. In 2012, Huawei surpassed Ericsson (then the world leader in telecommunications networks) in turnover and net profit, and this trend continued in 2014, when the corporation reached an all-time record for its entire existence: $ 46.5 billion in sales and $ 4, 49 billion in net profit.

What makes this company so successful? As the saying goes, "success has many fathers, only failure is an orphan." But, as with many great enterprises, we will find a partial answer in specific values ​​that define Huawei's corporate culture. After talking with its employees, reading articles, letters and speeches of its founder Ren Zhengfei, as well as asking questions to himself, we were able to shed light on this aspect of her activities.

Customer - first of all

Strong leaders give important meaning to their people's work, and Ren Zhengfei is no exception. His first and foremost concern is the consumer. Many organizations strive to make the client the focus of all their activities, but how many really succeed? In this sense, Huawei is different from its competitors. In a conversation with us, Ren Zhengfei recalled several cases of how, at the dawn of the company's existence, many of its representatives were forced to "turn to the client in front, and to the bosses in the back." For example, a few years ago, a delegation of institutional investors led by Stephen Roach, chief economist at Morgan Stanley, visited Huawei's headquarters in Shenzhen. Typically, venture capitalists made these visits in the hope of acquiring a stake in a company. Ren Zhengfei asked to receive a delegation from Fei Ming, his vice president for R&D. Roach later announced with disappointment, "He rejected a $ 3 billion team." Ren Zhengfei's explanation was very revealing: he told us that he was ready to meet in person with any client, even the most insignificant, but Roach is not his client.

Another example of this attitude can be seen in another legendary episode from the early period of the company. In the desert and rural parts of China, rats often gnawed at telecommunications networks, disrupting communications. At that time, multinational telecommunications corporations did not consider this to be their concern - they say, it is a customer problem. In contrast, Huawei viewed the rat problem as a challenge the company had to solve. To this end, the firm built up a wealth of experience in developing more durable equipment and materials (such as gnaw-resistant wires), which later helped them win several major tenders in the Middle East, as problems such as this one puzzled competing global corporations.

Since then, there have been other projects where Huawei has faced serious climate challenges - for example, the construction of the highest wireless base in the world (at an altitude of 6, 500 meters on Mount Everest) and the creation of the first GSM network in the Arctic Circle. And these projects have also helped the corporation acquire useful know-how. For example, as Huawei expanded its 3G communications market in Europe, it became apparent that European providers had slightly different requirements. They want base stations to be smaller, easier to install, greener and more energy efficient, while still providing wider coverage. Based on these consumer demands, Huawei became the first company to implement the concept of "distributed" base stations, which provides radio access to both large and small private networks. This innovation made the use of base stations cheaper for providers and European partners liked it.

Staff Loyalty

Huawei keeps repeating that the only way to gain opportunities is through hard work. For example, in the early days of the company, each new employee was given a mattress and blanket. Many worked late, then slept right in the office, so that they could lie down for a little more the next day after lunch. As one employee said: “For us, mats were a symbol of hard work in the old days, and this idea has now moved into the category of our corporate spirit, into the desire to do any job the best possible.”

The fact that a dedicated and disciplined team enhances the company's competitiveness is not too difficult to understand. However, not everyone knows how to instill and nurture this loyalty in employees (and this is what Huawei successfully does). In part, the company achieves this with its reward system. Huawei is not listed on the stock exchange, and in reality it is owned by its employees. Ren Zhengfei owns about 1.4% of the company, and more than 80, 000 employees own the rest (data from the 2014 annual report). This shared ownership system at Huawei is called the "silver handcuffs." It differs from the more common stock options system, which is often referred to as the “golden handcuffs”. The idea behind this scheme is Ren Zhengfei's desire to share both responsibility and benefit with colleagues. According to him, he wants everyone to behave like a boss. But it is important to note that only those who perform well can participate in the cross-ownership program.

There is a widespread belief in the company that the IPO will lead to the enrichment of a small group of people and to the loss of motivation for most of the team members. Ren Zhengfei emphasizes that reluctance to go public and maintain the current employee revenue sharing system helps the company stay morale.

Long-term planning

Joint ownership of the company not only helps Huawei attract and retain dedicated talent, it also allows it to plan years ahead. Ren Zhengfei also believes that this aspect helps the firm adhere to its goals and long-term vision. For example, Huawei plans to grow the organization for a decade, while most competitors like Ericsson and Motorola have plans for a quarter or a year. As a privately held company, Huawei can pursue its ten-year plans, while competitors are forced to respond to short-term fluctuations in the capital market.

For example, it introduced a general rotation system in which three vice-chairmen take turns holding the CEO's position for six months. At the same time, Ren Zhengfei retains the overall leadership, acting as a mentor and coach for the current general. This innovative leadership structure is based on a new leadership work called Flight of the Buffalo by James Belasco and Ralph Stayer. It reduces the risks for the company in the event of a failure of one of the leaders in the post, but it is difficult to imagine that such an order reigned among competitors.

Gradual Decision Making

Ren Zhengfei is known for avoiding hasty decisions and forcing himself to take time out for reflection every time. A similar strategy of behavior is reflected in the strategy of his company. And again he ties this fact to the way of owning the enterprise: thanks to Ren, the choice of the development vector remains entirely in the jurisdiction of the company (no external investor receives even partial power). As we have already seen, Huawei's management has much more freedom and less pressure from the market when making decisions. The rotating general system ensures a smoother, more democratic decision-making process. She also helps Ren Zhengfei to calmly decide on her future successor.

Huawei also places great emphasis on what the company calls “thought power”. The philosophy of the firm is that the most valuable thing is the ability to think. For example, efforts are being made to keep intellectual exchange going. Managers are instructed to read books outside the scope of their specialization, it is compulsory to have books in every office. Moreover, employees are often brought up with new ideas, both from senior management and from Ren Zhengfei himself. At the same time, it is important to note (and this is a testament to the international character of an organization that started out as purely Chinese) that it always welcomes feedback: it is designed to improve the ideas that will form the basis of the future strategic vision of the firm.

It's no secret that Ren Zhengfei is a man with an army background (he served in the People's Liberation Army of China). And it is to this life experience that he attributes his ability to fight and survive - qualities reflected in one of his favorite early slogans: "We will drink to the bottom, having achieved success, and if we fail, we will fight with all our might until we die." ... Well, Huawei quite often had reasons to drink to the bottom.