Double or Nothing
Who is Huawei?
In the 1990s, China’s economy continued to grow rapidly. During this period, the bigger international brands dominated its larger cities. Because of this, Huawei’s entrance to the scene was an unobtrusive one – they first set up camp in smaller villages. This had its own unique set of challenges – customisation and innovation were the needs of the day.
“These [rural] areas had harsh conditions and had no equipment rooms or air-conditioners,” says Xu Wenwei, a long-time Huawei employee who is now president of Huawei’s Institute for Strategic Research & Development. “The power supply there could go up to over 300 volts at night and down to 100 volts during the day. Lightning strikes were quite common as well. So our equipment needed to be very stable in order to adjust to these conditions, and be as maintenance-free as possible.” Research and development kept Huawei ahead of these challenges.
“This is where Huawei stood out from the crowd,” says Professor David De Cremer from National University of Singapore Business School. “There was simply no idea of research and development [prior to this] – good enough is good enough was the idea. Why should we invest? You had a few people who really jumped on it … Ren Zhengfei was definitely one of them who had the energy, the ideas and the spirit to succeed.”
In addition to their dedication to R&D, Huawei built up their reputation in China through a radically customer-centric approach, putting in extra effort, time and dedication to their client servicing.
Lu Yingshan, an early rural customer of Huawei’s, recalls when Huawei’s initial telecom setup was completely destroyed by a lightning storm and all local communications in the area were disrupted, effectively cutting off his village. The company swiftly and without debate replaced their entire setup with brand new equipment. “We started to realise that Huawei was not like others. Huawei was more responsible. They never dodge, and were really proactive in resolving issues. We were touched by their response,” remembers Yingshan.
These strategies proved successful for Huawei and the company expanded rapidly, a state of affairs that can make or break an early-stage start-up.
It was then that Zhengfei made a key decision, bringing in IBM to help the company transform its integrated product development and then its supply chain process as it scaled.
Joseph Smith is a supply chain expert who used to work at IBM and who worked closely with Huawei after their team’s second visit to America in the 1990s. “They were coming from a sort of young, dynamic company where decisions were made in a kind of ad hoc basis,” remembers Smith. “Mr Ren, the founder, and a team of executives felt that there was a lesson there to be learnt from IBM, its business processes, manufacturing and innovation, so they kicked off a project in Hong Kong called ‘checks and balances’ to help improve decision-making in the organisation. It was incredibly unusual.”
Smith remembers some assumptions this caused IBM to make about opportunities in the Chinese market. “In fact, in IBM we kind of misread the situation because we saw China opening up, and then Huawei came to us and they wanted this advice on learning lessons, so we thought that China would be a huge market for this kind of knowledge,” says Smith. “The reality was that we were very wrong. It was just Huawei that had this style of thinking.”
It was a costly exercise for Huawei, but one that was completely supported by its founder. “The hourly salary for each consultant was US$680 – an amount almost equal to my monthly salary,” says Zhengfei. “But to prepare for the future, we had to learn from others. We recognised the value of these consultants and sent many people to learn from them.”
“He was a very dominant voice, I think, in terms of hiring IBM, because a lot of employees and executives at that time didn’t want to have any foreign company to intervene,” says Prof De Cremer. “But he (Ren) was determined. He said, ‘We have chaos, we need structure. We need to change our systems; we need to bring in knowledge we don’t have’. I think he took a big risk there as a leader.”
Huawei’s journey was just beginning, however. China was experimenting with mobile technologies, and Huawei put their money on the one that was an international standard, however not used in China.
“We actually invested in CDMA, but we chose to invest in 1X rather than IS-95, an outdated technology. It turned out that we had made the wrong choice and were not selected by the Chinese market,” remembers Zhengfei.
These new setbacks in their home market caused Huawei to look outward, and set them on a journey towards the global stage.
Who is Huawei?
Founded in 1987, Huawei is a leading global provider of information and communications technology (ICT) infrastructure and smart devices. We are committed to bringing digital to every person, home and organization for a fully connected, intelligent world. We have nearly 188,000 employees, and we operate in more than 170 countries and regions, serving more than three billion people around the world. Huawei's end-to-end portfolio of products, solutions and services are both competitive and secure.