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INF80040
AU
Swinburne University of Technology
From Imitator to Leader
Huawei has transformed itself from a technology imitator to technology leader (Liu, 2013). This is not incidental; this is a clear reflection of its re-orientation, adaption, tuning, and recreation strategies. Huawei has about half of its staff working on R&D with over 16 R&D centers and 28 joint innovation centers around the world (Huawei, 2013). Its wide range of products includes not only the traditional network equipment, but also wireless infrastructure, optical networking, datacom, enterprise solutions, and handsets. It was a world leader in designing and employing the world’s first 3G network, it has led, and is continuing lead, the world in the development of the 4G LTE (Long Term Evolution) network (Telecoms 2012), and it has recently delivered the world’s fastest high performance computer (FNN, 2013). In particular, with its far-sighted vision, while 4G is still new, it has already commenced work on 5G, which is expected to be commercially delivered by 2020 (Forbes, 2013). 5G will give mobile broadband speed up to 10 gigabytes – 100 times faster that 4G mobile. These R&D initiatives have played a critical role in propelling Huawei through this change into a position of global leadership.
From China’s Countryside to Developed Countries
Huawei’s initial markets were in China’s rural countryside. Its well-quoted strategy during this period was to encircle countryside first and then capture cities (Business Today, 2009; The Economist, 2012; IntoChina.Asia, 2012). Through the years, its international forays included Southeast Asia, Russia, Africa, Latin America, and Europe. Over the years, Huawei has tuned and adapted its strategy to “developing countries first, developed countries after” (Frost & Sullivan, 2007). This tuning and adoption allowed Huawei to gain sustainable traction in the international market, and helped it to transform its internal organizational structure and gear the company towards establishing an international presence. In 2004, Huawei’s overseas sales had surpassed that of the domestic market. It now has most of Europe’s major telecommunications corporations among its customers. Its Europe, Middle East and Africa region contributed US $12.4 billion to its revenue, nearly one third of its global revenue (ZDNet, 2013).
Global Operation Expansion
Even with the uncertain political environment, Huawei strategically set out to gain economic and technological advantages in different geographic areas. It has employed “re-creation” to increase its speed of internationalization since 2001 by creating its localized operations globally. The following examples demonstrated Huawei’s global expansion.
Building Strategic Alliances
Entrepreneurial partnerships have become pillars of an overall international venturing strategy for Huawei (Lou et al., 2012). Huawei applies a “re-creation” strategy to make multiple strategic alliances with universities and companies, including competitors and world leading companies, such as Intel, Texas Instruments, Altera, Motorola, Oracle, and Sun. Some of Huawei’s joint ventures are listed below:
Huawei’s mergers and acquisitions support its strategy to become impregnated with its partner’s technology by internalizing it, leading to a more efficient and cost effective method than developing the technology in-house, and at the same time increasing market reach and leveraging brand equity (Lou et al., 2012).
Managing the Change
Change needs to be managed, otherwise failure may result. How did Huawei manage its change?
A Change Agent
Huawei is a great change agent. Its entrepreneurial growth strategy is in many ways reflected in the entrepreneurial characteristics of the change agent - Ren Zhengfei (Luo et al., 2012). The change agent’s critical role cannot be over played enough.
Ren is the change catalyst and the agent who initiates, sponsors, leads, and executes changes. For example, he realized the necessity of expanding abroad as early as 1995 and pointed out, “We should not wait to expand abroad until everything is ready. Instead, we will get familiar with the markets and then conquer them in the process of learning from our international competitors…” (Luo et al., 2012). When he realized the importance of having international management operations, he made the decision to spend up to 3% of revenues buying advice from Western companies like IBM (The Economist, 2012). With Ren’s far-sighted vision and unwavering support and drive, Huawei was undergoing constant organizational change leading it to become an indisputable telecommunications giant.
Sense of Urgency
Sense of Urgency is the first and most critical step in John Kotter’s 8-step process of leading change (Kotter, 1996). An “emotional stir up” is critical in order to “break open the shell of complacency and selfrighteousness” in organizations (Lewin, 1951, p. 229). Huawei has this sense of urgency well induced. Ren once said, “We don’t have the reputation and networks that our international rivals do. Thus we have no choice but to make strenuous efforts. We can make good use of our rivals’ coffee time” (Lou et al., 2011). He cautioned his employees that that complacency leads to crisis in the highly competitive telecommunications market. “It is spring now, but that means winter is not too far away, so we will have to ponder about the problems in winter during spring and summer… Huawei must prepare itself” (Wagstaff & Yee, 2012). Ren shares his deep pools of insight about life, strategy, and the company through speeches and publications with his employees. This strong sense of urgency imbued by Ren permeates in Huawei and stirs Huawei’s employees to constantly change and transform.
Collective Learning
Lank and Lank (1995) emphasize that the quality of individual and organizational learning is an important determinant of organizational effectiveness. De Geus (1988) also states that the ability to learn faster than competitors may be the only sustainable competitive advantage. Learning plays a pivotal role in organization development and change. Huawei is a living example of applying organizational learning, which consequently renders it a sustainable competitive advantage.
Ren once said, “We have not yet got rid of our guerrilla style, and the new management style for international expansion has not yet established. ... We must learn from our international competitors” (Lou et al., 2011). In order to catch up to the international best management practice, Huawei imported a world-class management system of technology from IBM to establish and refine the technology management. It actively cooperates with leading management and consultancy companies such as IBM, Hay Group, KPMG, and PwC.
On the R&D front, after the realization that it needed to develop its own technological capabilities because of the fierce competition amongst manufacturers, Huawei tirelessly learned from its competitors and collaborators in order to catch-up and Lead (Liu, 2013). As Barbieri et al. (2013) commented, Huawei’s “double face identity” allows it to be a contributor as well as be a learner in alliance with different leading prestigious companies. The ability to learn from its alliance-based network from leading players has been critical and a springboard for Huawei to shorten its learning curve, stimulate R&D investment and enhance its technological innovation (Zhang & Duysters, 2010).
These collective learnings allow Huawei to acquire and assimilate essential advanced knowledge to increase its global profile.
Communication
Organizational scholars have long acknowledged the importance of the communication process in enabling successful organizational change. Lewis et al. (2009) in particular, demonstrate how communication can enhance understanding of change implementation activities.
Huawei has established information and communication channels to ensure timely acquisition of information, including its online forum for employees, communication channel for customers & suppliers, and the management meetings at all levels. Managers and process owners regularly organize training programs on business process, internal control to ensure information is up-to-date and is available (Huawei Annual Report 2012).
Huawei’s quarterly magazine, Huawei People, is not only an inspiring read but a powerful communication vehicle – communicating the vision and inspiration for its company and its employees.
Looking Back
Huawei is a master of change. It has gone through tremendous transformational changes as well as incremental changes on a day-to-day basis. It tackled these changes in a proactive way, as well as, in some circumstances, reactively.
Through diagnosing Huawei’s change needs, we understand that the company operates in a particularly complex political environment and an uncertain economic environment, along with extremely competitive technological and industry pressure. Inside Huawei, it is a well-designed machine. It has its own unique vision, value, and culture; its own structure and systems; its employees and their motivation. The machine is run from the very top with a unified vision under the uncertain external environment, the machine has feedback from every element within it, and it produces the results we see today.
Huawei has transformed. It changed itself from a technology imitator to a technology leader. Its markets have expanded from the mere countryside to the whole world. Its operations have also expanded internationally in order to become a real international player, learn more and build stronger position. It has purposely created strong alliances with partners and competitors alike to speed up its development process and again build a stronger position.
In terms of change implementation, Huawei has a great change agent, a founder, who is visionary and decisive. He imbues a strong sense of urgency and leads the change. Huawei’s organizational development is highlighted by on-going learning. It learns from world-class management processes; from its leading technologies; and, anything beyond to allow it to achieve its vision.
Looking Forward
Huawei is at a high point and a critical point. It is an extraordinary and inspiring story, exemplifying Napoleon’s awakening dragon prediction which he made two hundred years ago. Without going through tremendous changes and transformation, Huawei would not have achieved what it is today. However, the future is tenuous for all companies: the once giant telecommunications company Nortel is now bankrupt; and the once business-favorite Blackberry is now in demise. Huawei is facing even more challenges ahead of it.
How can Huawei sustainably maintain its competitive position in a Red Ocean (Kim & Mauborgne, 2005) environment? How can it overcome the well-established perception that its products and services are always cheaper than its competitors’ and possibly have less superior quality? How can Huawei not become complacent and stagnant in the face of its long lasting success?
Perhaps Huawei will need to extend into new markets by developing a new breed of products and services which have lower market competition; or perhaps Huawei will need to focus on internal operations ensuring they maintain an edge through exceptionally efficient and effective management and production; or perhaps Huawei will need to reimage itself by creating and promoting high-end products and services which are largely associated with superiority; or perhaps Huawei will need to purposely nurture its staff and executive shaping them into scarce and immutable resources and successful agents of change giving Huawei a sustainable competitive advantage.
Regardless of what the strategies are, we are certain that Huawei will need to go through continuous change to remain at its current front-runner position, and most importantly at some point in time it will need to implement radical changes in order to reinvent itself. However, the final solution remains elusive.
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