The Rise of Huawei

A Digression

Earlier this year, while buying books, I stumbled on The Rise of Huawei. The description sounded pretty interesting, so I bought a copy to read. I bought it long ago but kept putting off reading it, and after a long delay I finally finished it. I can’t help writing up a summary, lest it go in one ear and out the other.

Huawei grew from such a tiny company into roughly China’s largest private enterprise, and many years ago its revenue and R&D investment already equaled the combined total of the three internet giants, BAT, which absolutely makes it worth studying and learning from (the internet trio is now called BAT, but HAT would actually be more fitting). This book recounts many of the events and decisions during Huawei’s growth, and from them you can reflect on why Huawei succeeded while, among the “Juda-Zhonghua (Giant Dragon, Datang, ZTE, Huawei)” group, the others have almost no voice left.

On a separate note, I absolutely have to gripe about the author: the whole book is relentlessly fawning, and in some places it’s downright nauseating. The book’s coverage of organizational management is fairly shallow, and much of its thinking on the subject is filled with flattery of “Boss Ren” and management.

For friends starting a business, I’d recommend reading this book with the question “Why was Huawei able to succeed?” in mind. Read it through and I believe you’ll get a lot out of it. As for me, I don’t have any firsthand feel for it and can only look at it from a third party’s perspective, so my discussion isn’t very deep; take it as a bit of light entertainment.

Summary

Huawei went through roughly several stages, each one a breakthrough, breaking out of the cocoon and shattering the ceiling:

1. The startup battle
2. The growth battle
3. The survival battle
4. The galloping elephant

The Startup Battle

At the founding stage, Huawei chose the highly profitable telecom industry, which was the single biggest pivotal point. Had it not chosen this lucrative industry, there simply would have been no money to fund the subsequent series of R&D efforts and rapid expansion, including absorbing certain strategic decision-making mistakes. Today, for friends starting a business, it comes down to a commonly used phrase: blue ocean versus red ocean. Only by diving into the blue ocean do you get more opportunities and more fault tolerance (antifragility). And how do you find a blue ocean? You need to discover problems.

The Growth Battle

At first they distributed switches: as long as you had connections and could get the goods, you could flip them and rake in piles of cash. Sometimes the popular switches simply couldn’t be sourced, so Boss Ren decided to do his own R&D, to avoid being held by the throat. Anyone who gets things done wants to control the key points and reduce risk; there’s nothing impressive about that. But what made Old Ren formidable was his persistence: after a series of R&D failures, he finally made a big bet and went all in on fiber-optic switching, going straight for a 10,000-line switch and choosing a very correct direction, which took real boldness. Also, when the first product came out and they found their first key customer, the Yiwu Telecom Bureau, it was truly customer-first: all the R&D staff camped out on-site, solving problems on the spot, fixing every issue the instant it arose, and became a community of shared destiny with the Yiwu Telecom Bureau, rising and falling together. This approach is the highest realm of the client-vendor relationship, and it also gave Huawei a real training ground that helped it open up the market.

A small company’s rise depends heavily on the boss’s strategic decisions: bet right and you soar; bet wrong and the tree falls and the monkeys scatter. People who do great things often have a strong gambling streak, but once the company grows large, you have to guard against such mistaken decisions, and you need a mechanism to prevent decision-making errors, like Alibaba’s partners or Huawei’s rotating chairmen. Another approach to preventing decision errors is customer-first. On customer-first, Huawei truly embedded it down to the bone.

The Survival Battle

In 2003, Ren Zhengfei at one point planned to sell Huawei as a package for $7.5 billion. Think about the fuse behind this: it must have been that Huawei was facing a survival crisis.

This survival crisis had, first, the Harbour battle, and second, the Cisco battle.

In the Harbour battle, Li Yinan set up his own faction. Boss Ren’s initial idea was to have Li Yinan help fill in for Huawei, doing some supporting work for the company. But in the face of enormous interests, who can resist? What company doesn’t want to become a giant? So don’t challenge human nature; in the face of self-interest, people change. The second point was that Harbour was basically a knockoff version of Huawei, operating exactly the same way; with this kind of thing, if you don’t pull it out by the roots and finish it off completely, you’d rather lose 800 to wipe out 1,000 of the enemy, otherwise it’s letting the tiger return to the mountain.

Likewise, when Cisco attacked Huawei, it was afraid of bearing the label of monopoly, so it let Huawei off; knowing Huawei’s future was unstoppable, it still couldn’t bear to give up the meat. In this, Huawei’s strategy of “a small loss is a win” reflected a very high vantage point.

The two form a sharp contrast: one would rather lose 800 to take out 1,000 and pull things out by the roots; the other was unwilling to part with the bait to catch the wolf. As for the final results, everyone has seen them; always remember to think about problems from the long term.

In 2003, resisting the temptation to drink poison to quench thirst (resisting the lure of Xiaolingtong) and laying out the future were, again, a cut above.

The Galloping Elephant

Adopting the strategy of surrounding the cities from the countryside, they started by sowing in barren land, beginning with the leftovers others didn’t want, digging deep and biding their time before claiming the crown.

In some hard-to-crack countries, forming joint ventures was quite smart.

In the phone business, going from obscurity to giant was one solid step at a time.

Laying out HiSilicon Semiconductor was probably a move born of necessity at first, but it turned into a stroke of genius for Huawei.

Organizational Management

Throughout the book, the management coverage is wrapped in all sorts of theories: military management, mechanism, adaptive balance (there’s a specific theory, but I forget its name; roughly, each organization or module exists in a dynamic environment, needing to constantly take in resources/people and constantly output resources/people, with a bit of survival of the fittest). But behind it all:

1. Money, 2. Power, 3. Unity of spirit (customer-first, dedication as the foundation).

Different stages applied these three points with different means.

Finally

Today’s Huawei is practically a behemoth. No single company can be the oligarch in every field, so it still needs to reorganize resources and concentrate its superior forces to lay out the main channel of the future, and also leave a path for its partners.