It is no secret that within the business world companies have a starting date, but also that one day they will die. All of them! Most companies, however, do not write their own ending. Rather, it iswhat happens around them (i.e. the context) that decides when a company comes to its ending. Companies do differ, however, in their ability to extend their “survival” horizon. Some companies die young whereas others are able to keep going and deal with external threats for a long time.
The tech world is a place of coming and going of start-ups. Mostly these start-ups suddenly excel and then sell out to one of the bigger companies. Surviving for a longer time is not very much on the mind of young tech entrepreneurs. It’s a different story, however, when tech giants become involved in life struggles. Then, the whole world will watch and wonder what is happening. For several years, the conflict between the US and China has primarily been one of technology, where it is clear that the party possessing the most advanced technology will gain all the benefits, ranging from market share and economic prosperity to political influence and global leadership. This global tech war has influenced the life struggle of one of the global tech giants, called Huawei.
Huawei is a Chinese telecom founded by Ren Zhengfei in 1987 in Shenzhen and is one of the giants in the world of telecommunication technology, infrastructure and smart devices. They employ more than 194 000 employees, operate in more than 170 countries and regions, and serve more than three billion people (excluding the US market). In the fiscal year of 2019 Huawei’s revenue reached CNY858.833 billion (US$122.972 billion) and CNY62.656 billion (US$8.971 billion) in net profit (in 2018 revenue reached CNY721.202 billion and CNY59.435 billion in net profit). As a testimony to their global presence and level of success, they are leading the telecommunication industry, are second in smartphone sales globally and rank number 61 in the Forbes 500 list.
Despite the fact that Huawei overtook Ericsson in 2012 (in terms of sales revenue and net profit) to become the world leader in the telecommunication industry, the company never really was a household name in countries outside China. But, that all changed when the US government more firmly started to impose sanctions on high-profile Chinese companies and the biggest one of all was Huawei. For years, the US prevented Huawei from doing business claiming that the company was involved in espionage and thus represented a security threat. With the trade war between the US and China becoming more intense, the actions towards Huawei also became more intrusive. In December 2018 the daughter of the founder Ren Zhengfei, who was the company’s CFO, was arrested in Vancouver, Canada. An international warrant, issued by the US government, charged Meng and Huawei with bank and wire fraud in violation of American sanctions on Iran.
In 2019, Huawei was added to a list of companies that US companies were not allowed to transfer technology to without a government license. For Huawei this meant that it lost its ability to license Google’s commercial components for Android. Losing access to Google for its phones made that the sales of the Mate 30, the first phone absent Google’s Android and Play store, plummeted. A story seemed to be in the make where Huawei would lose out. Would this be the moment that the survival of Huawei would really be threatened?
As it stands now, it may yet turn out that Huawei is like Houdini, the famous American stunt performer who could escape from almost any situation possible. So, can Huawei survive without Google on its smartphones? The recent numbers seem to suggest they may do. In fact, they may have found a way to turn things around, and choose a new path that may even be more beneficial to them on the long term. How? The big difference between Google and Huawei is that the former is in the data business whereas the latter is not and makes its business by selling technology. Google collects data via its devices, browser and apps, and runs its business on it. With Huawei not being able to use its services, Google lost access to the data of many customers.
Huawei at the same time is using this situation to introduce its own AppGallery initiative, but has started to emphasize that it will do better than Google. Why? Google’s Android is an open system that makes available apps to many users worldwide, and a result the security screening of the apps have been difficult and of poor quality. Huawei has started to emphasize this and noted it will do better in terms of security and privacy. After all, it is hinted upon, Huawei is not a data business, so, the inference is clear: Huawei does not face the same pressures to go after the data of customers, instead, because it does not need your data, it can take better care of your privacy.
A bold move and if it works, Huawei is likely to escape from a situation that looked initially like a very bad one and change it into one that creates new opportunities. Of course, Huawei going in the defence by claiming that they can protect your data privacy and security better than Google is somewhat of an irony. Indeed, the company was put on the list by the US, preventing them from using Google’s Android in their smartphones, because of allegations regarding privacy and security. Furthermore, the company did make mistakes in that area in the past. For example, in July 2018, Ren Zhengfei gave a speech at the kick off meeting of the cyber security and privacy protection special forces meeting in Huawei, and stated: “We should place cyber security and privacy protection at the top of the company’s agenda. We cannot just shout out slogans; we need to work out action plans.” The reason for this statement was that the National Cyber Security Centre (NCSC) of the UK had given them a wake-up call since their UK team had not taken the NCSC’s recommendations seriously by failing to implement those improvement requirements for several years. It made clear to Huawei that they had a security problem. In that same meeting, Ren Zhengfei said: “We should first change our wrong mindsets, and then make up our minds to improve thoroughly, build up our capabilities, and deliver on our commitments.”
Whether it is irony or a smart move, from a management point of view, this situation introduces an important question, which is: What kind of leadership does it take for a company to be creative and pro-active in deciding on its own fate when crisis knocks on the door? As mentioned earlier, we know that organizations at one point will end when some sort of crisis hits them. It’s for this reason that having leadership in place that guides organizations out of a crisis is of pivotal importance. In fact, it is those organizations that have strong and wise leadership acting as a catalyst that brings all other organizational elements together that will survive longer. Without such leadership in place an organization can be compared to an army without generals – in other words, ready to be slaughtered by the very first real attack that hits them. Leaders are recognized to build the right work cultures that facilitates employees to create value in line with the beliefs and strategies the organization employs. Leaders therefore install the conditions needed to shape the mindsets of their employees to respond in specific ways to the external environment.
The leader that has shaped the work culture of Huawei, and as such directly the mindset of the ones who are now formally leading the company, is Ren Zhengfei. So, to understand how it is that Huawei seems to be able to adapt to the crises they are confronted with, and ultimately survive, we need to understand what Ren Zhengfei stands for and which values he has infused in the mindset of his work force. Below, I outline four such values.
Always ready to fight to survive
In the foreword of their 2019 report rotating Chairman Eric Xu noted at one point that “survival will be Huawei’s first priority.” As it usually goes within Huawei, the way to survive is to “optimise” their own functioning and install – once again – an attitude “to fight inertia and rid themselves of complacency.” The message was clearly intended to inspire people to continuously improve themselves while at the same time being on guard. It shows that Huawei’s culture is infused with the idea that one always needs to be ready to fight if one wants the company to survive.
And, this should not be such a surprise when looking at the history of Huawei. The company describes its own history as a long journey of battle and survival. This battle started with surviving the first 10 years of its existence while having to fight simultaneously the SOE’s receiving government funding and international companies that were superior in technological advancement. Today the battle continues as the language of survival has returned now the company is fighting off the US allegations.
Where does this focus on survival come from? Throughout this journey, there was always one man who consistently emphasised that Huawei must survive: Ren Zhengfei. On one occasion, someone asked him what Huawei’s most basic goal was. He replied: “Survival.” The person then asked what Huawei’s ultimate goal was. Ren Zhengfei replied that it was also survival. Why is he so committed to be ready to fight and not take success for granted? Much may have to do with his child-hood experiences that took place in South-West China’s Guizhou Province, which was one of the poorest regions in China. He had 6 brothers and sisters and the circumstances made it difficult for a family of 9 to survive. Poverty, hunger – they even had to eat grass at one point – was part of his early memories and serves as the foundation of his belief that nothing is for granted and that continuous dedication and sacrifice needs to be shown.
This attitude of committing to the fight is frequently illustrated when he gives speeches. At an internal meeting in 2018, Ren Zhengfei said the following when he wanted to illustrate the importance that everyone within Huawei can contribute to its success and long-term survival: “Today at this meeting, I saw you make a vow: “If I ‘die’ on the battlefield, I will be a hero; if not, I will be a general. If I become ‘disabled’ and still can’t make it to the top, I will cook in the secondary battalion. No matter what, I won’t leave the battlefield. I will hold onto this battlefield, forge ahead courageously, and uphold the spirit of ‘One Battalion, One Gun'”.”
Like a general, Ren Zhengfei exemplifies the attitude to fight until the end, and it’s an attitude that is “on” all the time. Walking the talk, Ren Zhengfei as such became the reminder for everyone within Huawei that survival should be on everyone’s mind.
Hardship and sacrifice as driving forces
When being focused on survival, Ren Zhengfei also shows the dedication to suffer hardship. And, he expects the same from everyone else. Take for example what his response was when his daughter was arrested in Vancouver. “As a father I of course care about my children,” Ren said. “However, the experience of hardship is good and suffering is good for Meng and her growth.” It paints the picture of a man who truly believes in the power of going through difficult times to ultimately prevail. And, throughout this crisis with the US, Ren Zhengfei indeed always expressed the confidence that Huawei is willing to suffer and work its way through this crisis.
This is an ability that Ren Zhengfei has demonstrated consistently throughout his career and which he has printed in the DNA of the company. Huawei employees believe and are convinced that more effort, dedication and passion will eventually help the company to achieve their goals. As one Huawei executive said when talking about Ren Zhengfei’s way of making decisions; even if we only have 30% confidence in the decision then we will still take the risks, because we believe that the other 70% will come from our willingness to sacrifice and show dedication at every level of the company.
Being pro-active and confident as strategy
The ability to survive as a company does not only reflect itself by the decisions and actions taken in the midst of the crisis. Companies able to deal with and overcome crisis also anticipate the arrival of those crisis situations. Or, in other words, these companies are prepared to face what is coming. As I noted earlier, Ren Zhengfei fosters such anticipating attitude by being worried about survival all the time. Important to stress is that this is not done in a manner that creates anxiety 24/7, but more in a way that makes clear to everyone that things can change very quickly and that pro-active rather than re-active thinking is needed. This way, Ren Zhengfei empowers the company and its people to always think ahead and consider the worst scenarios possible. Rather than a sign of uncertainty, such pro-active attitudes are regarded as a strength.
Of course, emphasizing the necessity for a pro-active thinking mindset is one thing, but to find the time to actually live and work by it is another thing. It’s here that Huawei distinguishes itself from all other companies in their industry, which is that they are not a public company. Huawei is owned by its employees. Ren Zhengfei likes this concept not only because it rewards – in his view – entrepreneurial and hard-working employees fairly, but also because it makes that the company does not have to think in the traditional financial quarter way and be accountable to external shareholders all the time. Liberated from this kind of thinking allowed Ren Zhengfei for many years to think about the kind of company he wants Huawei to be in the next 10 years. Indeed, Huawei plans the development of the company by decade, whereas most of their competitors plan it by financial quarter or year.
It are those unique characteristics of the company’s DNA that makes their leadership also more confident about what they are doing. As such, it may not come as a surprise, if they take bold decisions or move in rather unexpected ways. Their strategic decisions have usually been thought about deeply and extensively and put in the context of scenarios differing in failure and success ratios.
Knowing why to survive: the customer
Although Huawei endorses a kind of “deep thinking” culture where decisions are analysed and reflected upon highly, which helps them to take risks when it is needed, their main value remains unchanged. That main value is to invest in the customer, at all times, regardless of the costs. Ren Zhengfei believes that the hardship and sacrifice that is needed to deal with a crisis situation is rooted in the reality that Huawei employees all focus on the company’s primary goal: providing the best service possible to the customer.
Indeed, there is no confusion about the purpose of Huawei, which is helping customers to realize their dreams. Customers come first and crisis situations need to be survived to ensure the interests of those customers. This focus on customer service as their natural born mission makes that Huawei’s product development is not simply based on a reactive strategy towards what the external environment introduces as challenges (a crisis situation or a bold move from a competitor). In fact, the customer always comes first and combined with Huawei’s mindset to anticipate and reflect on all kind of options before a crisis emerges, makes that whatever the decision will be on how to deal with a crisis, it will be one that serves the customer and that is prepared in confidence.
About the Author
David De Cremer is a Provost’s chair and professor in management and organizations at NUS Business School, National University of Singapore. He is the founder and director of the Center on AI Technology for Humankind at NUS Business school; which is a platform developing research and education promoting a human-centered approach to AI development. Before moving to NUS, he was the KPMG endowed chaired professor in management studies at Judge Business School, University of Cambridge. He is named one of the World’s top 30 management gurus and speakers in 2020 by the organization GlobalGurus and has published over more than 250 articles and book chapters. He is also a best-selling author with his book “Huawei: Leadership, culture and connectivity” having sold more than one million copies. His newest book “Leadership by algorithm: Who leads and who follows in the AI era?” will be out in print in May 2020.