Monday, September 19

Chinese Technology Company, Huawei, Wants to Build a Better Connected World

If  you’ve known me for any length of time, you know I have a passion for technology. I’ve had a tech podcast for almost 10 years and I know that by adopting proven advances, we can all grow our businesses by applying the new innovations.

I was approached by a company from China, Huawei Technologies, to attend their Cloud Conference in Shanghai; Huawei Connect 2106. Shanghai? Isn’t that in the People’s Republic of China? I’m a fairly adventurous traveler, but that’s behind the “great firewall.” My curiosity about this company and country drew me to accept the trip and do some serious research.

Admittedly, Chinese culture was never high on my reading list. I couldn’t go to China without doing some reading. Much of my attitudes about the Chinese and their technology changed when I read a book, The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World by Shaun Rein (a good read for those who want to learn more about the changes in China).

It seems that in the past twenty years Chinese consumers have experienced a cultural shift. The people no longer yearn to own copies of world class brands, they want quality goods and they’d prefer them to be made in China. There is an ongoing shift in strategy from imitation to producing real innovation.

Today all businesses operate in a global environment, so I think it’s time to let go of our fears of the unknown. In every country there are government regulations, tax breaks, subsidies, low-interest loans, and government contracts. Even diplomats help out when it comes to global commerce. Without being political, I think it’s also safe to say that most governments also have their fingers where they don’t belong when it comes to business. Suffice it to say that I feel that transparency and mutual cooperation in trade and technology would go a long way.

Around 2010, our media (and government) went to great lengths to discredit Huawei over security concerns. Ken Hu, (now one of three rotating CEOs of Huawei), wrote an open letter to the United States, taking a stand against what he believed was an unfair perception of the company. You can read it here.

In 2012 the anxiety over cyber backdoors culminated in a Federal Investigation on security issues posed by Huawei and another Chinese company, ZTE. In the end nothing was proved, but more warnings about what “could” happen. It also managed to put a stop to a deal between Huawei and an American telecom.

It seems that none of this is easy, and trust is most difficult. There are economic and political forces afoot way above my pay grade. So all I could do is try to understand our cultural differences and goals. What follows is some of what I learned.

Who is Huawei?

We tend to think we “know” our industry? Here is a multi-national, private company founded in 1987 by Ren Zhengfei and five friends in a garage that I never really heard of. From what I read of its founding, I picture Mr. Zhengfei and his cohorts assembling telecom units the way we used to build computers at home to sell. Fast forward to 2015, they reported $60.8 billion in annual revenue worldwide; which represents an increase of 37% year over year. Pretty astounding.

The company was started on a small budget and is now number 129 on the Fortune Global 500 list. Today they are a worldwide leader (170 countries) in information and communications technology; they’ve built about half the world’s LTE networks.

The company is divided, as many US companies (like IBM) are, into three units. These internally are called BGs – or Business Groups – who represent different markets: Carrier, Enterprise and Consumer (where they’re now popularizing and building their brand). They each operate independently. Consumer products like smartphones, mobile broadband and home devices are a growing market.

After leading the world in telecom infrastructure, the Cloud and Consumer markets are the next step.

Huawei is the world’s third largest manufacturer of smartphones. They shipped 108 million units in 2015, and as of Q2 this year 60.5 million. The top three smartphone manufacturers’ market share globally is Samsung 22.4%, Apple 11.8% and Huawei at 9.4%. In an executive briefing with Huawei Technologies Chief strategy marketing officer, William Xu, referred to catching the bronze medal and modestly remarked that the gap between number one and number two was so big. If you check out this interactive chart from Statista showing quarterly market changes since 2009, you’ll see that Huawei seems to be closing fast on the competition.   

The way I see it, their foray into the United States consumer market with smartphones is a smart strategy. Phones seem a lot less intimidating then telecommunications systems and will give them a chance to build their brand. The world (especially Americans) want phones that are not tethered to carriers and they offer many. I reviewed their flagship P9 phone (with dual Leica cameras) on my #techradio podcast and find it to be one of the best phones I have used to date. Huawei just released their Honor series and have sold 1.5 million units in the first two months since release on July 19, 2016.

William Xu honestly laid down the basics of what people want in a smartphone today. “It is about the camera and the battery life. At Huawei we launched our smartphone with dual cameras which can take really high-quality pictures, especially at night. For that specific model we did not choose a very big battery life. We sacrificed something customer cares very much about. In the past, in the previous models, Mate 7 and Mate 8, the battery life are very big so that there's no need to carry a portable charger.'
"Today, in our technology innovation, we try to focus on the areas the customer cares the most.” ~ William Xu
Huawei got to where they are by spending a bundle on research and development. According to their 2015 annual report, they invested 15% of revenue $9.2 billion, clearly outspending Apple’s 8.1 billion investments. This enabled them to become the world leader in patent applications. Internationally, Patents are filed under the Patent Cooperation Treaty (PCT) with the World Intellectual Property Organization (WIPO). This does not grant a patent, but is the opening step to filing patents within the various member countries. Huawei filed the most technology applications in the year 2015, a staggering 3,898 applications; with Qualcomm in second position with 2,442.

Company Culture

When it comes to culture, there are many differences and as many similarities. Huawei has a rotating CEO program where three key executives spend an allotted time each year running the company; making changes to the business direction based on the current environments.

During the conference and in person, Huawei executives continually repeated their devotion to customer-centric culture; it was a recurring theme that I could not ignore. Although the phrase has become commonly used these days; they don’t just talk about it, they deliver it. In the aforementioned briefing with William Xu, he said “Customer centricity is firmly rooted in the mindset of our employees, and the management and executives.” Further, “We want to shake hands with the world and build an ecosystem. “

This is a long standing refrain within the company. Previously in 2011, CEO Ken Hu stressed this mantra: "To succeed in emerging markets today, companies need to focus on the concept of 'glocalization' – combining their globalization efforts with local insights and considerations. This means having keen insight into each market's unique social and economic environment by truly understanding its customers' core needs. Only then will companies be able to create the innovative business models necessary to win over customers."

What I heard and what I saw in my few days with Huawei, made me believe that they have a solid understanding of what it takes to succeed in today's technology market.

To this end, Microsoft and Huawei recently joined to publish an ICT (information and communications technology) Cybersecurity Buyer’s guide through the East West Institute. It's readily available and you can read it here. To quote the guide, five main principles are set out:
  • Maintain an open market that fosters innovation and competition and creates a level playing field for ICT providers. 
  • Create procurement practices that utilize fact-driven, risk informed, and transparent requirements based on international standards and approaches. 
  • Avoid requirements or behavior that undermine trust in ICT (e.g., by installing back doors). 
  • Evaluate the practices of ICT providers in terms of creating product and service integrity. 
  • Create and use tools and approaches to address risk and assign high value to cybersecurity investments.
This entire experience got me thinking. It’s time for us all to think globally – as well as locally. Enterprise-level security governance is the first step. Let’s just hope that this is the beginning of new inroads to collaboration and understanding between all the tech giants.

FTC disclosure: This is NOT a sponsored post. I only work with and showcase products, events and/or companies from which I believe my readers will benefit. I have not received payment from Huawei, but did accept a trip to their conference. All thoughts and viewpoints are mine. This is disclosed in accordance with the Federal Trade Commission’s 16 CFR, Part 255: Guides Concerning the Use of Endorsements and Testimonials in Advertising.

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