Tuesday, May 29

When Technology Black Swan Huawei Blueprints Future Vision, people listen

Black swans are the ultimate outliers. They have the ability to surprise and disrupt the status quo.

I was recently in Shenzhen and was permitted access to Huawei’s campus. I know I didn’t see it all, but I saw enough to get me thinking. I had heard lots of stories, but reality was even more interesting. Seeing and talking to the people gave me new insights. I’d heard that in China, tech employees worked 10 hours straight a day. Not really. The offices, campus and the university (yes, a University where all employees study) are perhaps even more modern and inviting than many I’ve seen in the United States.

It was hard to take in everything, but I was fascinated by the fact that Huawei  founder Ren Zhengfei’s office overlooks a most exquisite man-made lake.  This lake is open for anyone to walk and enjoy. Most interesting was the fact that black swans were imported to live in the lake. It wasn’t until I had returned home that I realized their significance. Black Swans!

Upon reflection, China’s Huawei is the ultimate black swan. Rare and unexpected, its employee owned (privately held) status allows it to disrupt common business models and even technology. There are no outside shareholders to answer to and they foster the philosophy of “we’re all in this together” as well as collectivism. Huawei looks at the world considerably different than the majority of the Interbrand 100 companies. (In 2017, they were number seventy on the list and are the youngest technology manufacturer on the list.)

Founded in 1987, they’ve risen from obscurity to one of the top growing brands in the world. According to the 2018 China RepTrak® study, conducted by the Reputation Institute, Huawei has been ranked as the most reputable Chinese corporate brand in their home country. In the study, “How to Win on Reputation in China: Understanding Chinese vs. Multi National Companies,” they out-performed Apple (a one time a classic black swan) in terms of transparency and open communication “Compared to Apple, Huawei is 2x more genuine”.  They are clearly the fastest rising 31 year old startup.

Black swans catch the competition by surprise. Huawei began their journey as a small telecommunications supplier, but quickly grew from home spun to acquiring major contracts. The black swan strategy is clear in their progress. Rather than going after telecoms in economically advanced major cities, Founder Ren chose to go after rural areas where competition was small and need was great. At a time when The Art of War was a popular tactical and strategic philosophy, he chose to "surround the city with the countryside." Huawei would cover the provinces with employees to support and service their equipment, signifying their devotion to a customer-centric philosophy. After being hugely successful in the countryside, they soon conquered the metropolitan cities.


Black Swan Trait: Innovation and disruptive cost structure

Their growth was bolstered by their offering significantly lower pricing than their competition and to overcome the "made in China" quality stigma. They were able to undercut competing vendor prices by almost 12 percent.

After conquering the China market, they moved through Thailand, Brazil, South Africa then Nigeria, Ghana, Mauritius, Morocco, Congo and Kenya by 2006. They then ventured into the developed markets offering upgrades that could be done by software, rather than forcing telecoms to purchase new hardware.

Before attempting inroads in Europe or North America, They built part of a French network free of charge (and allowed it to operate for three months) to demonstrate its viability before final purchase. Here was a "big business" competing like a startup; a fairly unthinkable strategy in the early 21st century.

One may argue that growth like this needed to be heavily financed and only the government has money for loans in the billions. True. Governments in all countries back business expansion with loans and incentives to carry on international trade. Take Boeing for example; they recently signed an agreement to sell 300 planes to a China company (retail price, $37 Billion). A visit to the Boeing corporate site shows that Boeing Customer Finance is “proactively engaged with the U.S. Export-Import Bank.”  According to Wikipedia, the Export–Import Bank of the United States is the official export credit agency of the United States federal government. By law, the EXIM is directed by Congress to set aside not less than 20% of its aggregate authority for small business (so perhaps your startup can be a black swan too). On Twitter, @EximBankUS offers insights into how they work.

Black Swan Trait: Research, Development and patents

From the beginning, Huawei invested their profits back into research and development, having more employees in R&D (500) than in production (200) in 1990. Today they have over 80,000 employees engaged in development. Innovation is key to climbing the ladder from startup to becoming a top technology brand.

Since then, the company has invested billions of dollars in R&D. The spending ultimately rose to almost $14 billion in 2017, outspending Apple, Microsoft and Intel. This could be their most sustainable advantage; developing their own technology (software and hardware) in house.

To defy those who question Intellectual Property, Huawei is the possibly one of biggest filer of patents. As of December 2017, Huawei had 74,397 patents, of which 64,091 were in China and 48,758 were foreign patent applications (of which, 90% were invention patents) is a solution to a specific technological problem and is a product or a process.

Black Swan Trait: Corporate Governance Paradigm

Unlike the standard corporate structure, in 2013, Huawei instituted innovation in management. Perhaps preparing for the retirement of the founder, the company elected three executives who took turns acting as CEO. This is a unique strategy which can bring talents from different areas of the company to the fore, thereby breaking down silos and maintain a collaborative effort. This creates a diverse environment where different perspectives can be tested and evaluated. Three deputy chairmen act as CEO and rotated in the position every six months.

Always adapting, this year, the rotating CEO system will become a "rotating chairman" system, with a fixed CEO position held by Ren Zhengfei. The overhaul will leave the company with rotating chairman at the top, and a single CEO.

Black Swan Trait: Global Vision for the future

The reason I was in Shenzhen (and had my black swan epiphany) was to attend the annual Analyst Summit. Here Huawei laid out their Global Industry Vision 2025 report, (#GIV2025) a window into Huawei’s thinking regarding roles and opportunities for Information and Communications Technology (ICT) in the intelligent world. Note this is not what they will do this year, but how the company has a long vision for future business in 2025.

The intelligent world will be defined by two immovable truths: Artificial Intelligence (AI) will become a “general purpose” technology and that ICT will be the foundational infrastructure.

They predict mass innovation that will tap into a new, digital economy valued at $23 trillion. Not just large enterprises will benefit, there will be opportunities for startups and unicorns.

They describe this era as being the fourth industrial revolution. The first, second and third being Industrial, Electrical and Information technology. The new era is founded on ICT and enabled by AI. The recurring theme is that all things “will sense, be connected and be intelligent.”


As this evolution occurs, AI will be the infrastructure that will power the intelligence provided by ICT. 5G, cloud, video, IoT and blockchain will fertilize the ground of the era of the intelligent economy. This convergence will bring disruptive change to every stage of our lives and our businesses.
If you consider that by 2025 there will be 40 billion smart devices and 100 billion connections, there will be no more information silos. We will have a cascade of data at our fingertips and #GIV2025 lays out the groundwork for how we will benefit by these great technological advances. 

By 2025, we will see 180 ZB (one zettabyte equals 1 trillion gigabytes) of new data generated each year. For contrast, a study in 2013 reported that 6.9 zettabytes of data were accessed in the U.S. in the previous 12 months. The bulk of this data is currently untapped. Data only creates value when it is connected; and the cloudification of all data will enable business to leverage it. Right now, over 95% of data is unstructured and most data is not being analyzed or used. Intelligent algoritims will enable this data to become useable.

“Data will become an inexhaustible resource. Intelligence will decide how the value of data is transformed and delivered. Connections will carry massive quantities of data, and enable exchange of data and smart value creation.”

The GIV 2025 report is designed to be a valuable reference to industries:
  • Helping industry leaders better understand how ICT can enable and guide the direction of industry development, popular technologies and applications, and best practices
  • Helping decision-makers and organizations better understand the routes of development and investment directions in the industry
  • Assisting those working on the frontlines of ICT to better understand customer needs and explore new models and room for development in ICT
  • Helping other stakeholders such as analysts, opinion leaders, the media, academics, and think tanks by sharing the latest industry news and information.

Black Swan Trait: Transparency

During the Huawei Analyst conference I was able to interview Gregory Fox, Huawei Vice President of Corporate Marketing to get the short version of #GIV2025. The video can be watched on YouTube here and a transcription is below:

MC:  I'm here with at the Huawei Analyst Summit with Greg Fox, the vice president of corporate marketing. He's going to answer a few questions on what this all is, what the future is going to be of 5G, AI, IoT, and the world. Hi Greg.

GF (Huawei): Hi Marsha. Great to be with you.

MC: Great to be with you.

GF (Huawei): Thank-you.

MC: We hear so many acronyms when we go to conferences like this. You guys have lots and lots of things that I don't understand. The theme of the conference is GIV 2025. What's GIV?

GF (Huawei): GIV, Global Industry Vision. Huawei has a vision and a blueprint for how we see the intelligent world developing by 2025. It's our vision for this intelligent world.

MC: Why 2025?

GF (Huawei): Because we see that by 2025, key conditions and key factors will be present in society. It's this vision that is really impacting individuals, homes, and enterprises.

MC: Okay.

GF (Huawei): It makes use of ICT technology.

MC: Which is?

GF (Huawei): Information communications technology.

MC: Okay. That's another one. ICT.

GF (Huawei): Yeah. Huawei is a leader in ICT solutions, and a leader in the industry. We view that this vision is a way that helps articulate to society as a whole and how society will be developed in this intelligent society.

MC: Basically technologies you're working on are going to help bring us there.

GF (Huawei): Absolutely.

MC: I've heard a lot of phrases like, "Sensing, connected, intelligent".

GF (Huawei): Yes.

MC: It sounds good. What does it mean?

GF (Huawei): We view by 2025, all things will be sensing. All things will be -

MC: All things. As in -

GF (Huawei): Intelligent.

MC: Like phones? Tablets?

GF (Huawei): Yeah. Basically everything will have the ability to be sensed or be brought into the intelligent society. If we look at, say AR or VR for example. By 2025, 440 Million AR VR users will be active. Meaning that if I want to be immersed in a ballgame or a concert, I'll be able to have those full immersive experiences and experience it up close and personal.

MC: Don't you see more of an application though, I see it very much for retail. I see it for eCommerce. I see it for medicine.

GF (Huawei): Yes.

MC: I see it so many industrial and professional ways, even more than an entertainment thing.

GF (Huawei): Yeah. If we look at tele-medicine. Some great breakthroughs are happening.

MC: Exactly.

GF (Huawei): In Hannan in China, which is the world's largest tele-medicine site. 1800 sites. Many users. Basically they're trying to deliver better customer care to individuals without them having to go directly to visit a doctor.

MC: Really? So they could just phone in with their camera and -

GF (Huawei): Yeah. They can connect.

MC: "Here's my rash".

GF (Huawei): "Here's my rash. Here's my condition". How can I be better diagnosed? Satisfaction is higher. The experience is better. Costs are lower. They're able to better serve the needs to the community in a ways they weren't able to previously.

MC: We've had three industrial revolutions in our world. We've had the industrial, we've had electrical, and information technology. Huawei is telling me there's going to be a fourth one. What's the fourth one?

GF (Huawei): We think it's the intelligent world, and intelligent society. We see that this digital economy will be valued at $23 Trillion by 2025. Which means that the digital economy is a growing portion of the overall economy as a whole. We see that society, that companies, institutions, government organizations, as they invest in digital assets and make use of ICT investment, that the ROI on those assets -

MC: Return on investment.

GF (Huawei): Return on investment, another acronym, will be seven fold.

MC: One of the things I see in, for example the retail apocalypse, where brick and mortar stores are going out of business. What I see is, it's almost a self fulfilling prophecy in that they're not adopting AR and all the sensing. There's so much. Do you see that too in the retail space?

GF (Huawei): Absolutely. If they could better understand their customer, the customer experience, and what customer needs are, then they could deliver those kinds of immersive visual digital experiences, and allow them to -

MC: I really think that once they do this, they're going to pull themselves, but they're going down the drain so quickly. So hopefully.

GF (Huawei): Yeah, and we'll see a lot of transformations and transitions in society occur as a result of that. Some will be able to adapt. Some will not be able to adapt. We're also seeing that in governments. We have what we call a global connectivity index. GCI.

MC: GCI.

GF (Huawei): Another acronym.

MC: Okay.

GF (Huawei): Governments, if we mapped governments and their use of digital assets and ICT investment, what we're finding is, the governments that invest more in digital and ICT actually increase, they have a higher GDP than countries that don't. Even countries themselves are trying to transform, and to offer better services and solutions to the societies that are under them.

MC: A lot you're saying is transformation and sensing, and everything's going to the cloud.

GF (Huawei): Yes.

MC: Everything is, but what about privacy? Will there be privacy when we're all transparent?

GF (Huawei): Hopefully, yes. But I think governments will have to tackle that issue and understand the privacy concerns of individuals and institutions. I think some countries will adapt better to the privacy needs.

MC: Are some countries more ahead of that than others?

GF (Huawei): Yeah. I believe so. It will vary by country. I think as we look at cloud, you talked about cloud, and we see that by 2025, 85 percent of all apps will be available on the cloud. That does bring in a whole new set of privacy concerns and issues.

MC: Right. How much can be read? How much can be stored?

GF (Huawei): How much can be stored? I think those are kind of issues that we're going to have to face and society will have to address, and countries will be unique in the way that they approach that.

MC: Once all this data is in the cloud, obviously it helps in industry and things like that. But all the knowledge can be put into machine learning and AI.

GF (Huawei): Yes.

MC: Do you see that as a benefit?

GF (Huawei): I see it as a great benefit. Because through machine learning, AI, intelligence will be more prominent. It brings the previously unconnected into the connected world. It'll make better use of decisions. More efficiency. Lots of benefits to society as a whole. I would say that how that evolves and how that develops is still to be determined. But it's definitely an evolution that we have to plan for.

GF (Huawei): I don't think it's necessarily going to be disruptive ... It will be somewhat disruptive to jobs.

MC: Somewhat?

GF (Huawei): And people and skills and so forth. But I would say that the economy and societies will adapt to that. The jobs of the future may not be the jobs of where we're at today. But how we evolve will be an important transition that governments and societies need to plan for.

MC: I think one of the things that we really need is, with all this data, I talk about data storytelling.
GF (Huawei): Yes.

MC: Because people listen on a verbal basis or visual basis. Like we're doing this video now. If somebody is in each company, and there's a place for those who still major in grammar and things like that in their countries.

GF (Huawei): Of course.

MC: For them to get familiar with data, they've got a lot of openings. I don't think it's a matter of re-training. But I think it's just new and exciting ways to do what you do.

GF (Huawei): Absolutely. I think if you look at the jobs in the future, data scientist, analytics, those kinds of degrees will be important in terms of the jobs and making use of information to make it intelligent and useful. To better serve, based on the customer needs that we're trying to serve as companies.

MC: If there's one thing you want to tell everybody about what you personally see in 2025 and you're excited about, let's close with that.

GF (Huawei): In 2025, I mean I'm a big sports fan. I like baseball. If I can see myself kind of fully immersed in the baseball experience firsthand, one the front row without actually having to be there. As if I were there at the ballpark. With the smells. I'm a big LA Dodger fan, so the Dodger Dog in my hand. But being able to follow my favorite player. Being able to be there and interact with them, and experience it firsthand without having to physically go there. I think that would be fantastic.

MC: When you come to Los Angeles, we're all going to have to go to a Dodger game, okay?

GF (Huawei): I would love to. It's my favorite team since I was, I could barely walk.

MC: Okay. Thank-you so much, Greg.

GF (Huawei): Thank-you.

MC: Vice president of corporate marketing for Huawei. We really appreciated getting these explanations.

GF (Huawei): Thank-you, Marsha. My pleasure.