Innovation: Case Study of Huawei

Innovation: Case Study of Huawei
Innovation: Case Study of Huawei

An In-depth Innovation Report of Huawei Company

1. Introduction: Huawei and the Business case for Innovation

Huawei, a company that initially started as a private start-up in China is rapidly becoming a competent innovative and encompassing company. Through competitive advantage, the company has found its way inside countries where competent companies exist, like the United States, Europe, and Japan. With staffs spread worldwide, the company allows employees to hold stocks, thereby becoming an employee-owned company, allowing the company to quickly spread across the world (Tao & Chunbo, 2014).

Historically founded in 1987 by Ren Zhengfei, Huawei has undergone extraordinary transformation since its foundation (Cremer & Tao, 2015a). Zhengfei started the company selling Private Branch Exchange (PBX) in 1987. By 1993, he had built research and development (R &D) team, and the company was developing its own digital PBX (Zhu & Jones, 2014). Rapid expansion through innovation and leadership made the company to enter overseas market by 1995, and since millennium, the company has its presence across 170 countries.

Transforming from one man sales to international telecommunication giant, speaks about the innovative business management undertaking that Huawei embodies. The company mainly deals with selling optical transmission equipment that generates voice data and video services (Cremer & Tao, 2015a; Zhu & Jones, 2014). Some innovative products such as the Softswitch products, which is a used in VoIP network and Public Stitched Telephone Networks (PSTN) and VoIP networks are made available through this company.

Other products of Huawei that provides edge over other company includes the Next Generation Network (NGN) that give solutions to multimedia networks in cell phone (GSM and CDMA), land lines, and television (Abbott Foster & Reinsch, 2010). Collaboration and partnership with strong company like IBM and Neuf Telecom has also allowed the company to quickly build on their business set-up (Bell, 2008; Cremer & Tao, 2015b).

All these factors put together is making Huawei to offer good price-value-offer in the market, and allow cheaper and better technologies of China to compete and match with the Occidental ones. In short, Huawei is the upcoming company to watch and compete in terms of business innovation.

2. Prioritising Innovation in Huawei

Through transparent media desensitization, the company is able to show that company based in China is worthy of respect, and that it is ready to play their part in international field (Tian et al., 2016). Huawei has unique management and business systems, different culture and systems, different approach towards innovation and reform, and rapid adaptation to evolving strategies and leadership systems that allow the company to climb towards innovative leadership board. Given such advancement, Huawei has become one of the most cited companies in terms of their business programs across the world (Tian et al., 2016).

During the 90s, R&D was all about internationalization, corporate entrepreneurship, and information-integration, but the turn of millennium is taking R&D towards becoming a technological maverick, which the Chinese company like Huawei is emphasizing. Huawei has simply become the classic example of technological prowess from emerging power country that is China (Boutellier et al., 2008). In China, Huawei is known as the B2B-brand, and the Chinese consider it as the largest manufacturer of telecommunication equipment  (Bell, 2008).

Within China and beyond, the success of the Huawei is attributed towards its excellent R&D, where they  engage in investing 10% of its revenue every year, holding thousands of patents, and cooperating with global players like IBM, Intel, Motorola, Oracle, and TI  (Bell, 2008; Tian et al., 2016). With research centers in information technology centers of the world like India, Russia, Sweden, and the United States, the Company works toward garnering customer’s requirements, thereby becoming a leader and innovator in technology world.

Their business innovation comes in terms of creating several digital technologies that will help link PCs, TVs, stereos, and other devices to the internet, thereby making the company to get easy access to the competitive platform, and in establishing itself as one of the leader in innovation (Bell, 2008). Again, since there are many fourth generation networks operating commercially across contemporary world, the relatively new system is suddenly becoming obsolete again.

Huawei’s R&D is therefore working to develop fifth generation or 5G network system that will give innovative and leadership edge in the telecom world. With hundreds of engineers working on 5G networks, excellent airwaves or spectrum is expected to be released by Huawei by 2010  (Hu, 2013). This network will allow Huawei to introduce 5G network, which will accelerate the speed to 10 Gigabytes, which is 100 times faster that 4G network.

The company also believes in diversity as part of its business innovative skills, and such emphasis has been able to garner revenue sales for the company. Diversity has been able to build the company’s sales and revenue, allowing employees and stockholders to build their own business and interest. Study by Cremer and Tao (HBR) shows that in the initial period, when Zhengfei designed the Employee Stock Ownership Plan (ESOP), he came to realize that not owning the company’s total share capital will not harm his company.

He therefore makes employees to have their own share, and he himself holds only 1.4% of the company’s total share capital. Such profit allowance to employees and stockholders is an innovative step of the Company, yet unapplied in other competing companies. Confucian values of equality and harmony, and the idea of building the company on equity are making Huawei to rapidly expand their businesses. Bridging wealth gap, but getting paid for what people contribute balanced out the business growth and entrepreneurial set-up of the company.

3. Leadership and Innovative challenges

3.1. Theoretical Framework

Smith, Fressoli and Thomas (2014) in “Grassroots Innovation Movements: Challenges and Contributions” shows that innovative challenges in technological world mainly encompasses some grassroots issues like attending the needs of distinctive local requirement-specificities, and company like Huawei faces such challenges in penetrating local markets. For Edquist (2009), innovation challenges mainly takes the form of global innovative challenges where many competent markets are there in the market for consumers to affiliate themselves with. West and Gallagher (2006) present in “Challenges of Open Innovation:

The Paradox of Firm Investment in Open-Source Software” also present a theoretical framework that innovation challenges and becoming a leader in the market often involves finding creative ways to compete with other brand; understanding internal and external needs of the companies; and keeping up with the need for innovations that will fulfill customers across its market. Will R&D solve such issues? Since Huawei invest vehemently in R&D, this alone may not be the solution, but business strategies and management, innovative product development, and selling complements will also speed up the process.

3.2. Leadership and Innovative Challenges within Huawei Company

Huawei is no doubt a leading Information and Communications Technology (ICT) solutions provider, and the leadership of Huawei is demonstrated through its capacity to surpass Sweden’s Ericson in 2012, thereby proving that it is an upcoming world’s largest telecom equipment maker and provider (Zhu & Jones, 2014).

However, given the fast changing environment and relentless international competition, Huawei like any other company now face innovative and leadership challenges in the telecom market. Huawei strategy so far concerns developing proprietary standards, and making technologies available at a low cost that will help the company to become the number one telecom company in the world (Abbott Foster & Reinsch, 2010), but Chinese companies are always regarded as copier of technologies, and not a world leader in terms of innovative revolution, and Huawei comes under this category.

In terms of leadership challenges, the company continues to compete with other telecom companies like Cisco, Lucent, and Alcatel (Bell, 2008; Boutellier et al., 2008). Since they remain as the world leading equipment manufacturers, Huawei faces strong competitions to their leadership stand.  

In China, Huawei faces strongest competition against their leadership and innovative spirit from UTStarcom, where the latter has branded Huawei as a ‘follower’ and not an ‘innovator’  (Bell, 2008). The work of Huawei is regarded as doing thing which others have already done and made.

This only manifests the company as imitating company, where research studies and building products are based on other companies’ working mechanisms and products. Thus, Huawei as a total B2B-brand is also not considered as consumer’s brands like Haier and Lenovo; instead, it is only regarded as a company that could or could not become a consumer brand someday.

Innovative challenges are seen even while creating equal access to stock opportunities by Huawei, since the company to not promote distribution outcomes. This equal access of ESOP however remains inaccessible to non-Chinese employees owing to legal constraints, thereby making the innovation business management and practices to possess its own limitations.

Attempt to solve the issue through long-term incentive plan known as Time-based Unit Plan (TUP) has not borne much success for the company (Tian et al., 2016). Huawei also basically remains as private company in terms of leadership and business management, and the fact that company has no plans to go public continues curtails innovation and growth of high value within the company.

According to Cremer and Tao (2015b), Huawei’s rotating CEO system that drives any profit organization also remains re-examination. The company should appoint competent strong CEO, since this position is the embodiment of the company in terms of promoting sales, profit and creating shareholder value in general.

Huawei aims to become the leader of smart phones and smart-device suppliers in the world in the coming four or five years, but such leadership target comes with all forms of internal and external challenges (Yu, 2016). Among technological giant countries, Huawei is only making rapid headway in China and Europe, but slower in the United States, Japan, and India. Penetrating rapidly in these countries will allow the company to grow in their leadership prowess, although breaking technological giants prominent in these countries remain challenging.

4. CONCLUSION: Practical Measures to Overcome Challenges

Huawei operates in a challenging environment, and although the company is regarded as an imitator, rather than a leader, the company can transform itself as a leader through the process of re-orientation, adaption, management strategies, and better business innovation through R&D.

The company can solve its leadership and innovation challenges mainly through R&D activities that will help design and transform the telecom and propel its position in becoming a global innovative ICT leader. To meet leadership and innovative challenges, Huawei should invest more time in R &D that meet the needs of customers and channel partners within and outside Chinese employee stockholders. 

In recent years, Huawei has been launching products that encompass progressive technologies like cloud computing, ISP, IOT, and all other vertical solutions that will provide better business platform for the company (PTI, 2015). Such innovation will provide the company to leverage with global experience and expertise to become the leader in telecom and information technology world.

The company should also come up with distinctive products for all non-Chinese markets, depending on the needs of the consumers in different countries. The fact that the company has been expanding overseas since 1997, but remained little known outside China shows its weak business management strategies and weak innovative skills (Witzel & Goswami, 2012).

Globalized strategies along with its heavy R&D investment will help the company overcome innovation and leadership challenges. Consumers always want better product and the company that can come up with their requirements to succeed in the competitive market, and although success depends on the customers to decide their affiliation with the most advanced telecommunication capabilities that fulfill their needs company’s innovative and leadership prowess can make Huawei the leading ICT brand in the market.

References

Abbott Foster, W. & Reinsch, R.C. (2010). Huawei’s leadership role in IMS standards development and in its own proprietary Softswitch R. Tiong (ed.). Chinese Management Studies. [Online]. 4 (4). p.pp. 297–304. Available from: http://www.emeraldinsight.com/doi/10.1108/17506141011094109. [Accessed: 3 March 2017].

Bell, S. (2008). International brand management of Chinese companies : case studies on the Chinese household appliances and consumer electronics industry entering US and Western European markets. Physica-Verlag.

Boutellier, R., Gassmann, O. & Zedtwitz, M. von (2008). Managing Global Innovation: Uncovering the Secrets of Future Competitiveness. London: Springer.

Cremer, D. De & Tao, T. (2015a). Huawei: A Case Study of When Profit Sharing Works. Harvard Business Review. 24 (September). p.pp. 1–2.

Cremer, D. De & Tao, T. (2015b). Leadership Innovation: Huawei’s rotating CEO system. The European Review. 15 November.

Edquist, C. (2009). African Journal of Science, Technology, Innovation and Development. [Online]. Adonis & Abbey Publishers. Available from: https://journals.co.za/content/aa_ajstid/2/3/EJC10560. [Accessed: 5 March 2017].

Hu, K. (2013). Huawei’s CEO: The Innovation Journey To 5G And Beyond. Forbes. 26 August.

PTI (2015). Huawei launches innovation solution-demo centre in B’luru. Free Press Journal.

Smith, A., Fressoli, M. & Thomas, H. (2014). Grassroots Innovation Movements: Challenges and Contributions. Journal of Cleaner Production. [Online]. 63. p.pp. 114–124. Available from: http://linkinghub.elsevier.com/retrieve/pii/S0959652612006786. [Accessed: 5 March 2017].

Tao, T. & Chunbo, W. (2014). The Huawei Story. New Delhi: SAGE Publications India.

Tian, T., De Cremer, D. & Wu, C. (2016). Huawei: Leadership, Culture, and Connectivity. New Delhi: SAGE Publications India.

West, J. & Gallagher, S. (2006). Challenges of Open Innovation: The Paradox of Firm Investment in Open-Source Software. R and D Management. [Online]. 36 (3). p.pp. 319–331. Available from: http://doi.wiley.com/10.1111/j.1467-9310.2006.00436.x. [Accessed: 5 March 2017].

Witzel, M. & Goswami, T. (2012). The Case Study: Huawei’s Entry to India. Financial Times. 17 September.

Yu, R. (2016). Huawei’s Big Plan: No. 1 in Smartphones Globally – WSJ. Wall Street Journal. 8 July.

Zhu, H.D. & Jones, M. (2014). Huawei: An Exemplar for Organizational Change in a Modern Environment. Journal of Information Technology Education:Discussion Cases. 3 (1).  pp. 1–13.

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