Ren Zhengfei: What Will Cause the Failure of Huawei?

Editor’s note: this is an excerpt from Ren Zhengfei’s speech during a seminar where he shared his views on technological innovation, the future trajectory and potential risks of Huawei.

Why will we fail? What will cause Huawei to collapse?

In history, there are many big companies falling into major decline after their significant success. Japanese electronic engineering industry was very successful in the 1970s, reaching a point where the wealth it made can even buy the U.S.. Japan was very successful in analog electronic technology, but was surpassed by the U.S. during the digital transformation when Japan was too conservative. However, the U.S. returned to the field of communication technology (CT) from information technology (IT), and might even revolutionize CT industry.

MOTO invented the cellular mobile communication system and was so successful in the analog era that it withdrew from the market during digital times. NORTEL made such a big success in constructing the 10G optical transmission network that it missed the opportunity to transform to 40G/100G network. Why did AT&T fail in the past? It judged that this world was based on 2M-bandwidth communication system which refers to the voice era. It failed to notice the incoming of big data era—of course, neither did we even have a hint at the time. Now the demand for bandwidth is intentionally reduced and we tend to think that the wider the bandwidth the better. But is that the case?

How should we deal with the current era? I’m quite not sure. When we first proposed the concept of pipeline, the intellectual description of big data was still immature. We still did not figure out how large was the pipeline and what is the rate of flow. In my opinion, wireless system can better suit the customers’ demand than cable system, for wireless network is closest to clients and thus more caters to the basic need of people.

In our current process of success, what will lead to our collapse? Cellular system is a coverage solution designed to adapt to the voice era and might not be able to support high-density data coverage. But I do not have a clear answer to the question of what is the basic approach to high-density coverage and what bandwidth can serve the basic need of a good number of customers. If your hypothesis of technology went wrong, and we had already established tens of thousands bases which cannot be updated, what could we then do? Therefore, the more success we attain, the more burden also befall on us. There is too much unpredictability in the future. Even if we have established the tens of thousands of bases, we could avoid the failure a little bit earlier as long as we knew earlier than others what mistakes had we made. Di Yun made a sensible point when he suggested 5M or 10M seamless coverage.

It’s easier for us to catch up than to lead, for as a leader, we need to figure out our direction. I was once depressed for around 8 to 10 years, and the reason was whether to stop producing the Little Smart and TD cellphone. I was not concerned about the external pressure, but worried about the future of my company—whether my decision would lead to the collapse of Huawei? That placed a lot of pressure on me and made me very depressed.

Now you are also at an apex and as a result need to undertake much burden. Where should wireless technology go from here? What is our thought for future technology? What is the trajectory for technological development? What is our assumption of the world? If we were right in our assumption, then we might be more likely to succeed. If we were wrong, we might sink into the decline experienced by NORTEL and MOTO.

Cisco is the most advanced producer of IP communication products in the world. Yet due to one of its investment error in core routers, Cisco is surpassed by Huawei. But do you think Huawei won’t be surpassed by others? Therefore, the best time to discuss the potential failure and decline of Huawei is at its most successful and prosperous period. Maybe we can get a clearer thought to figure out its future trajectory. Another issue is that we are not sure about the demand of our clients. Therefore I need to consult more frequently with experts in this field.

Commanding the real need of clients and insisting the tipping strategy in main trajectory

What we should focus on is the end customers, rather than merely the operators. The demand of operators is only one of the many procedures. What is more significant is the need of our end customers. The key point is how to direct the market demand and create demand. Whether for industry or personal market, the real demand is your hope.

The future development of information in the world is unlimited. The internet era is not equivalent to the era of network. Internet has become people’s basic need, while network only serves to be the carrier, linking different ports. Similar to the steamer which has led the Industrial Revolution in the U.K., network has also brought revolutionary changes to the modes of production in the entire world.

Some people commented online that the strategy employed by Huawei is a tipping strategy. He pointed out the truth. We narrow the domain of our strategy to a tipping area to avoid stepping on other’s feet. We adopt tipping strategy in the main trajectory, which means racing to the forefront but avoiding directly conflicting with others.

I’m not sure whether ICT fusion really accords with the future development, but there are two hypothesis: the trunk transmission will certainly be in the form of CT to ensure its timeliness, liability and accuracy, but the access layer can allow errors and packet loss. ICT fusion is a proposition of our company, yet whether it is correct is still left to further consideration. With regard to method in wireless coverage, the European standard in from exterior to interior, and the American standard is from interior to exterior. This is the competition between these two major technologies. I think both methods are correct. Therefore we need to do both and achieve some sort of fusion on certain level.

Opening to the world and a cup of coffee absorbing talents

We need to construct our future basic technological theory and thoughts from the perspective of strategic structure. Our breakthrough in the mathematics of wireless network is not without base, but our investment in the mathematics of cable network is far from enough. We need to start cultivating mathematicians in cable networks, including bring in PhD candidates, even in China.

The circle in Huawei is still too small. You should go out and have coffee with some PhDs and PhD candidates, to spread your technological thoughts to these future ‘seeds’. Our company need to adopt an open mode of management. It is by opening itself up that capitalism achieves great success. China did not succeed from maintain a self-closed system.

We also need to rise to world-class. Now we lack thinkers and strategists. If we only focused on moving forward while our idea or direction was wrong, there would arise serious problems. That’s why I hope among you can emerge thinkers, not just technical experts.

Our innovation should have borders, not boundless

We should evolve. Even long-term strategic thoughts are based on the gradual evolution and improvement of the ideas today. Do not always talk about being revolutionary and assuming that revolution will be accepted, which might not always be the case. The success of Apple was achieved after 40 years of accumulation. Apple invented personal computers and graphic interfaces, and was also successful in MP3. Later, it added mobile communication function to its MP3 which led to the birth of iPhone and made another huge success. From this example, we can observe that the success of iPhone is a breakthrough after 40 years of accumulation, not a sudden rise to fame. What we can learn is that we should not always think about revolutionizing ourselves with revolutionary ideas. What human need is not revolutionary changes, but rather high-quality inheritance and development of technology.

The innovation of product must be centered around business demand and should be bounded. Boundless innovation of technology might mislead the strategy of our company. What we are now striving to fulfill is the dream of Huawei, not of the human kind. Hence, our innovation should have borders, not boundless.

Source: Huxiu