‘Someone is sitting in the shade today because someone planted a tree a long time ago.’ - Warren Buffett.
When IBM celebrated its 100th birthday a few years ago, many strategy pundits produced the usual ‘lessons to be learned’ from its founder, Thomas Watson, who was at the helm of the company for close to 40 years. Five main lessons seemed to emerge from the general consensus: ‘dream big’, ‘create your own cult’, ‘take risks and innovate’, ‘make people talk about you’ and ‘hand off to a successor who is better than you’.
As Interbrand issued its latest list of the 100 best global brands last week, the biggest surprise was therefore not IBM standing its ground at No. 4 but the fact that, for the first time, a Chinese company was also included – Huawei at No. 94.
Chinese products seem to be everywhere nowadays but few Chinese companies are global brand names. Founded in 1988 as a distributor of telephone switches, Huawei has become the world's third-largest mobile handset producer (with a 5% share of the global market in 2014), behind market leaders Samsung (32%) and Apple (15%). It has also won the title of the world’s largest telecommunications infrastructure maker (which it eked from Ericsson in 2012). Although probably still more of a household name in Asia than in the West, it generated US$39.5b revenues in 2013, operating across 150 countries, and grew by 19% growth in the first half of 2014.
Could Huawei’s ascent herald the validity of the deemed 5 ‘lessons to be learned’ from ‘Big Blue’?
1. Dream that you are a company of destiny
When Watson took charge in 1914, he told his then demoralised workers that they were building a world-class, important company, even giving it the expansive name of International Business Machines. In the process, it created a compelling vision of how great IBM was going to become in the future, which led its employees to feel that they were on a mission, an attitude still present today.
One thing about Huawei is easy to understand: its ambition. In Paris last May, it showed off the Ascend P7, a sleek smartphone compatible with the speedy fourth-generation mobile-phone networks designed to take market share away from Samsung and Apple. In its main business, supplying network equipment and services to telecoms operators, it has already met its target to outplace the leader, Ericsson. Huawei sees itself as the beacon of a ‘better connected world’ and has set it sights firmly on becoming the world top brand, progressing from its own distant 94thrank in the Interbrand ranking towards Apple’s first.
2. Build a cult-like culture that either attracts or repels
Watson is credited as the first business leader to consciously create a culture for his company. The workplace became part of the identity of the employees as a set of unique values specified the behaviors required of all; along the lines of “how we do things around here” statements. It started with the famous THINK, later augmented by ‘Basic Beliefs’ such as ‘respect for the individual’ or ‘excellence’ and by other behavioural trademarks such as a no-alcohol policy, a dress code of stiff white shirts, and a tradition of group-singing of songs about IBM.
For Chinese companies, abstractions such as values and culture tend to be reinterpreted to include both Western management techniques (e.g. quality control or customer service) and Chinese values (e.g. the business firm as a greater family or patriotic spirit).
Huawei created its own flavor, attacking the traditional Chinese fear of “losing face” in public, in order to improve the performance of the firm. It introduced the culture of the ‘pillow talk’ encouraging employees to criticise poor products or management performance; akin to ‘hitting yourself with a soft pillow: though the blows are gentle, they will remind you to constantly strive for better performance.’ As a result, Huawei has become over the years the place to be for many Chinese graduates and employees calling themselves Huawei-ren or Huawei people; the Chinese version of IBMers.
3. Take risks and innovate
Realising that copying competitors would not make IBM an industry leader,Watson followed his convictions about the importance R&D, even during the 1930s depression when all the rest of the industry was divesting. This allowed IBM to have the machines, the factories and the new technology tested and ready when the Social Security Act was passed in 1936, creating the single largest information problem for government and business to date — tracking all those paychecks. A similar bet was made in the 1960s with the System/360 computer.
Endogenous innovation has been the key to Huawei’s success. Unlike most Chinese companies who have tried to absorb technology via JVs with technologically-advanced partners, Huawei made a conscious decision to develop its technology internally. Similar to the other biggest global innovators, Huawei consistently spends over 10% of its revenues on R&D. In addition, its innovation strategy has always centered on customer needs rather than on achieving minimum costs with its products. The result was that Huawei was the first Chinese company to develop a large-scale public branch switch system and is racing to develop a 5G network. It now has 26 R&D centers globally, 28 joint innovation centers, half of its 150,000 employees work in R&D and it holds an impressive 49,000 patents, making it one of the top five patent filers worldwide.
4. Make people talk about you
In Watson’s days, most people did not understand IBM’s computing machines. So he found ways to make the public take notice e.g. funding a grand “IBM Day” at the World’s Fair in New York, setting up one of IBM’s first electronic computers in the lobby of its corporate headquarters on Madison Avenue for everyone to see in operation, etc.
Huawei, after spending years defending itself against claims of breaching cyber security, has gone on the offensive with its 'Make it Possible' campaign aimed at making the connected world a reality for more people. Its work in partnering with telecom carriers around the world is leveraged as a way to show consumers how much of an impact Huawei has on the world they live in. Last September, it presented its strategy at a technology conference it had arranged in a vast auditorium in Shanghai (that had not seen as many people gathered there since the Rolling Stones were last in town) with its bosses striding the stage in front of a video screen as wide as a football pitch.
5. Hand off to a successor who is better than you.
The hurdle of succession planning in organisations that revolve around charismatic founding leaders is where many companies stumble on the path to 100 years. For Watson, the succession was easy as he had a son who was as gifted and who led IBM through the new era of electronic computing.
Huawei’s founder and longtime CEO Ren Zhengfei revealed in 2011 a system of rotating CEO whereby its four deputy chairmen of the board - Guo Ping, Xu ‘Eric’ Zhijun, Hu ‘Ken’ Houkun, and Ren himself – would act CEOs and rotate every six months. Ren viewed Huawei and China entering a period of rapid change, and having four rotating CEOs, with expertise from different parts of the company such as marketing, wireless, and research and development, is deemed to keep the company nimble.
Remaining a vibrant company for most of 100 years is not easy but Chinese culture has always had a more expansive view of the time. Huawei’s inherent long-term view, its cultural foundation and innovative management strategy coupled with some big bets have helped it overtake listed international competitors. Keeping these in mind, and it might still be around after its first 100 years.
More about Interbrand's 2014 ranking can be found HERE
by Christelle Espinasse - inSTRATEGIA
