How did Huawei, ZTE, and all the other well-known telecomms companies achieve what they did? We will consider the companies along four dimensions: company aspiration, marketing, innovation, and management.
Introduction: ABOUT HUAWEI
Huawei is a Chinese multinational networking
and telecommunications equipment and
services company headquartered in Shenzhen, Guangdong. It is the largest telecommunications equipment
maker in the world, having overtaken Ericsson in 2012.
Huawei was founded in 1988 by
ex-military officer Ren Zhengfei and formed as a private company owned by its
employees. Its core missions are building telecommunications networks;
providing operational and consulting services and equipment to enterprises
inside and outside of China; and manufacturing communications devices for the
consumer market. Huawei has over
140,000 employees, around 46% of whom are engaged in research and development
(R&D). It has 20 R&D institutes in
countries including China, the United States, Germany, Sweden, Ireland, India,Russia, and Turkey, and in 2011
invested around US$3.74 billion in R&D.
In 2010, Huawei
recorded profit of 23.8 billion CNY (3.7 billion USD). Its products and services have been
deployed in more than 140 countries and it currently serves 45 of the world's
50 largest telecoms operators.
Introduction: ABOUT ZTE
ZTE Corporation (formerly Zhongxing Telecommunication Equipment
Corporation) is a Chinese multinational telecommunications equipment and systems company headquartered in Shenzhen, China. It is the world's fourth-largest mobile phone manufacturer measured by
2012 unit sales[2] and the world's fifth-largest telecoms
equipment maker measured by 2011 revenues (after Ericsson,Huawei, Alcatel-Lucent and Nokia Siemens Networks).[3]
ZTE's core products
are wireless, exchange, access, optical
transmission and data
telecommunications gear; mobile phones;[4] and telecommunications software.[5] It also offers products that provide
value-added services,[6] such as video on
demand and streaming
media.[7] ZTE primarily sells products under its
own name but it is also an OEM, manufacturing some
products which retail under other brand names.[8]
ZTE was founded in
1985 by a group of state-owned enterprises associated with China's Ministry of
Aerospace.
1.
Aspiration level
Aspiration level is a soft index which is difficult
to measure—not like revenue or investment level which can be expressed clearly
by numbers.
Huawei’s
aspiration level
leads the pack. This company has
invested heavily in research and development, as seen in the high number of
patent applications – number 1 in 2009. Ren
Zhenfei, founder of Huawei, expects that Huawei’s development in future can go
beyond the dependence on single competition element including technology,
talent and capital; no longer rely on blind low-cost production. He expects
Huawei to become a business organization with high effectiveness, and
eventually grows into an international enterprise.
By comparison, ZTE’s culture is pragmatic,
controllable, invisible and tangible. Like Huawei, ZTE’s investment to R&D
is also about 10%, but they are more cautious about entering new areas. Before an obvious market potential is
visible, they are extremely cautious to present to market, and every further
step has to be verified by visible market potential. We conclude it has a
moderate aspiration level, which is also heavily rooted in the company’s
history and culture.
At Datang, the high aspiration level is fulfilled through the
government’s financial support, not though market. Quite a large part of the
research funding of Datang is from the central government’s budget. This kind
of aspiration level is not sustainable, because it is sustained largely by
external funding support.
Eastcom suffers from
lack of sufficient aspiration level. From the very beginning, it was an OEM
factory and more than ten years later it is still an OEM factory. Even
employees at the company despise its overwhelming interest in making money and
shortage of pursuit of core competency.
When UTstar gained sudden ascendancy, many people envied its success. But it declined just as fast, and many think
it’s because it failed to build core competency and core product. This
opportunism, coupled with a disordered management, led to its short-term success
story.
2.
Marketing Capability
Marketing capability simply means market
judgment.
Huawei and ZTE
go together on this one. They are both very good at marketing, in fact they
are overwhelmingly skilled. We know that Huawei and ZTE are persistent in
R&D investment, but they are also very careful in investing in R&D:
every decision has to be verified by market demand, confirmed by market
potential. The typical example is their strategy of “encircled cities from
countryside”.
Around the early 1990s, the two
companies perceived that although the Chinese mobile market was mostly occupied
by multinationals, these big companies had no time to take care rural market
and marginal region. Just because these niche markets were ignored by the big
competitors, or more exactly were despised as lower end market by the MNC,
Huawei and ZTE decided to develop self-owned product to meet the demand for
rural telephony and marginal network. The breakthrough started from these niche
markets and then based on the small breakthrough, they nibbled the rest market
little by little.
With regard to the two companies Eastcom and UTstar, we have to admire
their excellent market view. Eastcom was a very small telecom equipment
manufacture before the early of 1990s, but they’re aware the tendency when
technology evolves from fixed line to mobile, and grasped the opportunity by
first working as OEM and agent for Motorola.
3.
Learning And Innovation
Learning and
innovation are very crucial in all telecommunication industries, and depend heavily
on R&D i.e. Research and Development. All companies willing to make
progress always have a group of people or a department working on the research
and development. The future of the company might not be certain with the
absence of R&D.
The R&D in telecommunications
can be divided into three layers. The first is the physical layer of research;
they are the basic algorithm research which can make revolutionary change in
telecom industry. The second layer is the software development, for example
chip design. The third layer is the application development.
The latter two layers demand
large amount of brain labor to test many changes of software. Whereas the high
cost of R&D labour in developed countries limits their activities, Huawei
takes advantage of the abundant labor resource, continuously investing in the
second and third layers of development by sustained testing and adjustment, and
finally realizing technology improvement again and again.
Huawei’s hi-tech
enterprise is termed “knowledge-labor intensive” by the Chinese. Knowledge-labor refers to that labor who
grasps professional knowledge. The strategy fully takes advantage of the human
resource of high-tech industry in China, while also avoiding the most
challenging technologies, since one has to admit that the current Chinese
research level still cannot overcome the core technology.
Generally speaking, the
observation and discussion with Huawei and ZTE tell me that their catch-up in
technology learning is totally relying on their own development. The most
common method is that they import foreign technology or product, then deploy
large amount of engineers to imitate and modify. This is called “technology-borrower.”
Management capability
Management capability is heavily
correlated with innovation capability. Successful R&D is absolutely not
simply adding up talent and capital, neither is it an issue that can be solved
by FDI. An effective and sustainable R&D demands continuous catch-up in
technology, from the beginning it requires an accurate market sense, then it is
going to involve an organization’s comprehensive decision making capability,
finally follow-up project management and logistics management are also
necessary. Conversely, poor management
will eventually neglect talent and waste capital.
Huawei learns a lot from western
countries. From 1992, Ren visited
companies in the US, European countries and Japan, including Alcatel, Siemens
and other leading companies. After visiting Hughs, IBM, Bell Innovations and HP
in 1997, he proposed a reform plan after deliberate consideration. The proposal
laid foundation for Huawei’s global operation strategy. The proposal presented
by Ren was not based on the “Chinese way”, but “integrating global resource
into Huawei’s network” based on global perspective.
From 1998, Huawei decided to
focus on IBM as its learning model and strategic partner in the path to become
an international enterprise. Huawei firstly defined its transformation from
telecom equipment manufacturer to telecom total solution provider and service
provider, in order to fully take advantage of full scale products line.
In the following five years,
Huawei invited 50 IBM management consultants to work on the Huawei project in
order to improve internal management and business procedure, by investment 50
million USD. In addition, Huawei set up a 300-employee management engineering
department to handle implementation of IBM’s recommendations.
ZTE: There are many studies about Huawei’s
management, but few about ZTE. One of the reasons is that Huawei’s “wolf”
culture is certainly attention-grabbing, but the “golden mean” of bull culture
from ZTE is much less attractive.
Most of the ZTE employees who
have been working for them are still with them since the past ten years. ZTE
always steadily occupies and expands in the market. In 2000, when IT industry
was suffering winter, ZTE kept it as another high speed year; from 2001 to
2003, when other Chinese companies including Huawei tried to freeze hiring or
even laid off many people, ZTE still kept hiring many new employees. This shows
a very high management capability.
Huawei and ZTE are quite
successful when facing management transformation. Huawei applies the western system which
manages people by a regulation and proceeding. ZTE follows a Chinese
Confucianism management model to manage people by relationship and bond. Both
of these two systems make it possible to motivate all the people in the company
to work for the enterprise by combined efforts, but not get collapse for their
own interest. Both have created a
management system which is supported or accepted by most of their employees.
From the case of UTstar, we find
that although they bought a handful of foreign companies, they failed to transform
the external knowledge into their core competency. Companies like UTstar
remained on the surface in their adoption of various technologies; they did not
manage to absorb and make these purchased technologies their own. It is not
because of wisdom or foolishness of the company, it is because of the
management quality.
Eastcom expected FDI could bring
technology improvement, and reaped tragic results.
All those other companies, like
Dragon, Huawei, and ZTE, that ever acquired core technologies mostly depended
on self development. These companies
started when the Chinese market just opened, in the background of limited
information and knowledge from foreign countries, they depended on their own
capability and university resources to develop their own technology.
Based on the 2011
paper: A COMPARISON STUDY OF THE CHINESE TELECOM INDUSTRY, by Hui Yan, Aalborg University, Denmark.
The three authors are
undergraduate students in the Department of Electrical Engineering at Bells
University of Technology. They studied
Hui Yan’s paper and prepared this summary under my supervision for the course CEN 302: Introduction to
ICT. - Tosin Otitoju
No comments:
Post a Comment