Speech at King's College London
(11 October 2016, London)
I'm very happy to be here today and shareHuawei's start-up story with you. You can see an apartment building in thepicture: Huawei was founded in one of these apartments, not in a garage likestart-ups in Silicon Valley. Mr. Ren started the company, but the story ofHuawei consists of all the great stories about our 180,000 employees who sharethe same values.
We are a private company wholly owned byour employees. And we have grown from a small company with just 21,000 RMB instart-up capital into a leading global ICT company.
We serve over one-third of the world'spopulation, providing products and services to carriers, enterprises, andconsumers in over 170 countries and regions. In 2015, we achieved 60.8 billionUS dollars in sales revenue. By 2020, our revenue will exceed 150 billion USdollars.
I think there are four stages of Huawei'sgrowth.
The first stage was the start-up stage.Huawei was a sales agent of switches, and also provided installation andmaintenance services. Because of our fast response and good service, we wonmore customers and gained more experience, and started to develop our owndigital switches. In 1992, we achieved 100 million RMB in sales revenue.
Between 1992 and 2000, we started to expand– from rural markets, hotels and companies, into big cities. We thus became amedium-sized company with more than 20 billion RMB in revenue. In 1996, we tookthe first step into the overseas market.
In 2000, Huawei entered its third stage ofgrowth, and started to expand from emerging markets to developed markets. In2005, sales revenue in overseas markets exceeded that of the domestic marketfor the first time. In 2010, revenue in overseas markets accounted for 70% ofthe company's total revenue.
Starting in 2010, Huawei has seized theopportunity of ICT convergence, enabling our company to become No.1 in theglobal carrier market and No. 3 in the global smartphone market. The companyhas also gained fast growth in the enterprise market.
I have received delegations from differentcountries, and many of the visitors have asked me what drives Huawei to becomewhat it is today. In its early years, Huawei had no technical strength, nomoney, and certainly no useful connections.
I think there are four driving factors. Thefirst one is the level playing field brought by China's reform and opening-up,and the market opportunities that came along with the fast development of theglobal telecom industry. The second factor is our continuous investment ininnovation and our spirit of dedication and perseverance. The third is theinitiative to cooperate with Western companies to help improve our managementand build a process-based business operation system. And the fourth factor isour long-term benefit sharing mechanism which inspires our employees to takeresponsibilities and share benefits.
I would also like to tell you a"secret"– core values are our core competency. And the most importanttwo are remaining customer-centric and inspiring dedication.
What is customer-centricity? Huawei ran anad in The Economist. This ad featured a young smiling man, above thewords: "Huawei CEOs spend more than 70% of their time listening tocustomers." Customer-centricity is about listening to customers,understanding their needs, and creating value for them. Allow me to share moreexamples with you.
In 2004, BT was the first carrier in theworld to announce its 21st Century Network programme. Since the feasibility ofarchitecture design and technical solutions should be validated beforeimplementation BT required vendors to invest in R&D before signing thecontract. Huawei assigned an R&D team of 400 people to work with BT, andinvested around 100 million US dollars over about one year. In 2005, Huawei wasselected as a preferred vendor together with seven other vendors, includingCisco and Siemens. After passing the most stringent verification in Europe,Huawei won recognition from key accounts like BT, and knocked open the door toother leading global carriers.
Over the past 28 years, Huawei has gainedstrong technology know-how and innovation competence due to its heavyinvestment in R&D. This enables us to quickly provide the technology thatcan best meet customer needs and win their trust.
The distributed base station is a case inpoint. Europe is the birthplace of GSM and 3G technology, with many telecomequipment vendors operating here. And there may not be any chance for Huawei.However, Huawei noticed that there were many old buildings in Europe, whichmeant that it was difficult for customers to find an equipment room, and theinstallation and rental fees were very high. Huawei achieved a breakthrough byinventing the world's first distributed base station. This station separatesbaseband processing units and remote radio units like a split-type airconditioner. The indoor part is as small as a DVD, and most of the station isoutdoors, with an amplifier on the rooftop connected by fiber. The cost can bereduced by 30%. The distributed base station helped Huawei enter the mainstreamEuropean market, and later became an industry benchmark.
Costumer-centricity is also about providingthe best services to customers regardless of their location or circumstances.
As long as customers need us, we will bethere to help them build the network, whatever the difficulty, on the summit ofMount Everest, the bottom of the Caribbean Sea, or the coldest part of theArctic Circle.
Huawei is always there with our customersto ensure stable network operations during disasters like the Indonesiatsunami, Japan nuclear leakage, Chile earthquake, and Nepal earthquake.
I am most proud of our efforts to bridgethe digital divide.
What does "inspire dedication"mean? How do we inspire dedication? At Huawei, we believe that the brainpowerof our employees is our most important resource. So, we share benefits withthem to unleash their potential. We have a very effective "Contribute andShare" system. The more one contributes, the more one benefits. We rewarddedicated employees based on their contributions. This system inspires ourdedicated employees. We aim to achieve a 3:1 ratio between returns from laborto returns from capital. The returns from labor include salaries, bonuses, andbenefits. The returns from capital are based on a reasonable baseline.
Of course, benefits are not just aboutincome. They also include opportunities and career development. Only employeeswho create customer value can receive higher income, have more opportunitiesfor promotions, earn more respect, and thus feel a greater sense ofachievement. Huawei applies the "Contribute and Share" system to allemployees, regardless of whether they are Chinese or foreigners, or whetherthey are scientists, experts or ordinary engineers.
Now, I'd like to share with you severalquestions I have been thinking about: Have we become complacent? Are we awarethat customers are complaining more? Has our innovation come to a standstill oris it moving in the right direction? Is Huawei suffering Big Company Disease?Who will we compete with? Do our employees have good opportunities for growth?After we reach the top, will we become overconfident and refuse to leave ourcomfort zone? Or do we know that there is always someone better than us, andthat this is just the beginning? We must aim high and build an open, flexible,and vigilant organization as we continue to grow.
Only the right assumption leads to theright thought. Only the right thought points toward the right direction. Onlythe right direction gives us the right strategy.
What will the future look like? Huaweifounder Mr. Ren describes it this way: Over the next two or three decades, wewill be entering an intelligent world. The depth and breadth of this changewill be beyond anything we could ever imagine.
The intelligent world has three basicfeatures: All things will be intelligent, with the ability to sense andconnect.
We believe that the intelligent world willbe built on two factors. First, cost-effective broadband networks for thetransmission of high-definition images like 4K and 8K. Second, ultra-lownetwork latency for AI, VR, and AR. These are the two areas in which we aim toachieve breakthroughs. And they represent huge opportunities.
We believe that core values have been andwill continue to be our core competency. They are invisible and untouchable,but they truly exist, like magnetic forces. Core values will guide us forwardin the intelligent world.
Meanwhile, we need to keep our core valuesup-to-date.
Huawei stays customer-centric. This meanswe not only listen to, understand, and meet customer needs, but also delegateauthority to customer-facing teams, and strengthen our efforts to explore andresearch future technologies.
We inspire dedication. In addition tosharing benefits with our employees, we need to open our organizationalboundaries and establish a broader value creation and value sharing mechanism.
Only employees who are closest to customerswill have the biggest decision-making rights. Our back offices leverageadvanced IT tools to provide effective resources and help field offices betterserve customers. Staying customer-centric means we must fulfill ourresponsibilities and honor the spirit of the contract. We must never break thepromise we've made to customers. In the past, when a customer raised a request,dozens of our experts flew to the site and developed solutions there. Theworkload was huge but the efficiency was low. In the future, our accountmanagers will act as major-general-company-commanders. They will havegreater responsibilities and authority, with their exercise of authority beingsupervised. They can reach global experts through our customer cloud, knowledgecloud, and solution cloud. With these resources, they can make quick andinformed decisions, and respond to customer needs more rapidly.
We must never be opportunistic in an erafull of opportunities. Human progress is driven by advances in basic science,and these advances require long-term commitment.
Huawei has over 80,000 R&D staff. Overthe next few years, our annual R&D investment will gradually reach 20billion US dollars. Of that amount, 70% will go to development of products andsolutions, and the remaining 30% will go to research and innovation.
When dealing with uncertainties, Huaweiallows a 50% failure rate. In fact, we don't use the term "failure",but "exploration". We explore along multiple paths and in multiplewaves. We never bet on only one direction.
Breakthroughs in key technologies will bethe lifeline for Huawei and our customers. Huawei puts customers at the centerof everything we do. We will never take a gamble.
In the industrial age, the talent pyramidhad clear merits: order, a clear hierarchy, a clear division of labor, andefficient operations. Today, however, its weaknesses are also obvious: It isclosed. There is no exchange of energy with the outside world. Therefore, ourfounder Mr. Ren proposed the idea of blowing open the top of the talentpyramid. He encourages our employees to communicate with external experts,scientists, international organizations, and industry organizations. The greatideas sparked by such communication will help us to identify where our industryis heading. And these great ideas will benefit society, no matter who appliesthem.
The top of the talent pyramid is only bigenough for a few decision-makers, executives, and senior experts. So such astructure makes it difficult for us to exchange ideas with external high-endtalent. That's why we proposed the idea of blowing open the top of our talentpyramid. It allows more of our business leaders, strategic leaders, andtechnological leaders to stand at the top of the pyramid, helping us maintainour organizational vitality. Meanwhile, we have also opened our door to talentfrom around the world. Thanks to these efforts, some scientists have joinedHuawei and some others work as our external advisors. We will thus be able todevelop large numbers of leaders within the company and also absorb great ideasfrom external top talent. Huawei operates 26 centres of expertise around theworld. The purpose is to provide a platform for global scientists and experts,so they can contribute more to society. A person can gain more ideas andknowledge if he or she works with a group of people. As a Chinese saying goes,"Four ounces can move a thousand pounds." Many major academicbreakthroughs were the result of such "moves".
The ICT ecosystem will become more open.Therefore, Huawei will share benefits more broadly for example, with partners,developers, academic institutions, research institutes, and industryorganizations.
In 2025, digital transformation will createa market worth 100 trillion US dollars. This market will be big enough for alarge number of great companies. At HUAWEI CONNECT 2016 held a few weeks ago,Huawei announced that we will only have1% of this huge pie of digitaltransformation, and our partners will have the rest. This is not just a slogan.We have adopted such an approach for our employees. We are confident that, inthe future, we can also do this with our partners.
This is actually an assumption that we havemade, and it also shows our confidence in the future. In the100-trillion-dollar digital transformation market, we are not competitors ofeach other; instead, we are partners, working together to make our vision areality.
How can we manage the resources that arenot owned by Huawei? How can we create advantages using external resources?Where should we draw the lines between competition and cooperation? How can wework together with those with different ideas and interests from us and sharebenefits with them? All this depends on our leading technologies,organizational flexibility, and management system innovation.
Through the Huawei Innovation ResearchProgramme, or HIRP, we have worked with more than 1,000 scholars from 100universities and academic institutions, such as Oxford, Cambridge, Universityof Manchester, and Technical University of Munich. The areas of researchinclude graphene, wireless, optical, cloud, media, and cyber security. In thefuture, we will invest more resources to support the research of scientists whoare in the same area of focus as we are.
Last, I'd like to wrap up what I saidtoday:
First, a critical factor for Huawei's fastgrowth is our core values: customer-centricity and dedication.
Second, we will be entering an intelligentworld and we will continue to live our core values.
Third, our corporate values are evolving.For example, we are delegating more authority to those who are closest tocustomers; we are increasing our investment to explore future technologies; weare opening our boundaries; and we have established a broader benefit sharingsystem.
King's College London is a famousinstitution. It has produced several Nobel prize winners and many famous namesin fields such as literature, science & technology, and medicine. Thecollege has a long history of interaction with China. And in the 1940s, it wasthe only college in the UK that taught Chinese.
My sharing today is also aboutcross-cultural and cross-regional communication. I look forward to yourfeedback.