Huawei's Secret: innovation based on traditional bargain games play dead opponents

At the 6000-person National Science Conference chaired by Deng Xiaoping in 1978, a 33-year-old young man named Ren was sitting in the back row, now worried about whether his father could be vindicated and whether he could join the party. How does he know that after 9 years, he will go south to China's reform experimental trial in Shenzhen, with a mere 24,000 yuan to start a company called Huawei, and how much more than 30 years later, he will become Ericsson, Cisco and other bosses have a headache name.

Ericsson CEO Vestberg said Huawei is Ericsson's "most respectable adversary". This is not a compliment. Equipment on the market whistling a moment of Motorola, Nortel, such as the wind is always rain, Huawei this barbaric growth of private enterprises, but has been standing to the end of the PK station, which is the winning way, what is it?

Focus on the strength of Shenyang

"The toughest opponents" is what Cisco's CEO Chambers said about Huawei. Cisco, a former Silicon Valley star, is making a series of "combination punches" to Huawei, including sending "black materials" to clients, persuading customers not to do business with Huawei, accusing Huawei of copying its source code, and spending millions of of dollars mobilizing U.S. lawmakers and government executives to stop Huawei from competing with the US; The latest news is that U.S. lawmakers , with 73 holding Cisco stocks, the United States Congress and Cisco have apparently formed a community of interests.

The US setback has sparked Huawei's competitive resolve.

In his recent internal speech, Ren was adamant, "we have to rise to the competition, in addition to beyond, we have any way to go?" ”

Huawei insiders revealed that the boss's past view is to bide their time, to avoid the positive competition with U.S. companies, but this incident, there will be a big change, "the future in the corporate network market, we and Cisco competition is likely to be a life-and-death."

It is Huawei's consistent tactic to concentrate on Shenyang strength. From Huawei to the harbor, and then back to Huawei's Ching (alias), to the year of "Fight Hong Kong (WAN) office" is still fresh memory ——— 2000, is regarded as the successor of Ren Li left Huawei, self-employed, set up a harbor, and Huawei Direct competition.

In the face of the rise of the harbor, Ren hurt the killer, all the harbor orders, Huawei no matter how much cost to take down. If the harbour is marked in a certain area, it means that the head of the office or even the sales staff will have to pack up and leave. For example, in those two years, the harbor was like "living in a glass house".

In addition, Huawei has launched an IPR lawsuit against the harbour, which has since been traded without doors and has been forced to sell to Siemens, which has put pressure on Siemens at all levels and the deal eventually fell through.

2006 acquisition of the harbour, Ren on both sides of the competition blunt: "The two years of your competition is a bit bigger, the blow is a bit heavier, these years in this case, for our own survival, no competition and no way to go, this is sorry you." ”

Innovation based on tradition: flowers Don't leave cow dung

Cisco must have regretted that it did not destroy Huawei 10 years ago and let the hyena grow into a lion.

Cisco sued Huawei in 2003, saying it had stolen Cisco code. Cisco at the time, known as the "Never Fall" of the Internet hardware and software manufacturers, and then Huawei, but a low-end image of China Telecom.

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This is a mismatch between the strength of the competition, 2003, Cisco sales amounted to 18.9 billion U.S. dollars, Huawei sales of 31.7 billion yuan, overseas sales of only 1 billion U.S. dollars. I do not know why, 19 months later, two to reach a settlement. Cisco said at the time that Huawei had agreed to modify its command line interface, user manual, Help interface and part of the source code to some extent to promote its own victory.

Huawei's fast catch-up is well beyond Chambers ' estimate: Cisco's revenues were $43.2 billion trillion in fiscal 2011, and Huawei was 32 billion dollars. In the face of the pursuit of Huawei, Cisco, once again, offering a patent stick.

"We are well aware that customers value Cisco's innovative spirit, but they cannot see the same capabilities from Huawei," he said. We clearly reaffirm that imitation is not innovation. "Cisco executive vice president Lloyd said rudely.

Huawei does not mind the accusations ——— Ren himself admits that no original product has been invented since the venture. "We do not rely on self-development, because the independent development, market opportunities have not been, or rivals have built in the market advantage, we can not profit in the competitive market, so we often use direct purchase technology to shorten the gap and build the lead."

Huawei's long-standing strategy is based on the "Flowers in cow dung" strategy. Huawei never leaves the tradition to blindly innovate, but based on the existing existence to open, to innovate. Flowers grow good, and become a new cow dung, always based on the existence of innovation.

Patent fortification: Can't take up the hill

In Ren's view, excessive "independent innovation" is extremely dangerous. Huawei said the core idea of innovation is that how to solve the competitiveness of enterprises, to meet the "good quality, good service, low operating costs, priority to meet customer demand," the four requirements, but not excessive emphasis is not "independent" development and innovation, "it is a house of the end of things."

But because of the weak foundation of earlier, Huawei's patent is indeed its soft rib. "Not only Cisco, Nokia, Alcatel and Siemens have used patents to take turns attacking Huawei," he said. "Equipment Business Person Hangyuan (alias) said to the south, these international communications giants shot is also very scary, the most one-time out of more than 200 patents, and at least dozens of patents, through the letter of attorney to find Huawei negotiations, patents almost related to Huawei's product line.

According to the disclosure, these international communications giants demand 2% to 10% of product sales as royalties. "They demand that the royalties be calculated on the basis of the total amount of Huawei's external contracts, which, if accepted by Huawei, would mean that Huawei would have to pay hundreds of billions of royalties each time they signed in for large overseas orders." Hangyuan said, these developed countries ' telecommunications market was originally by Nokia, Alcatel, Siemens and other international communications giants monopoly, Huawei's cost-effective products to make them feel a huge threat, patent is necessarily the most effective counter weapon.

In response, Huawei has organized a huge intellectual property analysis team, closed in Shanghai for several weeks, analyzed each other's patents and found out how to deal with them. Finally, according to Ren "Can not occupy the mountain, the hillside, not the mountainside, on the hillside," the instructions, on the one hand with the international communications giants slowly mediate, on the other hand, Huawei launched a patent in the battle, the number of patents in a breakthrough in order to find the opportunity to fight back.

"Compared with a core patent like Qualcomm's CDMA, Huawei is more of an application-type patent to exchange with other vendors, and it can also create technical barriers by applying for patents, but because companies encourage patent applications and even reward methods, there is no rule of junk." One Huawei Insider, for example, is even known as a patent for Huawei's application for a "method of calculating women's circadian cycles based on mobile phones and related handsets".

This kind of "golden mean" innovation, to a certain extent, can not let the opponents convinced.

Ericsson East Asia executive vice president and marketing and strategy department general manager Feng Ying claimed that Ericsson more value the actual approved number of patents, as well as the "quality" of patents, especially the core patents, Ericsson has been approved more than 27,000 patents, and has more than 25% of the core of the LTE patent ——— Huawei currently has about 15% of the core of LTE patents.

Bargain Games: Foreign competitors cannot carry

Last year, Huawei reconstituted its corporate-banking BG (business group), fully into the corporate infrastructure network, unified communications and collaboration, cloud computing and data centers, and corporate information security, which is Cisco's "Big granary" ——— the Enterprise IT market.

According to Huawei's business strategy, by 2015, its business sales revenue to reach 15 billion U.S. dollars. There is no doubt that Huawei will squeeze Cisco's share and profit, which makes Cisco feel an unprecedented threat.

Cisco, for the moment, is no longer the Silicon Valley myth of the Year: income growth slows, profits plummet, layoffs are lost, and market capitalisation is less than 1/5 of the peak.

In the past five years, Cisco router market share has dropped from 66% to 55%, and the switch market share has fallen 2% to 67%. In this situation, Cisco must keep its last plots: the U.S. market, but facing Huawei's low-cost strategy, it seems hard to break.

A Cisco dealer said that a Cisco "NET" video conferencing products for example, the domestic price of up to more than 2 million yuan, and Huawei launched a similar product price of only about 1 million yuan. Although Cisco has long claimed that its product is far superior to its rivals, it has been robbed of many orders.

In a more than 6 million-yuan network equipment bidding project, Cisco quoted more than 5 million yuan, and Huawei only reported 1.9 million yuan. Although short-term losses can be made up from follow-on services, Cisco's listing on Nasdaq is unlikely to be easily involved in this bargain game.

It is one of Huawei's most important competitive strategies to pry the market with price sharp weapon. At the beginning of this century, Huawei quickly grasped the demand for return on investment after the bursting of the bubble, reducing the price of the GSM switch from $400 trillion to $80 or less per line.

When we first entered the U.S. market, Huawei advertised in American newspapers: "Their only difference is the price", which caused a strong rebound of Cisco, Alcatel and other giants.

There are equipment business overseas business people privately frankly, Huawei's Trump is low price, "The price is low to let foreign manufacturers heard ZTE, Huawei in the automatic walk away."

This is not a secret that cannot be said. Huawei uses the "pipeline marketing" approach ——— the main equipment (pipeline) does not make money, or even loss of money, and the profit depends on the flow of things in the pipeline, that is, auxiliary equipment, a variety of industry application solutions, upgrade costs and so on.

"Sometimes an order is a sign of entering a market, and the company is going to fight for it." "A lower-cost order may be strategic," said Zhang Yu, a telecoms analyst, "and the company values the service space behind the order, the expansion space for the network upgrades." ”

Hard skills: Gan cut their own feet, suitable for IBM's shoes

The pressure principle and the low price strategy let Huawei in the market development like the divine help, but the research and development management system's creation is not cavity blood can reach.

1998, Huawei Switch User board because of unreasonable design, resulting in the whole network more than 1 million user board rectification; In 2000, Huawei recovered from the internet and replaced more than 200,000 circuit boards because of the power problem of optical network equipment, resulting in a billion of losses ... All these mistakes will require the design and development of the system to be all over again, the previous efforts in vain.

Huawei is determined to change its research and development management system. 1998, Huawei and IBM cooperation project "IT strategy and planning" officially launched, the content is to plan and design Huawei in the next 3-5 years need to carry out business processes and required IT support systems, including integrated product development, integrated supply chain, IT system re-engineering and financial four unified eight projects.

"Without IBM, there would be no Huawei today." Huawei Senior vice president Ding outspoken.

Prior to the introduction of IBM cooperation, Huawei's order delivery rate of only 50%, while the international average of other telecommunications equipment manufacturers 94%; Huawei's inventory turnover is only 3.6 times/year, while the international average level of 9.4 times/year; Huawei's order fulfillment cycle is up to 20-25 days, The average level of international telecommunications equipment manufacturers is about 10 days. The aim of the reorganization supply chain is to design and establish the integrated supply chain with customer as the center and lowest cost.

For learning IBM, Huawei internal opinions are divided, that "American shoes" is not suitable for "Huawei foot." ren lipaizhongyi: "I hate ' smart people ', think that I read a few more books on the great, some people do not understand the business process is to open a ' process prescription ', resulting in seven sores in the process of eight old problems. We will pass the training, the examination competition posts, cannot pass the examination to be laid off. ”

Ren is willing to cut his "feet" to fit IBM's "shoes". IBM sent 50 consultants, a stay in Huawei for 5 years, with which Huawei set up a management engineering department, for up to 5 years of process reengineering. To this end, only a consultancy fee, Huawei's investment in 50 million dollars a year. According to statistics, Huawei for business process change, at least pay a whopping 1 billion yuan tuition.

Last year, IBM advised Huawei to expand its business to smartphones and tablets, while strengthening its branding of mobile phones. Revenues in the two businesses accounted for about one-fifth of Huawei's revenue in 2011.

Wu Chunbo, a professor at the School of Public Administration at Renmin University of China, is one of the drafters of the Basic Law of Huawei, who has been a senior advisor to Huawei since 1995 and has been in the company for 17 years now.

In Wu's view, the introduction of a world-class management system, the transformation of Huawei's organizational genes, enhance the vitality of organizations, improve the efficiency of the Organization, and comprehensively enhance the core competitiveness of the Organization, is the secret of Huawei's Evergreen. Huawei's "full shareholding" is also an excellent incentive mechanism.

Since 2001, Huawei has introduced an option reform called "Virtual restricted stock". Virtual stock refers to a fictitious stock which the company gives incentive object, which can enjoy a certain amount of dividend right and stock price appreciation right, but it has no ownership, no voting right, cannot transfer and sell, and automatically expires when leaving the enterprise.