6379 — Blog 3A: Huawei and Its Innovation
Innovation is the heart of what Huawei does. Huawei was founded in 1987 by Ren Zhengfei in Shenzen, China. When it founded, Huawei was focusing on Hong Kong — based phone and cable network businesses. However, back at the time, it was founded, there were already 200 domestic companies that were doing the same thing as Huawei did (Ahrens, 2013). Ren Zhengfei planned to improve domestic Chinese telecommunication technology to compete with foreign telecommunications companies, such as Ericsson and Nokia. Instead of cooperating with other foreign companies, Ren Zhengfei opted to reverse engineer foreign companies’ technology to learn how their technology worked (Hu, 2017).
Huawei understands that strong brands drive innovation, and this reflects in its worldwide operations (Martinroll, 2018). Huawei focuses on customer-centric innovation (Shao, 2012), and it is Huawei’s most significant differentiator (Martinroll, 2018). When the Beijing government adopted a policy of supporting domestic telecommunications (Ahrens, 2013), Huawei moved on from phone switches to sell infrastructure equipment for mobile networks, mobile services and enterprise services. The government loan also helped Huawei to land a network business in Africa and Latin America, and the experience from that helped Huawei with networking-equipment deals with major carriers in Europe (Cendrowski, 2017).
Chesbrough (2009) concluded that internal leaders have a role in business model change, especially in managing the result of business model change processes and delivering a new better business model for the company. Huawei has an innovative way of implementing this theory, as well. Huawei leadership strategy is the rotating CEO system, where a small group of executives takes turns to do the CEO duties (Martinroll, 2018). According to this article, Huawei believes a group of rotating and acting CEO are more effective because they have time to prepare for their next term as acting CEOs, they will also have a chance to share their breadth expertise.
By 2012, Huawei had become the largest the world’s largest telecommunications equipment maker. Gambardella & McGahan (2010) stated that when a firm implements an innovative approach to commercialising its underlying assets, business-model innovation happens. While doing their primary business (telecommunications equipment maker), Huawei also made “white label smartphones” where those smartphones branded with other companies’ brand. Huawei realised with their expertise in telecommunications equipment, Huawei has a unique position to cut costs of the smartphone’s spare part. For example, Huawei can create their integrated circuit chips (Hu, 2017). Other examples would be Huawei’s knowledge in cellular networks helped Huawei to produce modems that let Chinese users receive calls in basements and parking garages where most brands’ phones failed (Cendrowski, 2017).
Huawei did innovate not only their products but also their business model. Huawei started their business model from B2B (Business to Business) with selling telecommunication equipment to other telecommunication companies, now Huawei’s business model is expanding to B2C (Business to Consumers) as well by manufacturing smartphones to their customer.
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Reference:
Ahrens, N. (2013). China’s competitiveness: Myth, reality, and lessons for the United States and Japan, case study: Huawei. Center for Strategic & International Studies Report. Retrieved from https://csis-prod.s3.amazonaws.com/s3fs-public/legacy_files/files/publication/130215_competitiveness_Huawei_casestudy_Web.pdf
Cendrowski, S. (2017). Is the world big enough for Huawei?Retrieved from http://fortune.com/huawei-china-smartphone/
Chesbrough, H. (2009). Business model innovation: opportunities and barriers. Long Range Planning, 43(2–3), p. 354.
Gambardella, A., & McGahan, A., M. (2010). Business-model innovation: General purpose technologies and their Implications for industry structure. Long Range Planning, 43, pp. 262–271.
Hu, K. (2017). Good signals: Huawei pushes further forward. Retrieved from http://knowledge.ckgsb.edu.cn/2017/03/27/china-business-strategy/huawei-strategy-push-forward/
Martinroll. (2018). Huawei — transforming a Chinese technology business to a global brand. Retrieved from https://martinroll.com/resources/articles/strategy/huawei-transforming-chinese-technology-business-global-brand/
Shao, K. (2012). History is the key to understanding Huawei.Retrieved from https://theconversation.com/history-is-the-key-to-understanding-huawei-5994
