Huawei succeeded by a 44-year-old veteran into a competitor to Samsung Electronics.

 

Huawei, China's leading ICT company:

Communication equipment and solutions made by Huawei are used by one in three people around the world, and they form the third strongest smartphone market along with Apple and Samsung, and are called ‘China’s Samsung Electronics’.

 

Ren Zhengfei, founder of Huawei, founded the company in 1987 with 5 co-founders at the age of 44 with a capital of 21,000 yuan (about $300).

Unlike other Chinese telecom companies, Huawei was founded with pure private capital, and its sales share in China's domestic market and global market is balanced.

Founder Ren Zhengfei explains that Huawei is similar to a 'wolf pack' that senses a crisis with its extraordinary sense of smell and cooperates to survive.

This is because a pack of hungry wolves have been competing fiercely with the lions (foreign corporations and public corporations), who are the absolute powers, to hunt their prey.

A 44-year-old veteran challenges 'start-up':

Ren Zhengfei's father, a middle school teacher, was swept away by the Cultural Revolution promoted by Mao Zedong and was imprisoned for 10 years.

He served in the People's Liberation Army of China as an architectural soldier. There he made many achievements, but his father's influence prevented his career in the military from time to time.

[caption id="attachment_4430" align="alignleft" width="374"] Ren Zhengfei[/caption]

“It has become a daily routine to not receive an award even if you put up a ball. That experience created a character who does not pursue fame and profit.”
(Ren Zhengfei, founder of Huawei)

Afterwards, he retired from the military in 1984 because of the reform and opening atmosphere created by Deng Xiaoping. He have a desire to provide a good educational environment for children.

Ren Zhengfei was promoted to the vice president of the subsidiary of a large corporation he joined. He got fired after inflicting a loss of 2 million yuan to the company as he pushed ahead with the business.

Eventually, in 1987, he founded Huawei, which means ‘the Chinese nation has a future’.

At that time, Ren Zhengfei was 44 years old.

Early Huawei members, who were engineers, set up the company, but without a clear development strategy.

Huawei in business of telecommunication:

In the early days, he entered the trading business and sold various electronic products and even diet pills.

Afterwards, Huawei entered the telecommunication business by importing equipment from Hong Kong.

They heard that the government and public companies were buying a lot of small telephone switchboards.

And in 1992, after two years of research, we released the self-developed small exchanger ‘HJD48’.

Two years later, Huawei's total sales exceeded 100 million yuan, and a toast was heard.

“Huawei entered the telecom industry bare-handed. But It was only after it started that I realized that this market is a brutal battlefield where blood is dried every day due to technological competition.”

Initial problems of Huawei:

In the early 1990s Half of the co-founders left the company. The Chinese telecommunication equipment market was dominated by seven foreign companies, including Germany's Siemens, Japan's NEC, and Fujitsu.

Most Chinese companies were able to receive national protection through joint ventures between foreign companies and public companies.  And it became a rock-bottom for Huawei. A purely private company, to continue to compete in this market.

Ren Zhengfei believed that his efforts would have a chance of success. He met with fierce internal opposition and in the end half of the founders took the stake and left the company.

“I respect and understand their decisions. Propaganda was an era of extreme speculation and engineers (working silently) were called ‘idiots’.”

After that, a huge amount of money was invested in technology development. Next-generation products were not easily developed. This makes the existing market quickly saturated.

Eventually, cash flow problems arose, and Huawei was pushed to the brink of bankruptcy.

In order to overcome the crisis, he introduced the ‘employee-ownership system.’ In this system he sold shares of the company to employees, where everyone owns the company. It established joint ventures with 17 telegraph stations in China to obtain a loan of 30 million yuan. And go to the R&D department.

“If the project fails, you will jump out of the building. Do not plan to come back alive, study with the determination to die!”

With this opportunity, Huawei transforms into an employee holding company. Ren Zhengfei's stake was 1.4% as of the end of 2012. 74,000 employees were said to have a stake in the company.

Hungry Wolf, Huawei's Struggle:

After a lot of hard work, we developed a new electronic switchboard, but it was not easy to find a market with foreign companies already controlling it.

One time, at the Yichun Telegraph Station near the Russian border. Switchboard was tested by surviving the cold of minus 40 degrees Celsius for six months. In the end, it was rejected.

“It was said that the salespeople and chief researchers who risked their lives and rushed in wept on the spot. I think it was like the beginning of my misfortune that I entered this field without much thought at all."

Huawei gave up on conquering cities and imitated Mao Zedong's call to power in the countryside. Company achieved great success by attacking at the 'rural' that had not yet been taken over.

After that, Huawei started to attack big cities in earnest in 1998.

"Customer first" and "wolf culture":

Through rigorous sales classes, Huawei has cultivated its distinctive 'customer first' and 'wolf culture'.

“Our corporate culture is based on the three characteristics of a wolf: Firstly, a sensitive sense of smell. Secondly, indomitable fighting spirit and lastly, team play spirit.”

“Keeping promises to customers and ensuring quality is the lowest level of credit. Building a company that does not collapse is the best credit.”

“Our success is to protect the investment of customers who have purchased our products and to grow together with them!”

This hungry pack of wolves, ‘Huawei’, gradually eroded the market of foreign companies that were kings of the jungle.

R&D is 'half a step' ahead of competitors:

In 1998, Huawei's sales exceeded 8.9 billion yuan. Many Chinese IT companies invested in real estate and entered heterogeneous industries, but Ren Zhengfei had a different idea.

“We have nowhere to run. We will not enter the information service field like forever in order to become the world’s leading manufacturer of communication equipment.”

Huawei has always invested heavily in developing its own technology from the beginning.

“Technology should not be worshiped as religion. Technology has value only when sold for money."

“If Huawei had developed only the best technology in the world, we would have starved already!”

“In order to survive, you must be ahead of your competitors in technology. But The key is to be like exactly 'half a step' ahead of your competitors, You must not be three steps ahead.”

Meet the best teacher, IBM:

Ren Zhengfei, visited the United States at the end of 1997. He was very surprised that IBM overcame the worst crisis and reached a whopping $75 billion in asset value. It also decided as a 'teacher' to learn.

IBM, bruised by organizational hypertrophy and bureaucracy. It suffered a loss of $16 billion in 1993 and because of this huge loss it went on the verge of bankruptcy.

Ren Zhengfei felt that this was something that Huawei had to learn.

But still, Huawei pays 2 billion yuan over his five years to IBM. IBM got selected as a consultant and begins severe restructuring.

IBM pointed out that the technology development was merely a “mass production type.” It wasn't something Huawei were really proud of “market-leading type”.

IBM's management does not meet Huawei's expectation?:

Tough management classes were conducted on 10 items. However, at that time, Huawei was growing rapidly for the third year in a row. Most of the employees were in a state of intoxication with a sense of victory.

“IBM-style management does not match Chinese companies!

However, Ren Zhengfei fully trusts IBM's consulting and pushes forward.

“We were lucky to have the best teacher. You chose IBM and you must learn from them. If you have more than $90 billion in sales, I will learn from you.”

“I can’t see a person who is proud of himself without this ability!!”

In the process, it is said that he suffered from severe growing pains. such as delays in R&D and the exit of excellent talent.

Eventually, a new system was established in various fields such as global sales, human resources, accounting, and R&D. Just like that, Huawei was able to become a global company capable of doing business around the world.

Even the founding members should leave if there is no progress!:

Since its establishment, Huawei has continued to expand its efforts to survive. If it is a R&D competition with global companies, market dominance battles with public companies, and global expansion.

And this process has always been a series of crises.

“The biggest crisis is not knowing where the crisis is. Not feeling a crisis at all is a big crisis. But If we know what a crisis is, we have a chance.”

In 1996, after all the management positions resigned in the marketing department. Huawei decided to re-appoint them after internal competition

In the process, key figures such as founding members often left the company with their backs.

“When any organization stops its metabolism, life stops. To protect the honor of founding members is to forsake the future.”

“Huawei would not have taken root, no matter how advanced a management system would be introduced. Without the collective resignation of the marketing department."

Venture Bubble Collapse, Overcoming the Worst Crisis:

Huawei, which had been on the verge of success, faced its greatest crisis as the venture bubble burst in the early 2000s.

Before the venture bubble burst, Huawei made huge investments in 3G and GSM-based mobile communication technologies. But Still at the time, all of those investments went in vain.

China Telecom, the largest mobile operator in China, preferred CDMA rather than GSM. But instead of 3G, low-cost short-distance wireless like communication called "XiaoLingtong" has begun to spread widely in China.

Firstly, global companies suffering from the venture bubble jumped into the Chinese market, risking their lives for it.

Secondly, some employees handed over confidential data such as source programs and blueprints to competitors to fight counterfeiting.

To make matters worse, Ren Zhengfei's mother passed away in a car accident in January 2001. Chronic diseases diabetes and blood pressure got worst, and so she got very exhausted mentally and physically.

Huawei a competitor to SAMSUNG electronics:

 

At this time he was 57 years old. Ren Zhengfei struggled to survive.

Huawei Electric sold its net subsidiary. A foreign company bought it for $750 million but once again Huawei sold the company's stake to its employees.

In addition, the employees endured the harsh winter by voluntarily cutting their salaries.

As the cold season passed, the 3G market that we had previously invested in opened up and we were able to see the fruits of our investment.

Through this harsh process, Huawei has grown stronger as Samsung and Apple have to be vigilant in the smartphone market. Like In the telecommunication equipment field, it has grown into the world's most cost-competitive and technologically advanced company.

After that, there are many things to explain, such as the first rank, who was driven as an industrial spy, and the circular CEO system, but we will deal with the work after 2000.