How does Huawei Group make money?

Why can Huawei make money?

At the end of 1996, Huawei published a discussion draft of the "Huawei Basic Law" in its own "Huawei People Daily". This was the first time a Chinese company formulated a systematic regulation for internal management of the company. It clearly stipulates the purpose of the enterprise, basic operating policies, basic organizational policies, basic personnel policies and basic control policies. In particular, it writes the company's successful practice in the value distribution system into the Basic Law. The promulgation of the "Huawei Basic Law" marks that Chinese enterprises have begun to consciously form a management system to become a world-class advanced enterprise, and have begun to explore the road to becoming a world-class leading enterprise. This article considers Huawei's successful practice and some important issues in my country's corporate management from three aspects: strategy, mechanism and culture.

1. Focus on breakthroughs and system leadership - Thoughts on Huawei's business strategy

In the early 1990s, in order to join the General Agreement on Tariffs and Trade, the world promised to open up the communications product market. As a result, communications giants from all over the world have poured into the Chinese market. The supply far exceeds the demand, and the competition is more intense than any other country in the world. China's national communications companies have been severely squeezed, and many have collapsed, but some have stood out, and Huawei is one of the best.

One of the secrets of Huawei's growth in fierce competition is the unique strategy it implemented back then (now Huawei emphasizes the "pipeline strategy", and its strategic thinking is also the same).

Huawei's strategy is to concentrate all the company's resources, focus on breakthroughs, take the lead in the system, change the passive situation of competing in the low-level market, and develop related products on the basis of leading core technologies. The company only selects projects with maximum sharing of resources. Product or business diversification is closely centered around the sharing of resources. It does not engage in other attractive projects to avoid dispersing limited power and funds.

Huawei's business model is to gain technological leadership through high investment in research and development, form a virtuous cycle of positive feedback in the shortest possible time through large-scale sweeping marketing, and get rid of low-level market prices. Competition, taking advantage of the high added value of products brought by technological advantages, promotes the company's rapid and efficient growth.

Huawei calls this strategy the "principle of pressure." This is actually the only correct strategy for Chinese companies to use small to defeat big, weak to defeat strong when faced with competition from multinational companies. Thinking of the examples of some high-tech companies that, after achieving some initial success, were unable to resist the temptation of the real estate and stock markets, were eager for quick success and did whatever they wanted to make money, and ended up being short-lived, one cannot help but admire Huawei's determination and courage.

Huawei's policy clearly stipulates that research and development expenses account for 10% of sales. However, the policies implemented by most Chinese companies are to invest heavily in fixed assets and production facilities and limit research and development expenses and depreciation expenses. extraction ratio. As a result, the enterprise has only a small scale and lacks stamina; in terms of resource allocation, it is large in the middle (large production system) and small in the two ends (small research and development and marketing), resulting in a heavy burden on the enterprise and a slow response. Huawei's resource allocation structure is exactly the opposite. The company's research and development personnel account for 40% of its employees, marketing personnel account for 35%, production personnel account for only 15%, and the rest are administrative personnel. Such a resource allocation structure not only reflects the requirements of the company's strategy, but also enables the company to have high flexibility and adaptability.

Ren Zhengfei said that we squeeze out all the time for life and entertainment and catch up day and night to shorten the gap between us and large foreign companies. We will not split our time or eat away at others. Instead, some of the allocated bonuses, wages and stock capital will be transferred to corporate investment. In the same way, if state-owned large and medium-sized enterprises want to be revitalized, they must first pool their available financial, material and human resources to make breakthroughs in research and development.

2. To each according to his ability, each to his due - Thoughts on Huawei's value distribution system

The business operating mechanism is, in the final analysis, a profit mechanism. Among the various profit mechanisms of an enterprise, the distribution of residual value is the most fundamental.

Therefore, Huawei has extensively absorbed the essence of the corporate culture of developed countries such as the United States in its corporate culture, making it eclectic and unique.

Huawei's corporate culture is embodied in the company's core values. Four principles are put forward in the "Huawei Company Basic Law":

Put people first, regard talents as the company's most valuable asset, respect individuality, and work together as a team.

Independently and creatively develop the world's leading core technology system on the basis of open cooperation, advocating innovation and entrepreneurial spirit.

Love the motherland, love the people, love the company, love yourself and your family, and never let Lei Feng and Jiao Yulu suffer.

Form a community of interests among customers, employees and partners.

It can be seen that Huawei's corporate culture is a culture that contains lofty pursuits. It is a culture that is practical and tangible. This is where Huawei's culture is truly powerful. Why Huawei dares to choose the big market and shoulder the historical mission of revitalizing the national industry in the communications field is because its culture has this pursuit, this value, and the national spirit and patriotism in it. Therefore, corporate culture is by no means a slogan or form, nor should it become just a slogan or form.

So how does culture work in an enterprise? Culture actually has a deeper level, which is its system of assumptions. What really matters in culture is its system of assumptions, which is the system of assumptions underlying values. For example, Huawei has clearly announced that it will implement a free employment system, but this does not mean that you cannot serve Huawei for life. The implicit assumption is that slackers and incompetents will not be able to stay in the company. For another example, Huawei follows the decision-making principle of "following the wise rather than following the herd", which implicitly assumes that the truth is often in the hands of a few people. Therefore, the company's decision-making principle cannot be that the minority obeys the majority. Subordination by the minority will suppress and obliterate the truth. This is actually the cultural system at work.

In the core values, it is stated that Lei Feng and Jiao Yulu will never suffer. This is actually a correction of a distorted assumption currently popular in society. Of course, its purpose is not to challenge the assumption system of our society. . Heroes such as Lei Feng, Jiao Yulu, and Kong Fansen have emerged in our society. But these heroes are a very small number of people after all. Their real assumption system is that Lei Feng and Jiao Yulu suffered a loss. When this hypothetical system is at work, the emergence of Lei Feng and Jiao Yulu becomes an individual phenomenon. Even if they emerge, people will treat them coldly and even suspect that they have other motives for their appearance.

So how does the hypothetical system affect corporate employees? How to cultivate a corporate culture that is conducive to the competitiveness and development of high-tech enterprises? Huawei's successful practice shows that the construction of corporate culture is actually the construction of corporate systems. What kind of corporate system, including corporate leadership system, labor and personnel system, assessment system, distribution system, and various management systems, will What kind of corporate culture is there? Therefore, to understand the culture of a company, we do not look at the slogan of the company, but at its institutional system and the assumption system based on the institutional system. On the other hand, what kind of culture will be established and what kind of corporate system will be established and maintained. This helps explain why the reform of state-owned enterprises has been difficult. The root cause is that our society's culture and value system play a hindering role in some aspects.

Picture: Ren Zhengfei was on a business trip on April 25, 2012. He had no bodyguards or entourage. He held the suitcase with his left hand and took the bus with the shuttle bus ring in his right hand (photographed on the Capital Airport shuttle bus by "Rourou Rushi") . The photographer had an exchange with Mr. Ren: Why don’t you open Weibo? Answer: Technical people don’t know how to do these things. Why not start a fund? Answer: He will do real things and will not lie.

Huawei has a deep understanding of the role of culture from its own successful practices. They pay more attention to the management culture that determines the rise and fall of an enterprise. So in this sense, the most important thing for a business leader is to create and manage culture, and the most important talent of a leader is the ability to influence culture.

People are driven by motives. If they are driven entirely by the motive of profit, it will draw people's attention to trivial matters, and there will be no unity, cooperation, and pursuit between them. The role of culture is to enable people to transcend basic physiological needs and pursue higher-level needs and self-realization needs on the basis of material civilization and material interests, thereby fully mobilizing their potential. In the process of this pursuit, he cooperates with others, wins the respect of others, and wins the recognition of others. These needs form the basis for the operation of the entire team. Therefore, we say that Huawei's culture plays a very critical, invisible but tangible role in corporate management. Therefore, as soon as you arrive at this company, you will have many unique feelings.

Huawei is a high-tech company. Its nature determines that it must innovate not only in technology, but also in management and corporate systems.