A 70-year-old business thinker, more than 10 strategic entrepreneurs in their early 40s, thousands of middle- and high-level managers in their 30s and 40s, led by more than 100,000 20-30-year-old middle- and high-level young intellectuals The knowledge-based labor force walks alone in every corner of the world on five continents. Huawei, a global communications equipment manufacturer known as the "wolf culture," its success is no accident.
In the mid-to-late 1980s, when Huawei started its business, more than 400 communication manufacturing companies were born in China, but this industry is destined to be a deathmatch. The winner must be the one who died the most. Huawei has come to the end. Why can Huawei laugh at the end?
This is indeed a "weird" business. A few years ago, when Huawei first entered the world's top 500, a senior executive of the company walked into the conference room early in the morning. He said that telling everyone a bad news, the company entered the world's top 500. No one has a feeling of joy, and no one is proposing a celebration.
The Eastern Ghost's "Shangganling"
In 2012, Huawei's annual sales reached an astonishing 220.2 billion yuan - beyond Ericsson to become the world's largest telecommunications equipment supplier.
In the same year, Huawei announced a profit of over 15.4 billion yuan (this does not include the $12.5 billion red envelope used to award bonuses to employees). Also in this year, Huawei's research and development costs reached 29.9 billion yuan, equivalent to the annual output value of many top Chinese companies. - This is one of the best quality private enterprises in China.
From the data alone, Huawei has grown from 6 employees to 150,000 employees (including more than 30,000 foreign employees) since its founding 25 years ago, starting from 20,000 yuan in business and generating sales of 220.2 billion yuan. Private enterprises with no resources and lack of capital, Huawei has fallen into the hundreds of giants in the West. It is regarded by many multinational opponents as "the eastern ghost."
In fact, in the mid-to-late 1980s, when Huawei started its business, more than 400 communication manufacturing companies were born in China, but this industry is destined to be a deathmatch. The winner must be the one who died the most. Huawei has come to the end.
Why can Huawei live to the end? Background theory, relationship theory, etc. are coming out, is this the case? Otherwise why is Huawei not listed, why not accept interviews?
—— Ren Zhengfei graduated from Chongqing Institute of Civil Engineering and Architecture in 1968 and later joined the army. When he was 45 years old, he was still a layman in the communications industry. After 25 years, he led a 150,000 company with 1.42% equity, breaking the most cruel law of the global information technology industry. Huawei has a doorway.
In a sense, Huawei is the testing ground for Ren Zhengfei's management thinking. Ren Zhengfei, a soldier from the military, likes to talk about the Battle of Shangganling: the US military used computer simulations in the past and thought that it could take the position in one day, but the results later made the US military stunned.
The reason is that the computer can only simulate conventional things. It is impossible to simulate that someone will block the machine gun eyes. Some people will not move on fire. This is the power of the spirit. Ren Zhengfei believes that the core value of a company is “Shangganlingâ€. “Shangganling†may not directly produce “foodâ€, but once the company loses “Shangganlingâ€, it will never produce “foodâ€.
Huawei's logic
To learn Huawei, but Huawei cannot be copied because "current sex" cannot be copied. However, learning Huawei will undoubtedly benefit people. Its successful systemic logic, groundbreaking thinking and accurate grasp of the market deserve to be deeply studied and experienced.
Perspective 1: Unbeatable Low Cost Advantages - Comparison of Advantages and Disadvantages of Huawei and Domestic and Foreign Competitors
This is an era of rapid development of technology, in which the electronic information (market zone) industry is a highly profitable industry with highly knowledge-intensive and fast-renewing speed. Before the 1990s, the installation of telephones must first pay 5,000 to 6,000 yuan to the post and telecommunications bureau, and the post and telecommunications bureau will purchase switches from the switch manufacturers at the price of 2,000 yuan per telephone (the telephone relay hub equipment used in the equipment room of the telecommunications bureau, one equipment) It can access hundreds or even tens of thousands of lines of telephones, and the cost of the switch is only 300~400 yuan/line (the first line is a telephone). The profit of equipment manufacturers is extremely impressive. This is the profit logic of Huawei at the beginning of its business.
In 1988, Huawei started the program-controlled switch of Hong Kong Hongnian Company. In 1992, its sales revenue exceeded 100 million yuan. Twenty years later, Huawei's sales revenue increased more than 2,000 times to reach 220.2 billion yuan, becoming one of the world's largest manufacturers of communication equipment, with 150,000 employees and 46% of research and development personnel. There are 23 research institutes and 34 innovation centers around the world. It is also the only unlisted Fortune 500 company in the world.
Huawei's growth has plunged, but domestic and foreign rivals have fallen. why?
To analyze Huawei's growth logic, we must first look at its competitors.
Domestic and foreign competitors In the 1990s, Huawei faced international competitors such as Ericsson, Alcatel, Siemens, Fujitsu, Lucent, and Nortel in the international market, all of which are strong in technology and abundant in capital. The domestic competitors are Dragon, Datang and Zhongxing, and Huawei is also called “Great Chinaâ€, but only Huawei is a purely private enterprise, and the competitive advantage brought by the system is high.
The former two are state-owned enterprises with the background of state-owned research institutes. Although they were very popular in the early 1990s, the outcome of business failure in fierce competition can be imagined. ZTE is a mixed-ownership enterprise formed by state-owned enterprises and private enterprises. It is a state-owned private enterprise. In 2012, its overseas and domestic revenues totaled 84.2 billion yuan.
Domestic competitors are hard to compete with Huawei, and only international competitors pose a threat to Huawei. Compared with the two, Huawei has a huge advantage, that is, cost advantage, and relatively hidden latecomer advantage.
Huawei's low-cost research and development advantages Huawei's main competitive advantage is the very low R&D expenses - low-cost intellectual human resources. An internal report from the Siemens Board of Directors in 2004 concluded that Huawei's low-cost advantage is mainly due to low R&D costs.
According to this material (market area), the per capita cost of Huawei R&D personnel is 25,000 US dollars per year, while the per capita cost of R&D personnel in European companies is 120,000 to 150,000 US dollars per year, which is 6 times that of Huawei; the average annual value of Huawei R&D personnel Working hours are about 2,750 hours, while the average annual working time of European R&D personnel is 1300~1400 hours (35 hours per week, but there are many holidays), and the ratio of per capita work time is 2:1.
According to 2004 data, Huawei has 13,000 software and hardware developers. If the cost of hiring 13,000 European R&D personnel is invested in Huawei, Huawei can employ 78,000.
If the efficiency of Huawei's R&D personnel is only 80% of that of European R&D personnel, and considering the investment time of Huawei employees, it can be calculated that under the same expenses, Huawei has the equivalent of 125,000 in 2004 (78000 & TImes; 0.8 & TImes 2) The research and development capabilities of R&D personnel of similar companies in the West, and the R&D input-output ratio is 10 times that of most Western companies!
In other words, if Huawei invests 1 yuan to develop something, European companies need to invest 10 yuan to make it.
This is what Huawei has at the outset, and it has the core advantage of continuing to this day.
A small case is based on the same technology, and cheap is the king. The first article in Huawei's customer strategy is: "Do not sell the most expensive, only sell the best; not only low prices, more quality." Huawei in the product technology research and development in the blood of local investment, but the product price is not expensive, only maintain A reasonable profit margin. So, to what extent does Huawei's cost leadership strategy lead?
The low-cost strategy that Huawei has been adopting, the classic case comes from the 2008 CDMA tender of China Telecom.
In August 2008, China Telecom's nearly 30 billion CDMA big orders triggered a new round of bidding competition for equipment manufacturers. Alang (France's Alcatel, the United States, two international giants had to merge under the impact of Huawei's globalization), Canada's Nortel and domestic ZTE's offer between 7 billion and 14 billion yuan, Huawei reported The ultra-low price that makes everyone stunned, 700 million yuan! This price is called "streaking" by the industry. However, even with such low prices, Huawei's profits are still considerable.
No one doubts Huawei's investment and strength in R&D, cost and overall solutions. This shows that the overall return rate of the telecom equipment industry is high, and Huawei's cost leadership strategy is strong.
Someone once asked why Huawei succeeded? The two executives who have worked at Huawei for 9 years have made a very interesting statement. One said: "Because we have a fertile field." The other person vividly described: "The electronic communication industry is a deep water, only deep water. Raising big fish.†Fertigation means high profits, and deep water means huge market space.
Other cost advantages Another major cost advantage of Huawei is reflected in raw materials. In the 1990s, Huawei's long-term good cooperation with upstream raw material suppliers and domestic resource prices were generally lower than the international average, making Huawei's cost of raw materials relatively low. Under the economies of scale formed by Huawei's annual sales of tens of millions of devices, Huawei's material cost has dropped to 3%, and its advantages are obvious.
Furthermore, at that time, Huawei's domestic transaction/delivery costs were relatively low, and the quality cost was very low compared with foreign countries. The efficiency was not the most sensitive factor, and many could be compensated by interpersonal factors. Moreover, China has not been systematic. The intellectual property business rules, which become the lowest cost of domestic "transactions", in addition, the low cost of domestic services has also become an advantage.
Through analysis and comparison, we can see that Huawei has a series of innate low cost advantages in this industry. Under these preconditions, what kind of business strategy does Ren Zhengfei need to adopt in order to achieve today's success?
There is a small story that can become an alternative annotation for Huawei. At the beginning of 1993, in a small auditorium in Shekou, Shenzhen, Huawei held the 1992 year-end summary meeting. At that time, 270 employees, the first time witnessed the true feelings of Ren Zhengfei's heavy face and vicissitudes. After the meeting began, I saw Ren Zhengfei saying "We are alive" on the stage, and then we can't say anything without tears, and our hands are constantly smearing with tears...
- This is a mirror. From this, you can see the hardships and humiliations that Ren Zhengfei experienced in the early stage of his business. He can also see how firm his heart is when he adopts a win-win market strategy and a shareholding. I would rather share the interests of all people, preferring to own only 1.42% of the shares, but also let the partners, let the employees and themselves work hard to make the company bigger.
Capital and Market Test At this time, Huawei has already had a prominent cost advantage, but it also needs market size.
Without strong financial strength, the cost advantage is obvious, and it is difficult to make a big market. Then the cost advantage under economies of scale will not be reflected. Huawei has no advantage. The key is capital, but in 1992, Huawei’s sales revenue was only 100 million yuan, which is far from enough to make a market. What's more, R&D is also a long process that requires a lot of money to recruit a large number of technicians and continuously invest a lot of money... At this time, Huawei's funds are extremely tight, facing the test of life and death.
Where is the money?
In the early 1990s, foreign competitors entered the Chinese market through technology transfer, postal systems, and even joint ventures with local governments. Ren Zhengfei thinks that since foreign capital can do this and own core technology, why not? Huawei quickly learned this and done it more thoroughly. Huawei is not only a joint venture with a local postal and telecommunications system, but a joint venture with the nation's postal and telecommunications system to absorb shares.
What's more, Huawei does not absorb pure funds that only provide financial support and no business contacts. Instead, it focuses on the target of venture capital in the customer base that has both existing markets and funds. That is, the postal and telecommunications system funded a partnership with Huawei to form a new company, and Huawei invested and led the operation. This is the joint venture established by Guangdong Province and Shenzhen City in 1993, Huawei and the 21 provincial capital city postal and telecommunications systems jointly established the Mobeck Company with a registered capital of 88.81 million yuan. Huawei's annual dividends for postal and telecommunications shareholders are up to 30%.
For the post and telecommunications system, this is to use their own funds to market on their own sites. Make yourself profitable and naturally go all out.
In this way, Huawei and the telecom bureau customers have formed a close alliance of funds and market, just like the two sides of the coin, while gaining funds on the other side to obtain the market. The funds were solved, the market opened, and Huawei made a big turn and passed the life and death.
A stone number of birds Huawei's switch through the Mobeck channel quickly and low-cost impact on the national market, by 1995, forced the switch industry sales price from 200 to 300 US dollars / line down to 80 US dollars / line, postal system is also because of the industry-wide switch purchase price The rapid reduction of telecom services to the country has been achieved. In the end, the whole society, consumers, post and telecommunications systems and Huawei's win-win situation were realized.
The “interests and interests†model was immediate, and Huawei’s revenue increased from 100 million yuan in 1992 to 2.6 billion yuan in 1996. This year, Mobeck completed its mission to independently sell Huawei power products, and later changed to Shenzhen Ansheng Electric Co., Ltd., in 2001, with a price-to-earnings ratio of 30 times, the calculation price of 6 billion yuan was sold to Emerson, "far beyond The financing amount of countless listed companies", Huawei once again has a large amount of funds. The shareholders of the year also received a high return on investment.
At this point we can see that Huawei's market logic is actually very clear, that is to create a "community of interest", and everyone has money to earn. Ren Zhengfei said: "Modern enterprise competition is not a competition between individual enterprises, but a competition in the supply chain. The supply chain of an enterprise is an ecological chain. The fate of customers, partners, suppliers and manufacturers is on a ship. Only strengthen cooperation. Focusing on the interests of customers and partners, and pursuing a win-win situation, enterprises can live long." The idea of ​​"interest community" is directly more direct in the shareholding of all employees.
In 1994, Huawei once again established 27 joint ventures with the provincial post and telecommunications bureaus to further open up market channels and obtained a total of 540 million yuan of “risk investmentâ€, once again entering the blood for Huawei's rapid expansion and large-scale research and development.
The establishment of such a series of companies twice can be described as a number of birds. Both the funds have been obtained, the sales of Huawei have been promoted, and the long-term customer relationship has been dredged. What is more obvious is that all the communication manufacturing companies have a headache and the cash flow problem has been solved. Shareholders’ customer collections are a brilliant idea. Moreover, this bundle of interests may also have a subtle role in the corporate crisis. It may be a suspicion of related party transactions. These joint venture companies have left the company to become Huawei's branches after 2000. What is important is that they have fulfilled their historical mission to help Huawei overcome key competitors during critical times.
"We have the interests and the community and the interest-driven mechanism, we can activate this organization." Ren Zhengfei said.
This kind of stakeholder in the value chain of customers, suppliers, partners, competitors, etc., "pull down the water" and form a "win-win ecosystem" thinking of "you have me, I have you", and finally make Huawei's market is rapidly expanding on a large scale, and its low-cost advantage has finally erupted on a large scale. In the early years, it maintained a growth rate of around 100%. In 2003, the sales revenue was 31.7 billion yuan, and the gross profit margin reached an astonishing 53%. In this year, Haier, Lenovo and TCL ranked among the top three in China's electronic information companies, but the total profits of these three companies were only equal to Huawei's.
The logic of decaying into magic can be inferred. When Huawei lacks money, Ren Zhengfei will not first think of looking for a bank (market area). His first thought is how to turn this demand into a cooperation with stakeholders. Win the opportunity. If you are looking for a bank loan, you need Huawei to bear the risk of market and repayment, and the partners have no incentive to use more enthusiasm to make the market to increase the value chain. Therefore, the risk that the lonely Huawei bears is huge. It is also not conducive to the market to grow bigger.
Ren Zhengfei’s actual practice is to find a joint venture company to establish a joint venture company, on the one hand to achieve financing, on the other hand, to share the risk of Huawei financing to the entire value chain, and another, “profits and interests†will strongly stimulate partners to struggle, so that the value chain The added value will not only eliminate the financing risks distributed throughout the value chain, but Huawei can also easily expand the market and further strengthen customer relationships. The benefits of financing a bank are completely incompatible with this approach. It is already brilliant enough to dissolve difficulties and risks into intangibles, and Ren Zhengfei is more brilliant in that he has turned difficulties and risks into "golden bulls".
This is the logic of Ren Zhengfei.
Perspective 3: High Profit is a Pass: Encourage Extremely - How Huawei Manages and Inspires People's Ability
High profits have brought a new business thinking to Huawei. At this time, Ren Zhengfei, who holds a lot of cash, began a deeper level of business strategy: to make all the advantages of the company brought by high profits, in order to stimulate all the passion of employees, to achieve acceleration and "snowball" Larger development -
1 Implement high salaries for all employees and stimulate the potential of employees;
2 Implementing full-shareholding, forming a “community of all employees†within the enterprise;
3 large-scale investment in research and development, maintaining more than 10% of revenue every year, even more than this number;
4 Recruit a large number of high-level R & D personnel, and fully promote independent research and development;
5 A large number of front-line personnel in the recruitment market have made a comprehensive attack on the global market.
It should be emphasized that the reason why Ren Zhengfei's practices are so open and offensive is completely based on the huge space of the electronic communication market (in 2009, the national fixed-line telephone reached 310 million, and in 2013, the mobile phone household reached 1.146 billion). The characteristics of high-speed product replacement and high profit. In Ren Zhengfei's view, the electronic communication industry is completely a market that runs all the way. Every enterprise in the industry has the potential to become a giant, depending on whether you have enough bold measures and determination to play.
In fact, Huawei has been implementing a high-paying system for all employees from the very beginning, but Huawei is now more daring to do so. At the beginning of 1993, Liu Ping, a software engineer who entered Huawei, was a teacher at Shanghai Jiaotong University. The salary of the school was more than 400 yuan a month. This is the treatment of graduate students who have worked for eight years. After coming to Huawei, the salary in February of that year was 1,500 yuan, which was higher than the salary of the principal of Shanghai Jiaotong University at that time. And he only took one day in February, and he got a half-month salary! This made Liu Ping feel very surprised and deeply touched. In the second month, it rose to 2,600 yuan. After that, Liu Ping was excited that his monthly salary would rise. At the end of 1993, his salary had risen to 6,000 yuan. This year his annual salary was 48,000 yuan (compared to the purchasing power of 2009 is roughly equal to the annual salary of 480,000 yuan). Huawei did this because Ren Zhengfei believes that enterprises can buy components at high prices, buy machines at high prices, and buy talents at high salaries.
Later, in the "Huawei Basic Law", there was a saying "Huawei Company guarantees that during the economic boom period and the stage of good career development, the per capita income of employees is higher than the corresponding highest level in the regional industry."
Another person calculated that in 2007, the average annual salary of Huawei's grassroots employees was 160,000 yuan, the average annual salary of ordinary managers was 500,000 yuan, and the company-level executives were tens of millions of yuan, far higher than the annual salary of other domestic enterprises. Level.
In the early days of the founding of the whole staff, it was difficult to finance as a private enterprise. In order to attract talents, Ren Zhengfei diluted his shares in large quantities, which is the full shareholding of Huawei.
According to Huawei's internal stock system and operation, if a developer with development potential enters Huawei in 1997, he will receive a year-end bonus of 40,000 yuan in 1997 and will receive 80,000 yuan in stock; in 1999, 80,000 yuan. Yuan stock dividends 60%, while the 1998 bonus of 80,000 yuan, but will be divided into stocks 180,000 yuan. At this time, he had 260,000 yuan of Huawei stocks after three years of work at Huawei. Of course, these stocks need to be bought in cash, and they are cashed in a certain proportion when they leave the company. Moreover, the internal stocks that the company assigns to talents can't be bought. If you don't buy it, it means that it is not a heart with the company, which will affect the next promotion and salary increase.
The dividend ratio of Huawei's internal stocks was 100% in 1992-1996, 70% in 1997, and then decreased to 20% in 2002. A bonus was issued once a year, and the bonus automatically rolled into the principal. In the past, Huawei had the “1 1 1†saying that the income of employees, wages, bonuses, and stock dividends was equivalent.
Once Huawei stops growing or closes, employees will suffer heavy losses, so Huawei can be one-minded and vigorous, and the company's execution is particularly strong. Because employees are working for themselves. At the same time, many employees who have tasted a high dividend ratio have tried to earn more stocks every year. The only way is to create more value for the company.
Ren Zhengfei owns only 1.42% of Huawei's shares, and the rest are owned by senior executives and employees. At present, 70,000 of Huawei's 150,000 employees own Huawei's stock. Due to high salary and shareholding, giving employees high treatment, in the core values ​​of Huawei, this is "struggling."
Why is Huawei not listed? Huawei does not go public, and can be explained here. First, the equity is too scattered. According to relevant regulations, the number of shareholders of non-listed companies must not exceed 200, while the number of shareholders of Huawei exceeds 70,000. Second, the proportion of Ren Zhengfei's shares is too small. After listing, it will certainly lose control of the company, and Huawei will leave. Third, if Huawei goes public, it will generate tens of thousands of million or billionaires. Can the eagle tied to gold fly in the sky? The listing of wealth and Huawei's "long-term persistence in hard work" core values ​​are completely contrary. Why did the famous international telecommunications giant Nortel Canada decline so fast? It is because a large group of billionaires who have hundreds of millions of dollars discuss the survival of the company, there is no sense of urgency. Therefore, Nortel missed many opportunities for self-rescue transformation. Fourth, shareholders’ short-term financial indicators for listed companies’ quarterly reports are inconsistent with Huawei’s “planning for the future in 10 years†market model (this is Huawei’s victory over many international giants). The important reason); Fifth, the most important thing for Huawei is money. Even if Huawei lacks money, it will throw this opportunity to partners in the value chain.
Perspective 4: High profit is a bargain: competition is the bottom – Huawei's competition rules based on cost and customer relationship
All of Huawei's business practices are centered around "high profits." How big is its profit? This is almost a trace. We only see that it always delivers incredible low prices – directly challenging industry game rules. It also directly according to its own gameplay, and the two old business competition modes that were given new ideas by Huawei were sunk, sinking to the end, sinking to the point where they could no longer sink, and then sitting in prison, then defeating the opponents. Make money.
Two old business models that have been completely innovative by Huawei, one is ultra-low-cost, and the other is the “no tie relationship†under the core value of “customer-centricâ€.
The long-term pricing rule is exactly the same as that of Galanz's microwave oven in the past, and it has created a high threshold for ultra-low price. Before the rise of Huawei and ZTE, the telecommunications industry was a technology-driven industry. Enterprises invested heavily in research and development of new products, then set high prices, earn high profits, recover research and development costs, and then invest in new products. When products are mass-produced and followers After a large amount of entry, the price cut began, and the product life cycle quickly entered the final stage, and then began to promote new products to the market, earning high profits... and recurring, forming a virtuous circle. Huawei compared this business model to Wang Xiaoer selling tofu. Wang Xiaoer opened a tofu shop and sold two yuan a pound. Some people saw profitable and opened a second bean curd shop. Wang Xiaoer began to cut prices to five, three and four... the tofu shop opened more and more More, the price dropped to 8 Mao, Wang Xiaoji tofu shop closed down.
Huawei does not do Wang Xiaoer, it has pushed international competitors to the position of Wang Xiaoer.
After the global IT bubble burst in 2000, Huawei was keenly aware that the telecommunications industry has shifted from technology-driven to customer demand-driven, because the development of technology far exceeds the current customer demand, and new technologies are increasingly difficult to prove by the market.
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