A New Year’s Message for 2018 Ken Hu, Rotating CEO

At Thirty, We Stand: Building a Fully Connected, Intelligent World

A New Year’s Message for 2018
Ken Hu, Rotating CEO

Warm winds from the east are a welcome call,
stirring saplings and seedlings from their Winter’s shawl.

In 2017, we have seen a steady recovery in the global economy, and despite deep structural changes, the ICT industry continues to plow firmly ahead. As always, we remain focused on our pipe strategy and creating value for customers, with a special emphasis on improving operations this year. Our sales revenue is expected to reach 600 billion yuan in 2017, up 15% year-on-year. On behalf of the company’s management team, I would like to thank each and every one of our employees for your hard work and dedication1.

In 2017, despite fluctuations in telco investment cycles, our carrier business has remained healthy and robust. As markets waver, we are more committed than ever to exploring better solutions with our customers as they shift away from network construction models that are investment-driven, to models driven by value.

While addressing the practical challenges that carriers face today, we are also helping them prime their businesses for growth in the future. Right now, with innovative solutions for quality home broadband, scenario-specific wireless sites, and mobile money, we are helping carriers tap into the potential of existing network assets worth trillions of dollars. In the meantime, we are speeding up pre-commercial testing for 5G, and building all-cloud networks and digital O&M systems with data centers at their core. The goal is to help carriers deliver a superior experience in video, IoT, and cloud communications for all of their subscribers: individuals, households, and enterprises alike. This is the foundation of new growth in the telecoms industry.

In our enterprise business, we are resolutely accelerating the digital transformation of companies and organizations around the globe. We continue to enhance our products and solutions – specifically in cloud, campus networks, data centers, and IoT – which have all seen wide application in smart city and safe city projects, as well as in the finance, energy, transportation, and manufacturing sectors.

With full-stack solutions across device, pipe, and cloud, we help our enterprise customers produce more holistic top-level designs of their ICT infrastructure. In addition to providing platforms, we also stress the importance of ecosystem support. We are actively working with partners to flesh out the ecosystem based on our customers’ digital transformation needs. At present, 197 companies in the Fortune Global 500 – 45 of which are in the Fortune 100 – have chosen Huawei as their digital transformation partner. Our enterprise business is brimming with potential, and will soon burst forth with tremendous vitality.

Our consumer business continues to make breakthroughs on its path to building a world-class smart device brand. In 2017, our Huawei and Honor brands both saw a persistent rise in consumer loyalty, leading to rapid growth in the market. This year, Huawei shipped a total of 153 million units (including Honor phones), securing more than 10% of the global market share. We are firmly situated among the top three phone makers in the world and remain the market leader in China.

This year we released the Mate 10 – the first smartphone with an embedded AI chipset. With this groundbreaking device, we have unleashed the power of artificial intelligence to bring our consumers a smartphone that’s truly smart. Moving forward, we will work to better understand consumer needs and continue to explore where the intelligent world is taking our industry. We will drive further innovation in domains like AI and AR to guide development trends.

This year we also formed a Cloud Business Unit. Together with partners, the new Cloud BU provides our customers with stable, reliable, safe, and trustworthy cloud services that evolve alongside their needs. At the end of 2016, our cloud service portfolio consisted of 45 services in 10 different categories. In one year’s time, we have more than doubled our offering to 97 different services across 14 major categories. We have deployed over 50 solutions for manufacturing, enterprise intelligence, e-commerce, and SAP applications. Since the formation of the Cloud BU, resource utilization and our number of cloud users have both tripled. In 2017, after announcing plans to collaborate more broadly on a range of public cloud offerings, we have forged over 1,000 strategic partnerships around the world.

As we look to the future, emerging technologies like 5G, IoT, cloud computing, and artificial intelligence will soon see large-scale commercial application. All industries have dived into the digital deep end, and an intelligent world is just around the corner. In this intelligent world, all things will sense, all things will be connected, and all things will be intelligent. Against this backdrop, we need to stay at the forefront of innovation and business trends, evolve the industry, and shape future technology in a way that meets our customers’ long-term needs. We need to pay special attention to the practical challenges that our customers face throughout their digital transformation process. Helping customers solve problems and succeed in their business is how we provide truly lasting value.

Huawei’s own success depends on two critical factors: First, strategically speaking, we have to steer ourselves in the right general direction. We can’t be overly precise; we may need to adjust course when uncertainties come our way. Second, we need to ensure the ongoing vitality of our organization, which is growing larger by the day. These are both formidable tasks. We must have strategic confidence in ourselves, and move forward with resolve.

At Huawei, our strategy remains the same: We will continue to focus on our core business – connecting all people and all things – as we endeavor to become an enabler and driver of the intelligent world. As we execute this strategy, we must be clear about what we do and what we don’t do. We must not waste strategic competitive energy on non-strategic opportunities. It’s a bit like golf. To send the ball as far as possible, you have to minimize energy loss by hitting it with the part of the club that provides maximum energy transfer. This is what they call the sweet spot.

To bring about a fully connected world, we have to take the lead in connecting all people and things, and continue to build on our existing strengths in this domain. To enable a future world where all things can sense their environment, we will focus on building and consolidating our strengths in connectivity, edge computing, and distributed computing. And finally, there is intelligence itself. Bringing intelligence to all things relies on the convergence of operational technology (OT) and information technology (IT). Here, our sweet spot is cloud computing, big data, and AI platforms, as well as on-device AI. These technologies will power intelligent telecom networks, enable industrial intelligence, and help us optimize our own internal management processes.

To think strategically, we have to look up, open our minds wide, and cast our vision far. Managing operations is quite the opposite; we have to crouch down low and get our hands dirty. To improve operations in an increasingly complex business environment, we need to have a healthy respect for facts, tackle inflated numbers, and get closer to the business. We need to face challenges head on, boldly charge ahead to seize growth opportunities, and remain calm in the face of market fluctuations. Managing operations is hard work. It’s tiring and detailed work. It’s systematic, highly integrated work, and it takes time to develop the right set of skills.

Our rep offices are the grass roots of the company. They are the most important operational unit at Huawei, and helping them improve operations should be at the heart of all managerial activity. From the frontlines to HQ and back again, when we think of strategy, opportunities, objectives, approaches, and resource allocation, we need to think as one and act as one. We have to be detailed in our work, and solid. This is how we will create opportunities, uncover opportunities, and make them our own.

Our Carrier BG needs to keep ahead of industry growth, improve contract quality, and actively seek out new growth opportunities. Our Enterprise BG needs to keep growing at a faster pace and become one of our core business pillars within five years’ time. Our Consumer BG needs to reinforce its foundations, maintain positive growth momentum, and keep on improving profitability. Our public cloud business needs to invest according to plan, improve the competitiveness of its products, and concentrate on scaling out.

As a global player, we need to be patient and persistent, demonstrating our value and contribution one quiet step at a time. We need to earn trust, continue to improve, and cultivate a receptive business environment that can support business development on a whole new level: not just 100 billion dollars, but revenues of hundreds of billions of dollars and beyond.

We will extend our value creation and sharing platform to include the entire value chain. To build out the industry ecosystem, we need to make the most of the outstanding talent available to us. We need to strengthen our presence in places with abundant resources and favorable policy. At the same time, we have to enhance our ability to oversee internal risk controls and operational compliance. We need to establish a crisis warning and management system, and better protect our brand image.

On the management side, we will continue to select leaders with successful track records. Let’s choose people with a sense of mission and responsibility – decisive people with strategic insight. People with complete command over the playing field. Let’s elevate those with a fighting spirit, the people among us who are willing to sacrifice themselves for the good of the team.

In 2017, we fast-tracked the promotions of 4,500 top-performing employees. In 2018, we will aim for 6,000. Among them, 3,000 will be promoted from levels 15 and 16, and 2,000 will be promoted from levels 17, 18, and 19, with the remaining 1,000 reserved for top performers at other levels.

Our rep offices are the basic building blocks for sound operations and sustainable, profitable growth. We need to speed up the selection of front-line commanders (e.g., rep office general managers), experts, and professionals. We will soon implement a dedicated development plan for those who are working in hardship countries and regions. This plan will throw open the doors to development, enabling people in lower ranks to quickly rise to the top. Responsibilities and results are the crux of promotion, not seniority. So we will take a practical approach, promoting people based on the scope of their responsibilities and the outcomes they produce.

At the same time, we need to recognize the fact that an increasingly complex business environment has raised the bar for commanders in the field. We need to prioritize capability building and get our field commanders up to speed, so they are not only willing to go out and fight, but good at it. We also need to expedite the development of frontline professionals, giving them the tools and the know-how to manage business certainties in a more prompt, accurate, rapid, and streamlined way. On top of this, we need to broaden the skillsets of our frontline expert teams. Ultimately, we want to cultivate a new generation of leaders who can not only think and write, but fight.

Our commanders in operations responsibility centers should focus on the fight in front of them. On victory. Sustainable business success is the only yardstick by which their performance will be measured. They need to drive growth, prevent risk, and find the right balance between short-term results and long-term development.

Our senior managers need to look to the skies – see farther, think harder, and guide the company in the right direction. Commanders and experts at all levels need to learn from Xiang Kunshan2 and Man Guangzhi3, and get intimately involved in business on the ground. This will help them discover issues and resolve them as they arise. We face a great many challenges ahead. To keep ahead of the digital game, our commanders need to get their hands on the best tools available. Why stick to an old set of tools when there are better ones out there? Go out and get the best. If we don’t, and our performance suffers, we have no one but ourselves to blame.

Dedicated, talented people are the source of all value creation at Huawei. By advocating proactivity, diversity, and openness, we are building out a talent management system that promotes collaboration and shared success between Huawei and the people who help us thrive.

Right now we face a more dynamic business environment than ever before, and internal demands are growing in complexity. We need to dissolve the boundaries between our company and the outside world, and collaborate more broadly if we hope to keep ahead. We should adopt a combination of different approaches to integrate the best resources available. As Mr. Ren says, we need to absorb the energy of the universe over a cup of coffee, and serve as the glue that unites the best minds in the world.

Internally, we will fast-track the promotions of top performers and give them more room for growth. We will also adopt different approaches to managing and incentivizing different groups of talent, forming an integrated structure of commanders, experts, and professionals, each with their own unique purview. This will encourage our top performers to maximize contributions in their prime, in the roles that suit them most, and receive the greatest possible rewards in return.

To adapt to a more complex business structure, we will gradually establish a decentralized operations model in which centralized governance and individual business unit governance can co-exist. Responsibilities and authority will be clearly defined, operations will be more efficient, and oversight more effective. This will allow our business units to grow in the manner they see fit, while operating under the auspices of a shared platform and a shared system of values.

Organizations at all levels need to be more flexible: from HQ, to regions, to individual countries, our teams need the ability to expand and contract as needed. We should be able to mobilize resources when we need them, and release them when the job is done. We will continue to delegate decision-making authority to the front lines and strengthen the operations of project-centered organizations. Ultimately, we want the right structures in place so our frontline teams can call for support, and HQ will be there to provide that support when called upon.

After delegating responsibility and authority to the front lines, we need to do two things: redesign operational support around frontline needs, and put a system in place for frontline teams to appraise the value of the support they receive. In doing so, our goal is to combine all HQ functions into a single service platform, where services can be bought and sold according to market rules. This will help us to streamline and merge organizations at HQ, and ultimately reduce layers of management that give rise to redundancy and inefficiency.

We must remember to stay customer-centric, inspire dedication, and persevere in all we do. These values will never change. We need to evaluate performance based on results and responsibilities, and strike a balance between material culture and what inspires us at a higher level. This will align the company’s vision and mission with our motivations as individuals, and inspire us to keep aiming higher as a cohesive team.

As long as we respect the rule of law and take responsibility for our own actions, we should manage our teams based on trust. That means encouraging all organizations, managers, and employees to take initiative, do what they think is right, and own what they do. We will continue to simplify process KPIs and optimize our approach to assessing collaborative work. We have to breathe new life into that collective fighting spirit that we hold so dear. Always remember: We are united as a team, in both good times and bad.

In 2018, Huawei will turn 30 years old — the very height of our youth! In 20 to 30 more years, we will find ourselves in an intelligent world. At the threshold of this new era, we stand tall in our commitment: Huawei will bring digital to every person, home and organization for a fully connected, intelligent world. This is the vision that keeps us fighting, the mission we have chosen.

As the poet Tang Yanqian once wrote:

Hunting for flowers
I walked a path
bright as brocades in bloom.

In the end I picked
the one that shined:
the best from springtide’s loom.

A new day of hope and vitality is here. I trust that, years from now, when we look back at our time at Huawei, we will remember how we fought together to rise above the surging tides around us, and retain that sense of excitement, of elation and wonder.

Happy New Year! I wish you and your families the very best in the year ahead. In 2018, let’s work together to gain more and grow more, and lay the foundation for even brighter days to come.

1 Translator’s Note: The title of this New Year’s message refers to a passage in The Analects of Confucius, an anthology of the life, ideas, and conversations of China’s most renowned ancient philosopher. Its contents are central to Confucian philosophy, and to Chinese culture as a whole. The passage quoted here is from Analects 2.4, purported to be Confucius’s own description of major developmental landmarks in his life. Essentially, his lifetime in a nutshell: The Master said: “At fifteen my heart was set on learning; at thirty I stood firm; at forty I had no more doubts; at fifty I knew the mandate of Heaven; at sixty my ear was obedient; at seventy I could follow my heart’s desire without transgressing the norm” (Translation by A. Charles Muller).

2 Xiang Kunshan was an Assistant Regiment Commander who was unfairly blamed for his bold decisions during a military operation, which later proved pivotal to his regiment’s victory.

3 Man Guangzhi is a Chinese military strategist who adopts a diverse range of flexible, unconventional methods to improve military competitiveness.