Interviewee : Huawei Rotating Chairman, Guo Ping
Host: It’s true we need to constantly change. The only thing that can be constant is change. In this context, the context that you mentioned that you believe changing people is key to successful transformation, and of constant change, how do you create, how do you build a culture of innovation?
Guo: Digitally enabled, sound processes allow most employees to have rules to follow, but not all activities are heavily regulated.
The company also works to create a culture of innovation. And that starts with a tolerance for failure.
Each year, we invest more than 10% of our revenue in R&D. And 30% of that budget goes to research and innovation. Our 2012 Laboratories is a research arm dedicated to fundamental research, and they are encouraged to adopt a multi-path, multi-wave, trial-and-error approach. For example, we had been working on many different technologies for 5G before one given technology was selected to be part of the industry standard. There were many others we’d worked on that were not included in the industry standard. Our founder Mr. Ren once said, “We take a path to find out that it only leads to a dead end, and we share it with others so that they don’t repeat it and try another path, that’s also a success.”
Second, we are very serious in bringing onboard high-end talent.
We try to bring onboard the brightest minds to join our research centers around the world. We once set up a research center for a scientist who didn’t want to leave home. We follow the footsteps of talent and the company also works to create a relaxed working environment for the scientists and geniuses, so that their potential could be fully unleashed.
Host: Tolerance for errors, creating a relaxed working environment, and having the greatest talent is key. In this process of innovation, you know, through errors and change, learning is key. What’s your approach at Huawei to facilitate learning, for training and development of people?
Guo: We believe that change is about changing people’s mindset and behaviour, so the biggest challenge in change is changing people. Through its 20-year transformation journey, Huawei has developed a comprehensive framework to systematically address people-related issues during transformation.
First, we do stakeholder analysis, where affected individuals are grouped by capability and willingness for differentiated follow-up actions. We motivate those who actively support change and for those who resist change, we put them to other positions or take other appropriate measures.
Second, communication and training is carried out throughout the transformation. Following stakeholder analysis, different communication approaches are adopted with different groups. Then targeted training follows to reskill affected people and ensure effective implementation of the transformation.
For example, during the IFS, integrated financial services transformation for finance, we completed more than 1,000 training sessions for management, business, and finance personnel. Finally, we pay special attention to the changes to corporate culture. For example, with the IPD transformation for R&D, a matrix structure was introduced. Then necessary measures were needed to ensure that our employees who are used to reporting to functional heads would be comfortable to be also led by project managers. The shaping and transitioning of organizational culture is an effective guarantee to driving transformation.
Host: So many bits and pieces that we have to put together to achieve learning, to achieve innovation, to achieve change. Let me again highlight what you repeated, “create the right climate across the company” or you recently said “a relaxed working environment”. Give me specific examples of how you create this culture, this working environment.
Guo: I think there are a couple of things. First, positive incentives. Positive incentives are often used at Huawei to reward transformation teams, so that everyone is aware of the company’s orientation. Each year, various awards are presented to thousands of employees, which is certainly a positive impetus for change.
But in our experience, a sense of crisis is also very important. It generates the momentum for change, and it paves the way for real changes.
Sometimes, we need to make the potential crises visible, through visualization, to intensify the sense of crisis for the employees to truly understand the need for change. Back in 2014, for example, we had a problem in our supply chain. The actual goods did not fully match the accounting records. As information was sometimes slower than the flow of goods, many people knew the problem, but they did not fully understand the potential risk this posed to customer satisfaction and operational security.
In 2014, we brought back directors from more than 100 rep offices around the world for a global warehouse conference, which was a live broadcast among our global workforce. Some shocking pictures and videos were displayed, like off-the-books materials piling up mountain high at a subcontractor. This was done to help people profoundly understand the need for change and get fully engaged. After several years of hard work that followed, we finally achieved the target of matching inventory accounts with actual goods.
A severe crisis will push for even more efficient and radical changes. For more than 20 years, we had been used to sourcing the best parts and components in the world to develop the best products, growing our business year on year. This had been a pattern most people at Huawei got used to. Then over the last two years, Huawei was under significant challenges from external environment. All Huawei employees have realized that environment we live in has changed and all become inspired and determined to reinvent ourselves, driving further changes across R&D and also working to build a more diversified and resilient supply chain to ensure supply continuity. We’ve come to recognize that changes in the environment and the pressure of survival are the driving force for change and the perfect opportunity to create a climate for transformation.
Host: Very interesting. I really love your concepts. Just let me highlight a few words, a few sentences you said. Our goal is not to deliver world-class IT, but a world-class company. Changing people is key to successful transformation. To change people, you have to have a sense of urgency, be inspired to reinvent ourselves. Pressure for survival, you said, and that allows us to drive forward. I think it’s very very insightful. So, thank you very much, Mr. Guo Ping, for your remarks.