Lessons from Huawei: when Chinese companies go global

In today’s business world it is accepted as a given that if your business is still operating in local and regional markets you may as well not exist. Going global is a widespread religion for most companies and with the increased use of advanced technology this religion is only gaining more followers. Although expanding your business internationally can be a tough challenge, most business people believe that the benefits outweigh the disadvantages. With the rise of businesses going international a go-east motto initially dominated. Indeed, Asia has been and is still recognised as an emerging market where business opportunities are developing at pace. Moreover, the global middle-class is predicted to reach 3.2 billion people by 2020 with the largest growth taking place in Asia. Together, these observations make this market the place to be when it comes to expanding one’s market share.

In the meantime, however, things are changing. Although new markets introduce the opportunity to boost revenues significantly, one needs to be able to manage cultural differences well. If this knowledge is not part of your company’s DNA, going east may turn out more perilous to your financial and reputational health than anticipated. Increasingly, a go-west motto seems to be replacing the desire to look east. A growing number of Chinese companies are set to gain international experience and soon to become global giants. Interestingly, international expansion has not been on the agenda for many Chinese companies for long. In fact, given its 1.42 billion population, the Chinese market is the biggest for any company, including those headquartered in China. For many Chinese companies, the penetration of new markets was not considered necessary to boost revenues significantly. China’s market was populous enough. This, however, has changed.

Three reasons going west has taken flight

First, the Chinese market today is competitive and fast-paced, pushing companies to explore other markets. Second, the Chinese economy shifted from a manufacturing to a service-oriented one, which made consumers even more demanding. Indeed, the modern Chinese consumer is not so different from a Western customer – they both want quality, innovative goods and services. Thus, by meeting the higher demands of their local customers, Chinese companies feel that they are now better placed to expand internationally as they have the focus and skill to appeal to a broader and more global audience. Third, because the average disposable income is rising quickly in China, costs of production and labour have increased quickly. Therefore, expanding one’s business allows for producing and selling more units, which, in turn, can decrease the costs per unit. The growing ambition of the government to make China great again has turned many companies into a strategic asset to achieve this national ambition by becoming influential at the global level.

Of course, I hasten to say that this shift from going east to going west is happening gradually. Today, it is still the case that few Chinese corporates have become household names in the west yet. Most are still on the learning curve when it comes to adopting and acting on a global mindset. One important reason for this concerns a switch in mindset and behaviour. When companies decide to go global, they are asking their people to start thinking and acting with a global mindset. Indeed, the decision to go global for any company usually starts with the CEO convening her C-suite leaders. She communicates that the need exists to expand the business and thus to go global. It takes just a few seconds for the CEO to explain the global ambition. However, for those listening, reality quickly kicks in. This global ambition will involve global mobilisation of their people. How do you install a culture where a global mindset is not prescribed but, rather, where people are empowered to enact global plans? For most modern Chinese companies, the question is a big one. Having shifted from one of the most closed countries in the world to the second largest economy, Chinese companies are not overly familiar with the practice of dealing with different cultures.

Huawei takes people global

One Chinese company that has treated its global ambition as a people-led movement is Huawei. This Chinese telecom giant employs more than 180,000 people worldwide and serves more than 3 billion customers (the US market excluded). The company has always been a private organisation that is owned largely by its employees (about 98.6%). Being an employee-owned company makes it less surprising that for its founder Ren Zhengfei and any Huawei executive people matter most when important business decisions are taken. Moreover, Huawei is recognised as a company aiming to create an integrative work culture where east and west meet, where employees’ enjoy a heightened global sense of awareness.

Huawei considers people its biggest asset and combines that with cross-cultural sensitivity. The powerhouse is not satisfied with using procedures and strategies that will suffice in a Chinese-only market context. Rather, the company is focused on achieving the highest quality level possible, as its standards are global. For instance, the company supports and supervises its employees to work abroad. Unlike most Chinese companies, Huawei usually prepares them with high global standards such as safety, health, language, customs paperwork, laws and regulations, local customs and etiquette. How did Huawei escape the typical traps Chinese companies step into when going global? Much has to do with the thinking and philosophy of their founder.

The founder’s philosophy

A primary belief of Ren Zhengfei is that if a company wants to go global they need to ensure that their people think with a global mindset. How does Zhengfei get this message across to his employees? The founder is known for his love for using historical events to illustrate his thinking. His use of storytelling emerges partly from his frustration that he considers most Chinese business people to lack a sense of historical awareness. As Zhengfei once put it: “Today’s leaders are fire fighters – they have no sense of history. Therefore, they more easily repeat the mistakes of the past.”

What does this look like in action? Notice how Zhengfei recalls the second half of the 1990s, when Huawei moved beyond China: “Russia is great – there is no way back – behind us lies Moscow.” He borrowed these words from Vasily Klochkov, who was an officer in the Soviet Union’s Red Army. In 1941, when fighting the Germans to protect the city of Moscow, Klochkov and his regiment were willing to sacrifice their lives as they believed in what they were doing. It was a call of time. In a similar vein, Huawei’s actions – once they decided to go global – were considered the buds of capitalism in China. Nevertheless, Zhengfei and his team were convinced that a Chinese company can have global influence in service of the homeland China.

Furthermore, Zhengfei also reminds his employees that Huawei decided to move beyond China to prove its identity. Huawei is characterised by its purpose to serve customers by connecting people via communication. As Zhengfei noted: “We need all our employees to take action.” There was only one clear value proposition, he said. “Serve our customers.” The dream of connecting people via communication is one that spans the entire world and therefore Huawei considers itself as having a global identity. Consequently, Zhengfei pursues global leadership. Zhengfei said: “We must stand at the forefront of globalisation rather than act as ‘air force commanders’ with our heads in the clouds. We must keep our feet on the ground. Our senior managers and experts must go to the forefront and fully immerse themselves in the entire process from lead to cash.”

In this way, global leadership implies two ideals: determination and persistence to conquer ground. Zhengfei believes that Huawei’s employees should be soldiers that gain experience in their global strategy efforts. As he noted several times: “I want you to go places where strategic resources are concentrated and explore alongside others and broaden your horizons. Someone once said: ‘If you’ve never even seen the world, how can you possibly have a world view?’”

How experience creates global leadership

Building on the founder’s philosophy, Huawei has moved to an employee performance system that measures “global experience”, an important criterium for identifying future leaders. As Zhengfei noted: “You need to get down and manage at the front lines to get a true tasting of things. To qualify for greater responsibility, you need successful experience in the field.” A belief exists in Huawei that leaders of global (and virtual) teams need to be able to diagnose and interpret potential cultural tripwires in the group. In other words, one needs to be able to understand and deal with how cultural differences might impact team functioning to take up leadership within Huawei. Leaders are expected to go out there and gain experience in their field offices around the world to improve work situations and efficiency in serving customers with diverse cultural backgrounds. In this sense, global mobility in Huawei high potentials is systematic. In other words, the notion of global to Huawei leaders means integrating Chinese and western perspectives –not simply being Chinese in a global world. In fact, Zhengfei noted that “the management teams in our research centres in China must be world-class and have a global perspective. They must not operate like a local team, because a Chinese style will lead to complacency.”

Leading the global challenge at Huawei

Being in a leadership position at Huawei thus implies the ability to transcend the Chinese way of working and thinking. Chinese values and outlooks circle a global way of working. To achieve this, Huawei prizes spiritual and value-driven leadership, with a focus on customers. Employees stand a good chance of accelerating into leadership positions when they demonstrate value-driven leadership by serving customers. Being a global company, then, also means that a global mindset is needed to achieve this customer-centric focus. In addition, however, a value-driven leader also facilitates the development of other employees so that they can become company heroes, by promoting customer service and satisfaction. Leaders at Huawei are regarded as being responsible for mobilising employees to achieve customer centricity worldwide.

Collectivism and individualism join forces

A global ambition entails Huawei leaders transcending Chinese ways of acting and thinking, but it does not mean leaving Chinese traditions and values behind. Think back to Klochkov’s borrowed quote: global leadership is a marriage of individual and collective thinking. Zhengfei has infused Huawei with the idea that “collectivism should allow for individualism, because each individual is different and thinks in his/her own way. However, individualism must serve the collective interests of the team.” It is in the expression of this belief that the company’s ambition to bridge cultural differences is clearly emphasised. It underscores the idea that individualism should be used by the collective – who can then develop and diversify it.

Zhengfei said: “People should compete in solidarity and be united in competition.” How? The firm should celebrate individualism in the pursuit of the collective. Individualism drives people at Huawei to create value and contribute to China, noted Zhengfei. One could say that the underlying motivation for Huawei to go global represents an effort to bring together the western and Chinese dream.

The western dream includes a focus on an individual search for creativity, vitality and proactivity. Fuelled by liberal values advocated in western democracies, the pursuit of one’s individual dreams have become a synonym for being successful and effective. The Chinese dream does not focus on celebrating individual ambitions and goals, but more on achieving a collective effort and sense of pride all pointed towards supporting the nation of China. Can these dreams be reconciled? At Huawei, this question does not pose a dilemma. Instead, the company is known to embrace the idea that company cultures should celebrate opposing forces and ideas. In its ambition to operate as a global company, Huawei chases the western and Chinese supreme.