As always each year, Huawei hosted its analyst event in April, with hordes of analysts descending on Shenzhen. Here are a few observations from the event:
In 2015, Huawei’s revenues grew by 37% to €61 billion and its EBIT grew by 34% to €7 billion, keeping the operating margin stable at just under 12%. Huawei’s strategy paid off across all of its divisions in 2015. Huawei’s Carrier Business pushed deeper into carrier transformation support and grew by 21% in 2015. Its Consumer Business operations entered the mainstream: The division grew by 73% in 2015, with Huawei gaining the No. 3 spot in the global smartphone league table. Huawei’s Enterprise Business is gaining traction and grew by 44% in 2015.
There are four distinctive aspects that go some way to explaining why Huawei keeps on outgrowing its peer group. First, Huawei’s heart beats in its R&D division, and most of Huawei’s top managers have come through the ranks of the R&D team. Second, Huawei benefits from strong internal collaboration and flexibility. Compared with other vendors, Huawei seems a lot less process-driven. Instead, Huawei seems to tolerate, even encourage, self-organization among employees — despite strict management hierarchies. Third, Huawei has a flexible and unconventional approach to customer experience. Huawei completes projects that overrun without overanalyzing whose fault it is. Fourth, Huawei is not listed and therefore not answerable to external shareholders. This gives it the freedom to experiment and take a long-term view.
In 2016, Huawei is venturing into several new key areas. The internet of things (IoT) is a logical extension of Huawei’s traditional portfolio. It is designing products that can be attached to and become part of smart products, such as street lighting and elevators. Huawei is also pushing its own IoT operating system, LiteOS, with the goal of overcoming siloed operating systems and creating cross-domain solutions. Huawei is embracing customer experience (CX) services to enhance its customer engagement for its carrier customers. It is starting to go beyond network-centric metrics to interlock CX with infrastructure. Huawei has signaled its readiness for open innovation and ecosystems, and we see some evidence that it is beginning to open up through initiatives like its Open Labs.
However, Huawei still has a long way to travel to develop a deeper understanding of business processes for vertical industries, let alone be able to assist its customers in their business model transformation efforts. But very few of its direct competitors are much further down this path. And Huawei still has its own demons that it must tackle, such as a deeply entrenched engineering culture, a fairly high degree of “ad hoc” organization, and limited transparency in many areas.
Where does this leave Huawei? On balance, taking into account Huawei’s strengths and challenges, I see real opportunities for Huawei to extent its winning streak into new areas like IoT, customer experience management, and open ecosystems.