Source: Yuanfang, what do you think? Wechat ID: yflooklook
On August 22, an article on “the business policy of the whole company should shift from pursuing scale to pursuing profit and cash flow” was launched on Huawei’s internal forum.
Soon, after fermentation, this article was forwarded by various major media. The reason why people pay so much attention to this article is that the author of this article is Ren Zhengfei.
Ren Zhengfei said in this article that the global economy will be facing a recession and a decline in consumption capacity. Huawei should change its thinking and business policy, shift from the pursuit of scale to the pursuit of profit and cash flow, and ensure that it will survive the crisis in the next three years. Take survival as the most important program, shrink and close all the edge businesses, and pass the cold air to everyone.
In 2001, Huawei just completed a sales volume of 22 billion yuan in the previous year, and won the top 100 in China’s electronics industry with a profit of 2.9 billion yuan.
In March 2001, when the new year was just beginning, Ren Zhengfei published an article in the enterprise’s internal journal, Huawei’s winter. In this article, Ren Zhengfei recounts the problems of enterprises and talks about crises and failures. For a time, it was spread in the IT industry, and then gradually out of the circle, setting off a wave of learning from Huawei in all circles of enterprise management.
In the article the day before yesterday, some people called it “another discussion on Huawei’s winter”
Today, let’s talk about:
Is Huawei’s “winter” really coming?
As a matter of fact, we can see from the title of this article that the business policy of the whole company should shift from pursuing scale to pursuing profit and cash flow. The focus of this article is on “business policy”.
In fact, before Ren Lao’s article, there was another important document about Huawei that many people might not have noticed, that is, the annual report of Huawei in 2021 released in March this year.
On March 28, 2022, Huawei held the 2021 annual report release conference. The main character of the release conference was Meng Wanzhou, which was also the first appearance of Meng Wanzhou after his return to China.
On the agenda of the press conference, Ms. Meng Wanzhou and Mr. Guo Ping, the rotating chairman of Huawei, gave a speech of about 40 minutes in total. After the speech, there were on-site and online Q & A sessions.
The theme of the press conference is: live, live with quality!
Does Ms. Meng Wanzhou’s topic of “living” sound more interesting than Mr. Ren’s “the business policy of the whole company should shift from the pursuit of scale to the pursuit of profit and cash flow”.
At the press conference, Meng Wanzhou said:
“For the world, this is an uncertain year. The epidemic has affected the lives of millions of people around the world. Despite the continuous challenges, Huawei is still providing value services to customers around the world. Connection and communication capabilities have never become so important. Through technological innovation, Huawei is making communication smarter and easier to continuously improve the energy efficiency of the industry under the exponential growth of data volume.”
In the Q & a session, the Xinhua reporter asked: do you think Huawei has passed the darkest stage?
Meng Wanzhou replied: for Huawei in 2021, we may have passed through the black barrier area of this disaster, which is inseparable from the efforts of all our employees. Our team has become more united in the continuous pressure of these three years, and our strategy has become clearer at the end of these three years.
If we carefully read Ren Lao’s article and Ms. Meng Wanzhou’s speech, we can actually see three unchanged and three changes.
First, look at the unchanged:
The first thing that hasn’t changed is the pursuit of profit and cash flow
Some small partners may ask, isn’t what Ren said to change the current problem of only pursuing scale and not profit and cash flow? Why do you say that this has not changed? In fact, we can get a glimpse from the financial report data released by Ms. Meng Wanzhou.
In the annual report of 2021, Huawei’s operating data was mentioned. After the audit in 2021, Huawei realized a net profit of 113.7 billion yuan, an increase of 75.9% over the same period of the previous year. The operating cash flow was 59.7 billion yuan, an increase of 69.4% over the previous year.
It should be noted that the increase in net profit and cash flow were created when Huawei’s revenue dropped from 891.4 billion in 2020 to 636.8 billion.
Therefore, we can find that Huawei has not started to pay attention to “cash flow” and profit since Ren Lao wrote this article, but has already started to change and has made significant achievements.
The second thing that hasn’t changed is to pay more attention to the service system
In Ren Lao’s article, Ren Lao said: “we need to improve the status of the service system, and service experts should have a comprehensive judgment on accidents and network experience.” in the past, we focused on research and development rather than service. Now we also need to pay attention to the service system, and we should pay attention to our network without problems and good experience. “
In fact, at the press conference, Ms. Meng Wanzhou already said in her reply that Huawei cloud was officially proposed last year, that is, 2021“
Therefore, in 2022, we will closely focus on this strategy to accelerate the deployment of our global data centers and networks, so that our customers can get a consistent experience.
From this point of view, Ren Lao’s article affirms the previous strategy of “serving everything” and further promotes it in various departments of Huawei.
The third thing that has not changed is that the emphasis on talents has not changed
In Ren Lao’s articles, half of them are about the selection and assessment of talents. Starting from Chapter 3, they began to pay attention to the problem of talents. They even talked about such details as “some employees have been staying in the border areas for a long time, and their income has decreased after returning to China. They also involve the problem of children going to school. They are willing to stay in these countries to continue their work, and do not forcibly transfer back to China.”, It can be seen that Ren Lao pays attention to talents.
Ms. Meng Wanzhou also mentioned this point in her report. At the end of her speech, She said, “in combination with the business data I mentioned earlier, I would like to make a brief summary statement to you: Huawei’s greatest wealth is talent storage, thought storage, theory storage, engineering storage and method storage, as well as efficient and orderly storage of our internal process management. These are the real values of Huawei behind our beautiful financial report.”
Therefore, from the above three points of view, Ren Lao’s article is more appropriate to endorse Huawei’s reform achievements in the previous stage than to criticize Huawei’s internal problems.
However, there are also three changes.
The first change is the change in the judgment of the world situation
The judgment disclosed in the Q & A at the beginning of the year was as follows. A reporter asked about the impact of the “Russia Ukraine conflict” on Huawei. The judgment at that time was:
Huawei is deeply concerned about the suffering of the people. We have also seen that all countries are actively trying to find solutions. Like everyone else, Huawei also hopes to see peace and a ceasefire as soon as possible. We also believe that the wisdom of leaders of all countries can solve this crisis and restore the normal business environment as soon as possible.
After half a year, the current judgment is:
Now, due to the impact of the war and the continued blockade and suppression by the United States, the world’s economy is unlikely to improve in the next three to five years. In addition to the impact of the epidemic, no region in the world should be a bright spot. Then our consumption power will be greatly reduced, which will exert pressure not only on supply but also on the market.
It can be seen from this that even a leading global enterprise like Huawei can hardly make a clear judgment on the situation.
The second change is the change of Huawei’s cloud development focus
At the beginning of the year, Huawei cloud was introduced as follows:
A few years ago, we announced that we would enter the public cloud market and strive to become one of the five clouds in the world. It should be said that in 2021, we will become the fifth cloud in the world. However, we are still far from the global top, so we need to further develop and reduce the gap.
Ren Lao’s requirements for Huawei cloud are as follows:
Huawei cloud computing should firmly support Huawei’s business development and take the road of supporting industrial Internet.
From rapid external expansion to internal support for Huawei’s own business. This judgment is related to the fact that all countries and regions have paid more attention to information security and data controllability in the past six months, including Huawei’s best “government cloud” system. In fact, many local governments have recently begun planning to build their own “data cloud service centers”.
The third change is the change of Huawei’s smart car strategy
When talking about Huawei smart cars at the beginning of the year, it was mentioned that:
We have now built solutions for seven smart cars, and have listed more than 30 smart car parts to help Huawei’s industry transform to intelligent. We have provided solutions for car enterprises through Huawei inside and smart selection mode. We have conducted in-depth cooperation with many domestic and foreign car enterprises to help customers build good cars and achieve commercial success.
Under the new cooperation mode of industrial division of labor, Huawei adheres to the development strategy of “platform + ecology”. After more than two years of development, we have established cooperative relations with more than 300 partners. We will further increase investment in ecology and join hands with our partners to accelerate the progress of intelligent automobile industry
In Ren’s thinking, he thinks about smart cars as follows:
Smart car solutions can not open up a complete front. To reduce the research budget, strengthen the business closed-loop, take the road of modularization in R & D, focus on several key components to make competitiveness, and the rest can be connected with others.
The change from the “platform + ecology” strategy to the “modularization” route may be due to the challenge that Huawei’s own overall solution has encountered in the process of specific promotion. Several major OEMs also hope to build “self-centered” and “self controllable” systems.
The above “three changes and three changes” is my feeling after reading Ren Lao’s letter, which should not be the same as many people’s cognition:
Ren Lao’s letter is neither a 180 degree turn in Huawei’s strategy, nor how pessimistic about the future, nor dissatisfaction and criticism of the existing management.
More importantly, it is based on the promotion and strengthening of some effective solutions in the past, which is the recognition and affirmation of the existing management, as well as the solutions to some practical problems.
Although Ren Lao is not responsible for the specific work of Huawei, his prestige can make Huawei less controversial, do more practical things, and work together to tide over the “real winter”.
PS: one more word, the winter of the world market may not be the winter of Chinese enterprises, the winter of the communication industry may not be the winter of all industries, and the winter of Huawei may not be the winter of all enterprises. To be honest, from the perspective of security, stability and economic development, there may be no place in the world more suitable for “wintering” than China today.
It is necessary to persist in analyzing the current economic situation from a comprehensive, dialectical and long-term perspective, strive to cultivate new opportunities in the crisis and create new situations in the changing situation, give play to China’s potential and role as the world’s largest market, clarify the strategic direction of supply side structural reform, consolidate the basic trend of stable, medium and long-term growth of China’s economy, consolidate the basic position of agriculture, implement the tasks of “six stabilities” and “six guarantees”, and ensure that all decisions and arrangements take root, We will ensure that the goals and tasks of building a moderately prosperous society in an all-round way and fighting poverty in a decisive way are fulfilled, and promote China’s economy to ride the wind and waves and make steady progress.
— May 23, 2020, visit members of the economic community and participate in the joint group meeting