Evaluación de impacto en la protección de datos personales

Ups and Downs of Wang Laboratories, and the Warnings

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ne day in 1993, Ren Zhengfei was strolling around Zhong Guan Cun, a technology hub in Beijing and often referred to as China’s Silicon Valley. Someone asked him, “How do you like Founder?” He answered, “Founder has excellent technology, but its management is poor.” At that time, Founder Electronics’ Chinese Ideograms Coded Character Set was hailed as the terminator of Chinese traditional typeset- ting technology, one of the four greatest inventions of China. “How do you like Legend (later renamed Lenovo)?” He was asked again. “Legend has excellent management but lacks advanced technology,” he answered. The inquirer went on, “How about Huawei?” Ren Zhengfei said, “We have neither advanced technology nor good management.”

Ren Zhengfei told the truth. This was the reality of Chinese IT com- panies at that time. Since then, however, they have taken big strides after the global industry leaders. The year 1993 is a very important year. Of course, it does not mean any global event had occurred, but a milestone was laid down this year for the IT industry. The Clinton administration announced the plan to build its National Information Infrastructure (NII), a network of information highways. NII marked the beginning of a new era, an era of creativity and disruption. History has proven that any inno- vation or creation is made at the expense of old things being destroyed.

By 1993, Huawei was barely six years old. With less than 400 employees, its sales in the first half of the year barely exceeded CNY100 million. In that year, Huawei developed and launched its JK1000 analog

switching system, but its market performance was a disaster. In the same year, Huawei’s C&C08 2000-line switch was placed into trial for the first time by the Post and Telecom Bureau of Yiwu County, Zhejiang Province. At the same time, it started R&D on a new C&C08 switching system with a capacity of 10,000 lines.

The year 1993 was the real starting point for Huawei, because it had begun to open up itself to the outside world. Over the past six years, the company’s goal had been to overtake Stone, one of the leading Chinese IT companies in the 1990s. After 1993, however, Huawei began to vie for a place in the top-three list of the global telecom equipment providers. At that time, Lenovo CEO Liu Chuanzhi also dreamed of challenging IBM.

At the end of 1997, Ren Zhengfei led a delegation of Huawei’s senior executives to the United States. They traveled across the country to visit a number of American companies, including IBM, Bell Labs, and HP. The history of the American IT industry, especially the frequent rise and fall of companies, was an unprecedented revelation to all of them. Ren Zhengfei said,

The history is like a cycle. One large corporation after another is caught up in trouble and then dies; small firms mushroom and grow into large corpo- rations. The cycle then repeats itself. It is almost as if the 500 years of war- ring states in China transpires in the US within one day.

Nevertheless, he clearly felt the enormous power of the open culture and innovative system of the United States. This is a country of heroes, each of whom may take the lead for as long as decades or as short as several years, and who have inspired entrepreneurship and innovative power that underpin the strength of the nation.

On Christmas Eve, every family in the United States was having a happy reunion. But Ren Zhengfei and his colleagues shut themselves in a small inn in Silicon Valley. They had a meeting behind the closed door for three days and turned out a document of more than 100 pages. IBM’s management transformation was a great inspiration for Huawei: A small company lacks competitiveness, while large companies collapse if they are not effectively managed. Hard work in the American high-tech industry also resonated strongly with Ren. Most people worked very hard, especially those successful entrepreneurs and senior executives. Dedicated hard workers, in the millions, have been the engine of technol- ogy and management advancement. They are also the cornerstone that

great companies in the United States have been built on. Ren Zhengfei felt exactly the same: Hadn’t Huawei grown up on the basis of the unwaver- ing diligence of its people?

Huawei’s management was also shocked by the dramatic rise and fall of Wang Laboratories established by Dr An Wang, a Chinese-born American. In 1971, Wang Laboratories launched the world’s most advanced word processor, the 1200 BASIC. By 1978, Wang Laboratories became the largest information product supplier, yielding US$2 billion in personal wealth for An Wang. In 1985, An Wang ranked eighth on the Forbes list of 400 richest Americans. But in 1992, he filed for bankruptcy protection, and the company’s share price plummeted from an all-time high of US$43 to 75 cents.

What went wrong? It was not open enough. Wang Laboratories had enviable R&D capabilities, but the problem is no single company or indi- vidual can cope with rapid technology shifts alone in an open age. In the case of Wang Laboratories, a closed model for technology development partly explained the company’s collapse. The fundamental cause though was its closed culture. In its heyday, Wang Laboratories had a great number of tech geniuses, but the company had been managed exclusively by the Wang family. Dr Wang handed power over to his son, and man- agement soon became enmeshed in family politics. Eventually, the com- pany suffered from a mass exodus of its tech leaders.

The lesson from the fall of Wang Laboratories is both philosophical and practical—in this age of rapid technological and social changes, one cannot stay the course if they keep themselves in a closed space; they won’t grow or even survive unless they are open enough. Practically speaking, a closed company has no prospect. In 1999 in a message to his new recruits, Ren Zhengfei clearly stated, “Huawei must keep learning from the outside world if we want to survive. We must open our door if we want to catch up with the world. We have developed each and every major product through open partnerships.”

In 2012, to sum up the company’s experience over the past decade, Ren Zhengfei said:

Huawei must hold on to the open policy. We must not waver under any circumstance. If we do not open our door to obtain energy from the outside world, we won’t get any stronger. At the same time, we must examine our- selves critically in this process; otherwise, we won’t be open for long. In short, openness is the basis of Huawei’s survival and growth.

Learning from American Companies: Where Is the Brake?

One funny story about Ren Zhengfei is widely known among the older employees of Huawei. Near the end of 1997, Ren Zhengfei sold his second-hand Peugeot and bought a BMW. Whenever he was free he would drive his BMW along Shennan Avenue, a main artery in the city of Shenzhen. He would open the sun roof and the windows, enjoying the cityscape and listening to English lessons along the way. One day, he drove past an old car that was moving rather slowly. He turned his head and found it was Louis Gerstner, IBM chairman. Without saying hello to Gerstner, Ren Zhengfei asked, “Have you ever driven a BMW?” Gerstner did not answer. Sometime later, when he drove back and past Gerstner again, he asked, “Have you driven a BMW?” He still got no reply. When Ren asked the same question a third time, Gerstner was a bit upset and said: “What do you mean?” Ren explained: “Do you know where the brake is on a BMW?”

This may be a joke rather than a true story, but it had an interest- ing message. In 1997, Huawei was growing very fast. It had learned to accelerate the car so to speak, but it did not know how to slow it down. In other words, it knew how to grow but did not know how to manage its growth properly.

This may not be completely true, though. Back in 1997, Huawei needed the knowhow of acceleration more than any braking system. It needed a complete system that included acceleration and control, but it certainly required the acceleration part most. Huawei still needed to grow up fast enough to expand its presence in the global market; it was not yet time for Huawei to step on the brake.

The 1997 tour around the United States proved to be a pivotal event for the company. Since then, Huawei has introduced the process-based management of IBM and the experience of American companies has played a great part in its strategic design. A learning organization grows better; this has been proven time and again. Ren Zhengfei said: “It is good to borrow and transplant the advanced management philosophies and technologies of the West. Why should we resist anything that has proven successful? Huawei should first borrow them, then adapt them, and then institutionalize them. This is the inevitable process.”

Ren Zhengfei has repeatedly said, “We must learn from the US in order to overtake our American counterparts. In this process, we must separate a few politicians from the great American people. We must not

resist their successful experience simply because some politicians don’t like us.”

The United States protects its citizenship rights; it has a reliable legal system; it advocates academic freedom and innovative education; it devel- ops a dynamic free market economy; it implements a sound social welfare system; it boasts an inclusive and diversified culture; and heroes appear whenever the country needs them. This all explains why the United States is so strong.

A sound social system is instrumental to productivity, and it is pre- cisely for this reason that the American people are able to create the great- est wealth. This social system has also helped the United States attract elites from other parts of the world. For example, Albert Einstein, a German scientist, chose to become an American, under growing animos- ity of the Nazis. Similarly, Andrew Grove, the founder of Intel, was born to a Jewish family in Hungary, but fled to the United States as a refugee. And many other people who have made great contributions to the United States were also been born outside the new continent.

Reliable guarantee of property rights, scientific reason, mature capital markets, and advanced infrastructure have spurred the prosperity of the country and placed it at the top of the world. At the same time, the United States is a “militant” country: It “creates” enemies, which serves to keep the country dynamic and vigilant.

In short, the United States has a nurturing environment that produces great people, such as Steve Jobs and Bill Gates.

For this reason, Huawei has tried to learn from the United States. To this end, Ren Zhengfei and other senior executives have made frequent visits. No doubt, Huawei has been a faithful student. So then, why has the “master” recently seen the “student” as his enemy? What is the matter with the United States? And what is wrong with Huawei?

Some Western media outlets and politicians have consistently blamed China and Chinese companies for being conservative, closed, or mysteri- ous. It is a pity, however, that they are ill-informed or their accusations are ill-intended. Over the past three decades, Chinese companies, as a whole, have made huge progress, because the country is opening itself up and the business community has also acquired an open mindset. This is an apparent fact in China.

Merchants in China have historically been belittled. Business trade was the least dignified or even an illegal profession. Therefore, China does not have a commercial system or culture like the West, and the so-called

Chinese way of business management is no more than a shaky stunt. China has borrowed some business concepts from the West and inte- grated them to a certain extent, but even the most successful companies, including Huawei, Lenovo, and Haier, have not yet created any system of their own on top of imported tenets. This is a tough truth that people of insight in China’s business community are keenly aware.

While it could be a joke that Ren Zhengfei has no idea where the brake is on a BMW, this joke carries profound implications. Huawei was open, but it was still groping for stones in the river, and that was risky; it stood to lose everything should it spin out of control. So to speak, during this period Huawei was going through the “Death Valley” that many Chinese companies have trodden. They have completed their primitive accumulation but remained fragile while trying to metamorphose into a modern corporation. Can Huawei navigate through this valley? Then, the next questions would be: If Huawei should learn to get better, who should it learn from? And what should it learn? By 1997, Huawei had developed its own management system, with some concepts and models, based on its own experience, its acquired knowledge, and the wisdom of its leaders. Yet this system was simple and locally oriented, and the con- cepts and models were merely slogans. It proved unfit for the company’s further growth, especially when it was going global. Huawei needed a new system badly. It had to learn from leaders, in particular its American counterparts.

In late 1997, Arleta Chen, a senior executive of IBM, gave Ren Zhengfei a book about integrated product development (IPD) transforma- tion, which marked the start of Huawei’s learning from an American com- pany. Since then, IBM has helped Huawei build up a complete modern business management system, including management processes and cor- porate culture. In this way, IBM has earned a considerable amount of ser- vice revenues and promoted its own corporate culture and organization philosophy. Of course, Huawei has benefited even more. With the clues and instructions from IBM, Huawei has undergone dramatic organiza- tional transformation and learned how to control the power and braking system of the BMW. It has eliminated disorder in the organization and laid solid ground for an organizational and corporate culture that is more East than the West and even more West than the West.

This is exactly the power of openness. Without strong courage and the determination to open up, Huawei could not have become what it is today. In contrast, a lot of Chinese companies have also bought advisory

services from leading American consulting companies, such as McKinsey and Accenture, at a high cost, but few have reaped the benefits. Some of them, as the joke goes, have died even sooner after taking the pills pre- scribed by their foreign doctors. Why? There is the problem of cultural differences, but the key problem is their leaders are not really committed to openness. They would lose their heart midway when trouble arises. Of course, they may not possess the necessary wisdom to manage the reform and opening-up process.

Hunting Huawei: What’s Wrong with the United States?

A special briefing took place at the US House of Representatives, and Ken Hu, Deputy Chairman of Huawei, appeared before the panel to answer their inquiries:

Interrogator: Is Ren Zhengfei a member of the Communist Party of China?

Ken Hu: Yes. Just as some American businessmen are Democrat or Republican.

Interrogator: Did Ren Zhengfei serve in the People’s Liberation Army? Ken Hu: Yes, sir, just as many American businessmen once served in the US Army.

On February 25, 2011, Ken Hu published an open letter addressed to the US government to clarify false allegations by some Western media and politicians, including “close connections with the Chinese military,” “financial support from the Chinese government,” “disputes over intel- lectual property rights,” and “threats to the national security of the United States.” The open letter also invited the US authorities to conduct a formal investigation into any concerns they may have about Huawei.

The allegation of military ties is nothing new. These claims lay their entire basis on the fact that Huawei’s founder and CEO, Ren Zhengfei, once served in the PLA in a position equivalent to that of a deputy regi- mental chief, yet his position had no actual military rank. This “coming up from the military” is not rare in the United States, where about two- thirds of chairmen and vice-chairmen of Fortune 500 companies, and one-third of their CEOs, have graduated from West Point. West Point is not only a military academy but also an incubator for business lead- ers: It has produced as many industry captains as all business schools in the United States combined. After World War II, the three major military

academies, West Point, the United States Naval Academy, and the United States Air Force Academy, have turned out over 1,500 CEOs, 2,000 presi- dents, and 5,000 vice presidents at Fortune 500 companies, as well as thousands of SME leaders. Does that mean their companies are connected with the US Army?

In response to the allegation of financial support, or more specifi- cally US$30 billion each year from the Chinese government, Huawei explained, “For the past decade, Huawei has engaged KPMG, a US-based global accounting firm, to audit its financial statements. We would like to know, as people do, where the US$30 billion came from and where it has been spent.” Huawei had also issued similar statements through some European media outlets.

From 1993 to 2012, the world has undergone unprecedented changes. It is a revolution indeed. And the United States, by virtue of its open and innovative culture, has brought the human race into the irre- coverable past and the unpredictable future. In the past 20 years, through creative disruptions, the United States has produced a number of leg- endary companies such as Google, Yahoo, Microsoft, Cisco, Apple, and Facebook, and the strength of the country is derived from hundreds of super corporations that are richer than some countries.

The American community believes that the country’s core competi- tiveness rests with its businesses. Meanwhile, the American people, who hold strong faith in empirical and pragmatic philosophy, also believe in the law of natural selection, or the jungle law of survival of the fittest. Therefore, over the past two decades, innumerable American businesses, including some giants, have fallen, collapsed, or disappeared amid stormy technological changes.

Like Cisco and Apple, Huawei is an emerging company that rose above the horizon just 20 years ago. It has risen through learning from American companies, and in this process, it has witnessed one American giant after another falling down and out.

Since 2003, however, a number of American companies have taken

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