Analysis: Huawei's Generation Alternation

On April 18, Huawei released its 2010 annual report: sales revenue reached 185.2 billion yuan, a year-on-year increase of 24.2%; net profit reached 23.8 billion yuan, and Huawei held a cash flow of 38.1 billion yuan. Compared with 2009, Huawei's performance in 2010 has clearly rebounded.

Compared with the 2009 annual report released a year ago, this 76-page 2010 annual report is a full 18 pages thick. Judging from the major elements required in the annual report, the non-listed company's 2010 annual report can be said to have many of the same, but the level of disclosure is slightly less than the number of listed companies.

The biggest highlight of this annual report is the first announcement of Huawei's board members and their resumes. For the first time, the public was informed that there were 13 members of the new Board of Directors who took office at the end of last year. They are:

Vice Chairman: Sun Yafang, **, Xu Zhijun, Hu Houkun, Ren Zhengfei; Managing Director: Xu Wenwei, Li Jie, Ding Wei, Meng Wanzhou; Director: Chen Lifang, Wan Wei, Zhang Pingan, Yu Chengdong. As we all know, the board of directors is the highest decision-making body for the company's operation and management. It can make significant decisions on behalf of shareholders and determine the company's strategic direction. Therefore, by analyzing the changes in Huawei's board of directors, we can understand Huawei's future development direction.

Although Huawei did not publicly disclose the list of members of the previous session of the Board of Directors, it can be found through the business registration data that Huawei's “old” board of directors has a total of nine members: Sun Yafang, Yan Xu, Xu Zhijun, Hu Houkun, Ren Zhengfei, Xu Wenwei, Ji Ping, Fei Min, Hong Tianfeng.

If we classify them according to their birth years, we can see something interesting: Huawei’s “new” board of directors has five vice chairmen and vice presidents, among which the top leaders Ren Zhengfei and Sun Yafang are both “pre-60” and the other three. Vice Chairman **, Xu Zhijun, and Hu Houkun belonged to the “after 60′′. The three directors who left the “old” board of directors, Ji Ping, Fei Min, and Hong Tianfeng were both born in the 1960s.

Looking at the newly joined seven directors, the situation is very different. Among them, Li Jie and Chen Lifang are typical examples of the "post-60s," and Ding Yi and Yu Chengdong's year of birth have already reached 1969. Meng Zhaozhou's age is estimated to be about the same as them. She is the daughter of Ren Zhengfei and graduated from Huazhong University of Science and Technology. He joined Huawei in 1993 and has been responsible for the company's financial management. He is currently the Huawei CFO; Wan He and Zhang Pingan were both born in 1972 and are less than 40 years old this year!

Today, Huawei's first-generation entrepreneurs headed by Ren Zhengfei and Sun Yafang have already handed most of their powers to the “post-60s”. The successors of these successors are strong, and have experienced many years in many important management positions. For example, Hu Houkun served as sales president and CMO, and Xu Zhijun served as CMO and CTO. This also benefits from the turn-based system of Huawei’s top management EMT (executive management team): Each EMT member will serve as the “deputy CEO” for half a year, presiding over the daily work of EMT. In addition, the areas in which these EMT members are responsible are rotated every few years. This also makes Huawei's "post-60s" at the highest level fully familiar with almost all of the company's business areas, and can assume a comprehensive management.

The "post-70s" and "near-70s" are more responsible for leadership in a certain area. For example, Ding Hao is responsible for R&D, Yu Chengdong is responsible for Strategy and Marketing, Wan Hao is responsible for the terminal business, and Zhang Ping is responsible for Huawei Symantec, the joint venture company.

One generation alternates with Huawei being quietly in progress. On the one hand, it considers the continuity of the past. The top 6 directors of the “new” board of directors are all previous directors; on the other hand, it has also boldly introduced new blood, and some newcomers have entered the top decision-making level. With such continuity and fresh blood, we have added more confidence to Huawei's future development. As everyone knows, when any organization, whether it is a country, an institution, or a company, is most prone to problems, it is the time when the old and new leaders alternate. In the past, we have seen some living examples of the decline of some private enterprises in the two worlds. We have also seen some private enterprises that have successfully completed the handover. However, we have not yet seen revenues of 200 billion yuan such as Huawei. Alternation of generations of technology-based companies.

Although there is a good start, this does not mean that Huawei’s generational success will surely be completed successfully. Entrepreneurs will leave sooner or later, and companies will be able to grow. Huawei wants to realize the ideal of its founder Ren Zhengfei and become a world-class company with a revenue of US$80 billion. It also needs more innovation.

The establishment of operator networks, companies, terminals, and other four major operation centers centered on customers has weakened the functions of the Group's EMT, devolved more decisions to the operation centers, and accelerated the transition from manufacturing to service. All of these initiatives are for the future of Huawei to take a higher level.

At this time, the improvement of corporate governance, especially the function of the board of directors, is crucial. Since Huawei is not a listed company, the current Huawei board of directors looks more like an internal board of directors. The directors are basically EMT members, which also makes Huawei's future development lack new ideas and new attempts. In fact, we have seen Huawei continue to follow the old thinking when it comes to launching new corporate and terminal services; when it comes to providing Internet services, it shrugs off its feet and invests in mergers and acquisitions.

The old-fashioned, ideologically inclined ideas and habits have become the biggest obstacle to Huawei’s further progress. From the perspective of the board of directors, will Huawei be able to open up again and introduce some overseas Chinese entrepreneurs and entrepreneurs to Huawei's board of directors? Can we allow more external think tanks to take up important posts in the special committees of Huawei's board of directors? All these issues deserve Huawei's thinking.

Huawei wants to continue to be effective. The key lies in the board of directors.