Author: Zhang Lianyi

In 1998, Husayn Hsu walked into Huawei for the first time and found it to be a dynamic enterprise filled with engineers and senior engineers in their twenties.

“In this kind of environment, people are like being washed by waves. Based on intelligent organization, Huawei gives employees the greatest opportunities and incentives, allowing them to continuously experiment. If you succeed, you move up; if you fail, you move down.” Husayn Hsu seized every opportunity. During his 17 years at Huawei, he experienced various job positions and gradually broadened his vision of the business, accumulating management experience.

Husayn Hsu is a member of Huawei’s Human Resources Management Philosophy Editorial Committee and one of the main authors. He is also the main designer of Huawei’s Human Resources Management Philosophy, Financial Management Philosophy, and Business Management Philosophy Executive Empowerment Program. After retiring from Huawei, he wrote the book “Huawei’s Growth Method.”

Huawei’s philosophical thinking can be divided into three parts:

1. Business Management Philosophy – how a company focuses on customers, targets customer needs, and creates value for them. Huawei believes that the road to product development is based on customer needs. The goal of enterprise management is the construction of process-oriented organization, which means that processes and organizations must target customer needs.

2. Management Philosophy – how a company’s resources can adapt to business development and achieve long-term effective growth. Companies must first grow. The core reason why Huawei can promote many young people is because the business continues to develop. Secondly, companies must also grow effectively, which means that the company’s operations are healthy. Huawei’s “health” is reflected in financial indicators. For example, Huawei’s net profit margin has long been maintained at 8% or higher, which keeps it above the bottom line for survival. Finally, companies must grow in the long term. The abilities of employees are constantly improving, and only by maintaining sustained growth can the company offset employee demands for organizational opportunities and benefits. This is also why Huawei established “Legion” and other units. One cannot only consider growth in the current year but must also think about the next few years.

3. Human Resources Management Philosophy – how a company adjusts production relations, stimulates productivity, and increases the value of human capital.

This conversation with Husayn Hsu is not only to understand his understanding of intelligent organization but also to explore issues such as “Huawei’s layout intentions in the automotive field” and “how car companies can learn from Huawei’s intelligent organization.”

Below is the conversation between “Electric Vehicle Observer” & “Cyber Car” and Husayn Hsu:

Intelligent Organization should be Flexible

Q: Some people believe that in the era of intelligent electric vehicles, what is needed is intelligent organization. Do you agree with this view?

Husayn Hsu: I strongly agree. Because tactical efforts cannot solve strategic problems. If you want to produce intelligent cars, can you produce them without an intelligent organization and an intelligent entity? It’s not feasible; you won’t be able to find the answer to the problem on the level where the problem occurs.

Q: How do you understand intelligent organizations?

Husayn Hsu: I understand intelligent organizations as being flexible.The traditional concept of cars is just a means of transportation with limited variation in A type, B type, C type, D type. It takes a very long time for traditional cars to change. However, according to the current definition, an intelligent car is not only a vehicle, but it is also a smart terminal for human interaction with the external world. There is a wide range of diversity in external demands that is complex, diverse, and requires a quick response, so it needs an organization that can keep up with it.

Currently, cars are mainly driven manually, but in the future, they will be unmanned. I believe that no company dares to claim that they can achieve unmanned driving because there is one issue that remains unsolved, namely the ability to handle various rare scenarios. Previously, there have been accidents with smart cars due to the inability to identify stationary container trucks. Only when all kinds of small probability scenarios are considered, can unmanned driving become a possibility in reality. Otherwise, it may cause loss of life, so unmanned driving must be viewed from the perspective of respecting life.

The implementation of unmanned driving obviously cannot follow the traditional way of R&D, manufacturing, and sales in traditional organized model. In the past, vehicle manufacturers were designed with a lean manufacturing system; in the future, it will be based on a flexible manufacturing system. Many things need to go through multiple scenario simulations and demonstrations, through digital reshaping, and overturning the current management and manufacturing system to realize this automation, intelligence, and interconnection. Then, using big data to obtain data analysis of various small-scale scenarios to ensure that the produced car can truly reflect respect for life. This certainly requires a flexible organization to accomplish.

I believe that a flexible organization should include several aspects: first, it should be open-source. It needs to deal with various complex external situations and demands, while maintaining a sense of sensitivity. Now, many innovations are created by shutting doors, creating in isolation, and relying solely on the founder’s idea, but these innovations cannot be sustained.

I highly agree with Huawei’s model. It is a truly open-source organizational model, centered around the customer. It sets the organizational boundaries at the customer end. This means that where the customer is, the organizational boundary is. In reality, it forms a symbiotic pattern between the customer and the company by working together. This way, external demands can directly break the internal steady-state, continuously import external demands, and keep the organization in an active state.

Therefore, I believe that the future intelligent organization should be open-source, only through open-source, can the organization continue to interact with the outside world and get sustainable innovation, and get rid of dependence on individuals.

Second, it should be a distributed management system. That is, to modularize business processes, forming responsiblilty centers, and then connect the modularization process in a certain way. The distributed management system reduces the ability requirements of individuals. It is achieved through platform-based operations, where the organizational ability is built. I think this operational approach is the most sustainable and effective.### Flexibility at the End is Important

Traditional organizations issue commands from top to bottom, but I believe that this way of functioning will be slower in the future. The grassroots units usually have the most people, so once these sensors or end devices fail, relying on the top to stay sensitive will result in issues in responsiveness to customer demands and in handling various complex situations. Therefore, the sensors and execution units at the end market should be highly sensitive and constantly feedback demands to the middle and back-end. Then, the middle and back-end can respond to the front-end through management and data systems. I believe the value of the back-end organization lies in the front-end organization continuously capturing external changes and demands, while the back-end organization transitions from a control-based model to a service-based model.

Dealer Models are More Effective for Leveraging Resources

Question: When the manufacturing end of the automotive industry becomes smarter, is the direct-selling model more suitable for this open organizational structure than a distribution model in terms of marketing?

Hu Saixiong: Regardless of whether it’s a direct-selling or distribution model, I think the fundamental issue is whether your management system can be uniformly managed. If your management system is uniform, what problem is there with distribution? Moreover, if you really want to maintain a flexible organization, I personally believe that it may be more effective to find ways to use effective distribution methods.

Truly capable people emphasize leveraging resources. To achieve rapid expansion and flexible response, companies should actually leverage external resources and capabilities. We need to open up and integrate these resources to achieve our business goals. If an organization becomes vertically integrated and does everything on its own, it will actually be slowed down at times, and every local deficiency will become a bottleneck for the system. The characteristic of a market economy is integrated external excellent social labor division. Therefore, we need to open up and integrate.

Why do some companies emphasize direct sales instead of distribution? Many companies may think it is more difficult to manage distribution. If it is difficult to manage, it indicates that the company may have management deficiencies and needs to supplement its management capabilities, instead of giving up and doing everything themselves.

Some executives make the mistake of seeing subordinates doing something and feeling uneasy, so they end up doing everything themselves. This results in exhaustion and not doing a good job. Everyone’s time and capacity are limited, and it is impossible to do everything by oneself.

Huawei used to do the operator market, because it was customer-focused and relatively large, so it was done in a direct sales model. However, with the consumer market and such a large customer base, how can one do everything on their own? I think we should do more through high-quality social resources and capabilities, unite all available forces, and the energy will become greater and greater. Why must one turn others into enemies?

All Decisions are Actually Gambling Behaviors

Question: In recent years, some traditional car companies have also proposed transformation towards a smart organization. Compared with new car manufacturing companies, is the transformation more difficult for these companies that carry heavier “baggage”?

[End of text]Hu Saixiong: I think it’s very difficult, for example, some car companies have traditional car business and then go to do new energy cars. In a sense, their new energy cars are actually eliminating their fuel cars. When the left hand and the right hand play games, they will face great difficulties.

You see why new energy vehicles are called out loud in China, such as NIO, XPeng, and Ideal. In fact, our traditional car companies are also doing new energy vehicles, but the concept of making cars still retains a deep traditional imprint.

People have thinking inertia. It is very difficult to completely clear it suddenly when you are familiar with a certain field, just like it is hard for people to pull their own hair up into the sky. What should we do in this kind of situation? To achieve transformation, I think a business sector or company that is completely different from traditional cars should be formed. Their internal personnel should also include some truly Internet-based systems.

The group can form two types of personnel who can compete with each other in the organization. Just like military exercises, one side is the Red Army and the other is the Blue Army. The Red Army and the Blue Army can attack and defend each other through competition. In this process, they can find their own development rules, innovation opportunities, and growth space.

Huawei has a system of Red and Blue Armies. How can you ask the Red Army to think about the Blue Army’s affairs? The Red Army and Blue Army of Huawei are actually two organizations that are mutually offensive and defensive. They are also the natural selection result.

Question: Can we understand that your point is that traditional car companies retain some traditional organizations in the fuel car business. New business units, or companies, should do smart organization things, right?

Hu Saixiong: Yes.

Question: Will the team that makes traditional cars have any concerns that they will not be smart enough in the future and will be abandoned?

Hu Saixiong: They also need to find ways to exist and develop. Doesn’t this activate the traditional business? Fuel car teams and new energy teams are different organizations, and their current sales and future survival and development space are different, which means that the organizational structure cannot be managed with the same set of organizational structures.

Question: But both need to expand towards smarter direction in the future.

Hu Saixiong: Yes, this also involves decision-making issues. Our senior management encounters decision-making every day. Is there a scientific decision in this world? I don’t think so. All decisions are actually a kind of gambling behavior, and they are actually making trade-offs between interests. Risks and benefits, risks themselves are also benefits.

The smartization of fuel cars, because of its “burden”, considers more how to make the existing losses minimised. The “lightweight fight” of electric vehicles emphasizes more on how to make the future opportunities maximised. These are different assumptions, and the differences in the action strategies behind them will also be huge.

Car companies should learn the “metaphysical” things of Huawei.

Question: Many car companies are learning Huawei’s organizational structure. Do you think there is a possibility of successful replication for them?# Translation

Huawei: I think many companies fall into a misconception by focusing solely on tangibles rather than intangibles. I often advise companies not to try to become Huawei. Every industry has its own distinctive features, and companies need to combine Huawei’s intangible values with their own strengths to form their own logical system.

Question: Can you be more specific about Huawei’s intangible values?

Huawei: For example, Huawei values customer satisfaction. Many companies just concentrate on product development.

Question: Many companies claim that customer satisfaction is the most important thing.

Huawei: Yes, but there’s a difference between them and Huawei. Huawei puts customers first, meaning that when conflicts of interest arise with them, customers’ interests must be given priority. In the face of these oppositions, we strive to find resolution and achieve harmony. Value is created through this resolution. However, a lot of other companies see this as a zero-sum game.

Huawei’s intangible values also include the emphasis on the people who fight for the company, contributions made and compensation earned by those who make outstanding contributions are greater, whereas many other companies adhere to the concept of egalitarianism. Some private enterprises also claim that they prioritize people who work hard, but there are differences with Huawei.

Huawei’s emphasis on those who fight for the company means that those who make big contributions will receive greater compensation. But the same is true for those whose relative value is not greater. Part of that compensation is also shared with the team, as cooperation is necessary for the team to succeed. People who can contribute more earn more, but they also need to give up some benefits to others. For example, in medicine, if a doctor performs an operation, not all the money should go to him, as the role of the nurse in the surgery is also significant.

Some businesses focus only on incentives for a minority of employees, ignoring the majority. This will create a team of individualistic heroes, which may cause problems. Huawei upholds its commitment to its passionate employees, slowly building their wealth rather than offering overnight fortune. For example, many companies offer original shares to their start-up teams, which can bring them millions once the company goes public. In Huawei’s view, it is impossible to soar with wings of gold.

Question: Do you think any auto companies meet Huawei’s standards?

Huawei: In terms of customer satisfaction, I believe that NIO does an outstanding job. Its sales force is not focused on pushing vehicles but on helping users answer their questions. This is in line with their customer-centric brand.

Question: You mentioned the entire system, from the company structure to employee assessment. Nowadays, many companies have adopted OKRs to motivate employees in intelligent organizational structures. Do you believe that OKRs can motivate employees more effectively?

Huawei: Firstly, I don’t think this tool will bring about any fundamental difference. OKR is just a goal and key result-based assessment, indicating that whenever we do something, we must aim for the end-result goal. This is similar to KPI. We must find the essential performance indicator. I do not think these two tools are essentially different.You are like Huawei, which has been successful for decades and has always been KPI assessed. Many companies perform poorly in their KPI assessment and mess things up. Even if they bring in another tool, they will still fail, don’t you agree? They don’t understand the assessment criteria. Do you think there is a perfect tool to solve management problems in the world? Actually, these people do not improve their understanding of management, but have differentiated demands for the tools. I think this may be a reversed way of looking at things. In fact, what is critical in an enterprise is the index that can truly bring value to the enterprise, which is the index of results, rather than process-oriented things. Process-oriented things are used by managers for self-measurement or management.

Q: You have been mentioning Huawei just now. If you had to describe Huawei’s intelligent organization with one word, what word would you choose?

Husseyin: “All-Out Defense.” I think this is the soul. In other words, as Huawei says, “Toast to victory and fight to the death in defeat.”

Traditional organizations are particularly concerned with boundaries and define functional divisions very clearly, making such organizations lack vitality. The outside world is not something we can define. After the pressure comes back, there will be many changing things. How can we deal with the things that were not defined at the beginning? How can we define the changing things? I have never heard of a soccer team that is all-out defense and has boundaries on the field.

Therefore, the characteristics of a flexible organization, in my opinion, is that it should be very flexible inside, like our bodies, to respond flexibly to external changes, and to interact with hands, feet, and brains. Huawei does this very well. Its whole organization system is the frontline calling for artillery fire, while the rear provides support and can quickly coordinate with each other. Intelligent organizations should achieve such an effect where everyone is responsible for the company’s goals.

The problem with many companies is that they have too many responsibilities and boundaries in their minds. Even if they draw the boundaries of the organization more clearly, they will become unclear in the future because the situation is constantly changing. This actually provides some departments with reasons to shirk responsibility. Huawei doesn’t define organizational boundaries much. We emphasize the positioning of responsibility centers, and each organizational unit dynamically captures changes in boundaries, crosses boundaries moderately, and allows each organization to maintain a sensitivity, a tension, and a business sensitivity. Doesn’t this organization become intelligent?

Yesterday (December 12th), I had tea with a senior executive from Huawei. He said that working at Huawei feels like your brain is always in a state of alertness. The mobile phone must be on for 24 hours. You’re always worried about not receiving information for fear of delaying things. Isn’t this a really impressive aspect of Huawei, maintaining this kind of vigilance for every member of the 200,000 team? Besides success, it really has no other way to go.

Q: Indeed, Huawei has always been able to quickly adjust and respond to business, mainly due to their all-out defense strategy, right?

Husseyin: In addition to this reason, I think there are some underlying things that are equally important, which are not solely responsible for Huawei’s success.# Huawei’s Three Principles for Talent Retention

Huawei emphasizes the importance of continuous learning, organizational capabilities, and long-term incentive mechanisms for talent retention rather than individual competency. Huawei promotes lifelong learning so employees can adapt quickly to changing demands in any role. Strong organizational capabilities diminish the need for individual competencies while increasing talent mobility within the company. Long-term incentives are global and not affected by job relocation, reflecting mutual interests for sustainable success.

Huawei’s Collaboration with Xiaokang is a Prototype

Q: Under pressure from the United States, Huawei has been venturing into the automotive industry. From your perspective, has Huawei entered into the automotive industry and touched on car manufacturing, or is it satisfied with being a supplier?

A: I believe this is not an issue of capability. Huawei can definitely manufacture cars, but it’s a strategic issue.

Based on my understanding, as Mao Zedong once said, “Unite all that can be united.” This is what Huawei advocates. Therefore, the company’s original approach was to turn many people into its enemies through direct sales. However, if I am an upstream provider, and my product is integrated into other cars, I can unite all car manufacturers rather than be in opposition to them.

Again, it’s the power of leveraging. If, for example, my product is integrated into Xiaokang or Changan, every car they produce is like a money-printing machine for me. But if I make my own car, I compete with all other car manufacturers, which involves choosing interests.

Q: We’ve seen Huawei’s cooperation with Xiaokang, which includes software, hardware, and factories. How does Huawei interpret the term “car manufacturing”?

A: Huawei’s cooperation with Xiaokang is a prototype, a demo. The company wants to boost credibility. It’s like working with someone excellent. When you succeed, is it because of you? Not necessarily. But when you work with someone less strong, and you perform well, it shows your strength.Therefore, I believe that Huawei even leads the way more than typical suppliers. This is one of Huawei’s strengths in breaking boundaries and helping customers succeed. We don’t just say that making cars is your job, and we provide you with supplies. Instead, we work with customers to develop and innovate together. This is a very important experience that Huawei has gained in the traditional telecommunications industry. We can apply this experience to the automotive industry.

“Legion” Aims to Help Customers Find Their Own Customers

Q: In fact, in addition to the automotive business, Huawei recently held a Legion Formation Conference. What is your opinion on the Legion tactic?

Hu Houkun: The Legion is industry-oriented. After the Consumer BG was suppressed by the United States, it has not yet recovered. With so many people at Huawei needing to eat, we must develop new areas of business to deal with this challenge in reality. The establishment of the Legion is actually a way for Huawei to address the problem from the customer’s perspective and help customers find their own customers in the industry application field. Many 5G networks have been built, but 5G applications still have significant obstacles. It is like building a highway without vehicles running on it. It will affect the development of subsequent businesses. Therefore, Huawei chooses to help operators find their future customers and help connect the end links.

Where does the real big data traffic of 5G come from? Industrial applications. The traffic generated by C-end applications is very small, and the large data application of industry is the true big data traffic source. Therefore, I believe that Huawei’s legion should target large data applications, and enable customers’ customers to have demand, customers to have business, and Huawei to have business. This can establish a virtuous cycle.

Why do we need to establish so many legions? Because we don’t know which one will succeed. This is what Huawei often calls the “horse racing mechanism”. One or two links will compete and win, and then we can replicate this model in other industry fields.

Q: So do you think that establishing the Legion is necessary at this time?

Hu Houkun: Yes, it is necessary and inevitable.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.