Huawei: Back To The Future?

Ten years ago, Siemens, Ericsson, Alcatel, Motorola, Nokia, and Lucent – to name a few – had operator, enterprise, consumer and handset divisions. Today, Siemens has sold all of its communication equipment businesses and Siemens Enterprise Communications is a joint venture of Siemens and the Gores Group. Ericsson exclusively focuses on operator customers after selling off its PBX division to Aastra and its share in the Sony-Ericsson handset joint venture to Sony. Alcatel-Lucent, who recently sold its Genesys call-centre software subsidiary, wants to sell the enterprise business to concentrate on telecom service provider customers. Motorola Solutions is focusing on the enterprise while the Motorola Mobility handset business is now part of Google. Nokia is in the handset and content business and wants to get rid of its share in Nokia Siemens Networks who in turn is focused on the operator customer. Lucent and Alcatel are now Alcatel-Lucent, and Avaya is the former Lucent enterprise division.

Even Cisco, who in the last ten years steadily built out its networking empire, is now getting rid of products and customer segments – the Flip video camera division the first victim – and is refocusing on its core business.

Yesterday’s all-you-can-sell-to-everyone network equipment manufacturer is extinct today.

Yet, on its ten year mission to seek out annual revenues of more than US$100 billion per year, Huawei seems to be boldly going where others have been before.

Twentieth century telecom manufacturers built the PBX for the enterprise, the switch for the operator and the (mobile) phone for the user. Huawei aims to provide the cloud for the enterprise, the pipe for the operator and the device for the user. They call this the cloud-pipe-device strategy. And they want to do this globally.

On the global execution front they face significant challenges. The US is worried that Huawei’s ties to Chinese government and military poses a threat to national security. Enterprise and consumer customers outside Asia are not familiar with Huawei as a brand. Huawei needs to build a global enterprise partner channel – outside its operator customers – from scratch.

But the real challenge might be the end-to-end cloud-pipe-device strategy itself. This is the era of networked ecosystems, where hubs and connectors drive and influence ecosystem behavior. Cloud, pipe and device are all hubs within the larger ecosystem of connected consumers, workers, and the enterprise. Those companies that are able to drive and govern a hub are rewarded with greater market power, profits and revenues than those that are not. The Wintel (Microsoft Windows and Intel) combination has successfully led the PC hub for twenty years but is now threatened by Apple and Android. Google has done the same for the web hub for ten years, but is now threatened by Facebook.

In this era, where focus, adaptability and agility are winning over breadth and muscle, pursuing a strategy that is based on cost leadership and end-to-end ecosystem instead of ecosystem hub dominance could prove to be a bridge too far.

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About Pim Bilderbeek