An in-depth study of Huawei Technologies reveals how innovative organizational structures and radical leadership development strategies create a ‘super-fluid’ corporation ready to adapt to the challenges of continuously changing customer needs.
Many companies struggle to keep up with today’s supercharged, constantly evolving competitive markets, where customers needs, products and technologies change at ever-increasing speed.
An in-depth study of the global telecom equipment leader Huawei Technologies by researchers from Cambridge University’s Judge Business School and China’s Zhejiang University’s School of Management offers a detailed lesson in what the researchers call ‘super-fluidity’: the ability of a company to change at high speed its structures and processes to meet evolving customer needs.
Organizational structure is key. Most corporations are rigidly organized into product-centric global strategic business units with their own embedded functional support services, such as HR or finance. Huawei’s organizational ‘twisted pretzel’ structure is based on broad business groups supported by shared services groups.
Huawei’s organizational structure has been continuously adapted and changed to meet evolving customer needs. Recognizing that centralized command from headquarters was too rigid to serve a growing global customer base, it adopted a country-based structure with ‘representative offices’ connecting with customers in their countries through their sales teams.
When its global customers began demanding customized network solutions, which required consolidating resources and capabilities across product lines, functional units and different countries, Huawei created district offices covering 16 regions. Sitting above the country offices, the district offices can marshal resources at the regional level to support new customer solutions teams in the representative offices.
The company’s structure also includes customer-centric sub-units. For example, a global finance centre in London helps global customers manage the financial risks of projects. Huawei also launched joint innovation centres around the world, through which it partners with customers in building the future.
Another important structural innovation in terms of fluidity is the organization of top talent into one ‘resource pool’. No longer tied to specific units or specific functions, this pool of top talent allows the corporation’s most experienced people to flow — swiftly — to whether they are needed as they are needed.
As evolving customer needs demand the coordination of resource and capabilities coordination at a global level, Huawei created a U.S. military-inspired ‘Joint Chiefs of Staff’ decision-making unit that can rapidly deploy its customer solutions teams to different problem areas.
Other innovative steps taken by Huawei:
Support services delivered through flexible functional platforms. Huawei recognized early that duplicating support functions, such as HR finance or procurement, in each of the teams or even business groups would hamper flexibility. Over time, the corporation would create 10 major supporting functional platforms, covering R&D, manufacturing, marketing and sales, HR, finance, and procurement, as well as administrative service, knowledge management, data sharing—and between R&D and manufacturing, a dedicate test and trial function.
The rotation of middle and senior management. Many companies rotate graduate recruits and other potential leaders in the company through various jobs to help them learn the company and the industry. Huawei has turned the concept of job rotation upside down: it is middle and senior management leaders who rotate through different functions and locations around the world, including the CEO.
Specifically, seven top managers rotate as COO of the company, and three of the seven rotate as CEO, not staying more than six months in the position before giving it up for the next senior manager in the rotation.
At first glance, this may seem more disruptive than helpful. Can leaders fully understand their mandate, build relationships with teams, and implement long-term strategies in six-month terms? Huawei believes, however, that any disadvantages are offset by the advantages of the rotations: motivating leaders to act quickly; continuously adding ‘new eyes’ to a position, which breaks the attachment to the past that keeps entrenched leaders from experimenting and innovating; avoiding the empire building that occurs when leaders accumulate power and resources and become focused on protecting their turf; and providing the company of pool of top leaders who all bring a broad range of perspectives to the company’s challenges and decision-making, rather than the perspectives of life-long specialists in one function.
A change-obsessed culture. Huawei’s culture is future-obsessed and change-obsessed. Founder Ren Zhengfei set the tone early in the company’s history, firing en masse 1000 employees and later 7000 employees; each time, the fired employees had to reapply for their jobs based on their qualifications and performance. In addition to the radical senior management rotation described above, senior leaders are encouraged to retire at 45, to bring new blood to the company’s top ranks. In an anonymous online forum, employees are encouraged to openly and freely criticize policies, management and even individual leaders. The message is clear: to succeed, forget the past, don’t stay entrenched in the present and seek instead to create change that is both visionary and pragmatic.
Creative destruction is a familiar phrase, but never has it been more radically and successfully applied that at Huawei. Your company may not be ready to rotate CEOs every six months or make thousands of employees reapply for their jobs. The Huawei example nevertheless highlights the diversity of opportunities and areas where companies can break entrenchment and attachment to the past and present through innovative organizational structures, reconfigured support functions and radical leadership development strategies. Such measures are not theoretical or hypothetical: they work in the real world because they fit the need of today’s real-world customers.
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