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Huawei: Innovation and Commercialization

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Huawei: Innovation and Commercialization

In the contemporary business environment, innovation has become essential to businesses, regardless of the industry in which they operate. Companies need innovation in order to achieve and sustain competitive advantage, lower costs, meet consumers’ needs and differentiate themselves from competitors. However, in order to achieve these effects, businesses have to engage in innovation management, which allows translating innovation into sustainable profits, thus commercialising it (Bessant & Tidd, 2015). Understanding how leaders in innovation achieve successful innovation management and commercialisation is necessary for managers to implement this knowledge in their companies. The present report will focus on how Huawei has managed to commercialise innovation, achieving a higher market share and growing sales through the process of innovation management.

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Background

There are two main ways in which businesses can commercialise innovation. On the one hand, they can use it to identify or create new opportunities for making profits (Bessant & Tidd, 2015). On the other hand, they can apply innovations to improve the ways in which they serve existing markets (Bessant & Tidd, 2015). For large tech companies, such as Huawei, both aspects are vital since they help to attract new customers while keeping pace with the latest market trends and winning over competitors. To develop innovation and manage it internally, Bessant and Tidd (2015) propose a four-step process model, which consists of “recognizing the opportunity, finding the resources, developing the idea [and] capturing value” (p. 21). By applying this model, companies can ensure that their products and services are innovative and provide superior value to customers, thus achieving a more significant market share and growing sales.

Huawei is a large tech company that currently focuses on developing, designing and producing mobile gadgets, such as smartphones and tablets, as well as various accessories and laptops. Huawei is now regarded as one of the most innovative companies in the world (“Huawei,” 2020). Its most significant competitor is Apple, which currently has the highest market share in the tech market (“Huawei,” 2020). Huawei voiced its plans to win Apple over “step-by-step, innovation-by-innovation” in 2016, and has been developing its product portfolio and operations consistently in order to keep up with and surpass the current market leader (“Huawei,” 2020, par. 1). Hence, innovation management is crucial to Huawei for achieving its long-term goals.

Innovation Strategy

Before reporting on the innovation management process at Huawei, it is crucial to highlight the company’s strategy with respect to innovation. Over the years, Huawei’s primary goal has been to develop its product portfolio consistently by creating and introducing new features that would attract customers and increase its market share (Zhang & Vialle, 2014). Recently, the company has announced a broader innovation strategy to solve current theoretical problems in engineering and ICT and apply new theories and knowledge to create entirely new technologies. As explained by William Xu (2019) at the 16th Huawei Global Analyst Summit, “today’s innovations are mainly built on theories from decades ago, and are mainly about technological and engineering innovations” (par. 4). The company’s current goal with regard to innovation is to resolve theoretical and engineering bottlenecks that are currently holding technological progress back and introduce real innovations based on new knowledge and capabilities (Xu, 2019). The company no longer seeks to focus on customers’ needs, instead wishing to leverage innovations in the tech sector as a whole to support its future development. This is a highly ambitious goal that requires consistent innovation management in order to support the R&D function. At the same time, achieving this goal would also offer commercial benefits to Huawei, making it an uncontested market leader in the tech industry. Thus, the company’s innovation strategy, although not explicitly focused on financial gains, still involves the commercialisation of innovation. The next section of the report will explain how Huawei manages innovation to achieve financial and strategic market benefits at all steps of the innovation management process.

Innovation Management

Recognising Opportunities

Recognising opportunities is the first step of the process model for innovation and entrepreneurship since it is vital for companies to know what innovations are needed. As noted by Bessant and Tidd (2015), “innovation triggers […] could take the form of new technological opportunities or changing requirements on the part of markets [or] come as a result of buying in a good idea from someone outside the organization” (p. 21). Huawei identifies opportunities based on market research and analysis, as well as based on various industry regulations and requirements (Xu, 2019; Zhang & Vialle, 2014). For instance, the company anticipated the increased need for cloud-based solutions and artificial intelligence software before many other companies showed interest, allowing the company to develop its own solutions (Xu, 2019). Throughout its geographical expansion, the company also ensured the fulfilment of various local product requirements, which stimulated innovation further (Zhang & Vialle, 2014). Like other tech companies, Huawei also collects data on the use of its products and services and user feedback, which can also trigger innovation.

Finding the Resources

In order to apply their innovation strategy successfully and gain commercial benefits, it is essential for companies to possess the required resources. Huawei’s innovation strategy requires financing and human resources, which the company seeks to acquire. Financial resources are gathered primarily from the company’s own funds, which is essential for Huawei to modify its R&D budget as needed. For instance, in 2019, the company invested $9.2 billion in R&D (“Huawei,” 2020). With respect to human resources, Huawei is heavily focused on engaging talents to staff its R&D department. According to Lin et al. (2018), about one-half of the company’s 170,000-people workforce is employed in R&D. The company sources talent both from its home talent and from abroad and holds various events and contests to acquire new talents internationally, such as the Huawei Innovation Contest.

Developing the Idea

Developing an idea into a product or service that can be purchased by consumers requires successful development, production and marketing processes. At Huawei, platform development is the core strategy used here, wherein a product platform is built first, and any innovations are generated by improving the platform and adding new features (Zhang & Vialle, 2014). This contributes to the company’s agility in innovations since products and features are not created from scratch. To support production, Huawei applied innovative strategies in its supply chain management, which allow finding the most cost-efficient solutions for materials, equipment, and other production needs (Bengtsson & Wang, 2016). In marketing, the company’s approach has also been rather creative. Zhang and Vialle (2014) explain that Huawei first focused on low-margin market segments, which are not attractive for industry giants. This enabled the company to scale up and attract loyal customers by offering more innovative products than its competitors in low-margin markets. Then, the company introduced high-end tech products, thus starting to compete with Apple and Samsung in the high-profit market. Therefore, innovative solutions in development, production and marketing supported Huawei’s process of commercialising innovation.

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Capturing Value

One of the most critical steps in commercialisation is making sure that customers derive superior value from a product or service since it helps to attract and satisfy customers. Huawei adds value to its products in two main ways. On the one hand, the company pioneers many technologies that are not available to its competitors. As of 2017, the company “has received 62,519 patent licenses, of which over 90% are invention patents” (p. 83). Hence, Huawei products are valuable to customers due to their unique, innovative features. On the other hand, Huawei also ensures that all its innovations meet customers’ needs. The company’s market is highly diverse, and so are the products it offers, meaning that every customer can find the functions and features that match their needs (Zhang & Vialle, 2014). Hence, Huawei’s approach to innovation translates into product value for customers.

Supporting Processes

Besides innovation management, there are also other organisational features that can hinder or improve innovation in a company. By ensuring that the organisational environment, structure and operations promote innovation, Huawei can develop its innovativeness further. The main corporate aspects at Huawei that encourage innovation are leadership and collaboration. These practices are part of the company’s operations, and they contribute significantly to research and new product development.

Firstly, the company applies a unique approach to leadership, which focuses on developing talents and encouraging employees to work to achieve a shared vision while supporting organisational change and flexibility. The company has three CEOs that rotate throughout the year, thus introducing fresh perspectives on decision-making and strategy (“Huawei,” 2020). The company’s dynamic capabilities have supported its transformations over the years, allowing the company to execute its strategic plans and ultimately achieve its long-term vision (“Huawei,” 2020). As the company has recently introduced a new vision as part of its innovation strategy, this approach to leadership will likely support its innovativeness and growth in the future.

Secondly, collaboration is one of the most significant features of Huawei that stimulate innovation through knowledge-sharing and organisational learning. Scholars note that Huawei is an excellent example of international cooperation since the company has managed to establish links with the key research and education institutions while also creating global open innovation networks (LIn et al., 2019). Collaborating for innovation allows Huawei to gain access to new talents and ideas while also supporting the process of idea development through joint thinking. In a report by employees of Huawei’s Technology Cooperation Department, the authors also explain that the company also strives to generate value from collaborations and has set processes in place to do so (Lin et al., n.d.). Hence, collaboration and related processes are crucial to the company’s innovativeness.

Recommendations

On the whole, the report shows that Huawei has a strong innovation strategy that is consistently applied using innovation management. Still, there are two recommendations that can be offered to Huawei based on the data reviewed in the report. Implementing these recommendations could contribute to future innovation management at Huawei, thus supporting the company in commercialising its innovativeness.

The first recommendation concerns the application of the company’s new innovation strategy. As explained by Xu (2019), the company’s focus changed from meeting customers’ needs to solving issues that hinder innovation and the development of brand new technologies. While this goal is admirable, it is essential for the company to ensure that the latest theories and methods developed by researchers and engineers are applicable. Spending time and resources studying solutions that have no practical value to customers would cause the company to incur financial losses, and relying on useless innovations too heavily could affect its market share negatively. Therefore, the company should evaluate each theory and idea carefully to understand whether it could provide any benefits to consumers when applied to products, features, or services.

The second recommendation concerns the training and development of human resources at Huawei. Based on the resources reviewed in the report, it is unclear whether the company focuses on developing its existing talents as much as on attracting new ones. Research shows that training can significantly increase the effectiveness of companies’ R&D functions (González et al., 2016). Hence, it is suggested that Huawei should continuously improve and develop the training and development strategies used in human resources management. This would help to ensure that its existing employees can deliver the best results and contribute to the achievement of the company’s vision.

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Conclusion

The report highlights the importance of innovation management for commercialising innovation. The information gathered from case studies and other sources shows how Huawei applies the innovation management model and supporting organisational features to gain market share and profits using its innovations. It Is evident that innovation is a significant part of the company’s strategy, and Huawei’s future plans are based mainly on its capacity to deliver innovations. The recommendations provided in the report will support the company in fulfilling its strategic goals.

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