We have known for decades that the customer matters to business success. Customers are needed for businesses to survive. Hence, paying attention to this stakeholder and their interests has dominated marketing and business strategies. Of course, people also become entrepreneurs because they are in love with their ideas, their products and the feel of running a business, but everyone realises that at the end of the day the opinion of the customer, and hence the decision the customer takes, is what makes the business world go around. It is thus essential to ensure a positive opinion in customers. Indeed, business wisdom says that essentially customers decide what businesses should focus on, produce and sell. As a result, the kinds of products or solutions businesses introduce to the market have to be those that are wanted and expected by the customer – and nowadays their expectations are high (Hyken, 2018). This kind of reality has brought to the fore the image of the customer as an expert whose expectations basically shape the kind of innovative solutions businesses will pursue and invest money in.
For obvious reasons, there is some truth in this perspective. There is no point in developing products and designing solutions that are innovative if the customer has no interest in them. No matter how innovative the product, if it does not sell, the business world will be merciless and your company will not survive. But, as mentioned earlier, only if this sort of logic is applied do we create a unidirectional kind of influence that drives innovation. In other words, the customer’s desires and needs will be recognised as expert advice and, in turn, influence where companies will invest their R&D budgets. Therefore, innovation projects that are not entirely aligned with the customers’ desires run the risk of being cancelled. That risk of cancellation, first in terms of reputation and subsequently in terms of not surviving as a company, obviously introduces a sense of fear of the customer today. And, as we all know, fear usually paralyses thinking out of the box and undermines creative efforts that could bring innovative solutions that may work in the long term, rather than satisfying the short-term, momentary desires of the customer.
Are innovation as a process and customer interest as an outcome best served if fear is so prominent in today’s business world, when it comes down to shaping and cultivating customer relationships? I think not. Business relationships need to be balanced and developed based on a two-way process. First, as discussed earlier, companies do indeed listen to the needs and concerns of customers and provide services and products accordingly. The idea here is a simple one. Basically, it implies that if the customer displays strong preferences for a certain service or product, then that’s what companies should focus their efforts on. However, despite the importance of listening to the customer in order to know what to deliver as a company, this perspective implies that the customer is recognised as a know-it-all. In this case, we assume that the customer is an expert in what they need and in what companies should be able to provide. However, this is an assumption that is not entirely legitimate, as it is also clear from our daily existence that humans work with the things they know, not with the things they don’t (Grant, 2021). Specifically, we may know what we desire, based on the knowledge that exists out there. But, the services and products that are being developed, thought about and researched are not part of the customer’s knowledge box yet, so how then could they ever indicate that they may have a desire for those things? And this point brings us to the second step of the business relationship. Companies also have a responsibility to educate the customer by means of updating them with regard to the kinds of innovations that are happening and how this may transform existing services and products. Taken together, companies in their relationship with customers ensure that they service the customers’ needs – based on existing knowledge – but at the same time break through this cycle of simply serving by also guiding customers to try new and different ways of service and product delivery (Davenport, DalleMulle, & Lucker, 2011).
One company whose leadership has discussed extensively and put in practice this dual nature of customer relationships is the Chinese telecom giant Huawei. The company was founded in Shenzhen in 1987 by Ren Zhengfei and became a global leader when, in 2012, they surpassed the then world leader, Ericsson, in terms of sales revenue and net profit (Tao, De Cremer, & Chunbo, 2017). Up to 2020, the net revenue of Huawei had kept growing, reaching CNY891 billion (US$137 billion) and CNY65 billion (US$10 billion) in net profit (in 2019, the figures were CNY859 billion and CNY63 billion, respectively), but with the tensions with the US in recent years, in 2021 the financial consequences of the US sanctions had a significant negative impact on their revenue. In its rise to become the first truly successful Chinese company at the global level, Huawei owed much to its specific perspective on how to build and shape relationships with its customers.
First, Huawei is known to be the champion in the tech industry when it comes to customer relationships. In fact, according to its founder, Ren Zhengfei, serving customers is the only reason Huawei exists. Huawei sees innovation in the ICT sector as one way to help customers realise their dreams. Huawei has thus one clear value proposition: “to serve our customers.” (Tao, De Cremer, & Wu, 2017) And the company does so in an almost obsessive way. There is a famous quote of Ren Zhengfei: “Everyone in the company must turn their eyes to their customers and their back to their bosses.” And it’s not just a quote; the founder of Huawei also acts accordingly. An illustration of this “walking the talk” concerns the visit of an institutional investor delegation led by Stephen Roach, chief economist for Morgan Stanley, to Huawei (De Cremer & Tao, 2015). Such visits were usually made by venture investors hoping to buy into Huawei. Ren Zhengfei asked Fei Min, his executive vice president of R&D, to entertain the delegation. Later, Roach said in disappointment, “He was rejecting a team with $3 trillion.” Ren Zhengfei’s explanation was quite telling, and it was this: “He told us that he would meet any customer in person, no matter how small they were, but that Roach was not a customer.”
This anecdote also makes it clear that Ren Zhengfei expects everyone in Huawei (including himself) to put customer-centricity as the guiding principle for everything they do, which often requires engaging in self-sacrificing behaviour (De Cremer, 2017). For example, Huawei’s efforts to build the highest wireless-communication base station in the world represents an insightful example of such a sacrificing type of behaviour. In August 2007, Huawei was asked by China Mobile to build two mobile communication base stations on Mount Everest, with the highest base at 6,500 metres. At this altitude, oxygen levels are more than 50 per cent lower than at sea level, causing the four engineers from Huawei to suffer from dizziness, headaches, swollen lips, sleeplessness and even nosebleeds for several days. In line with Huawei’s philosophy of going through hardship, these engineers nevertheless persisted and were eventually successful in their assignment. The feelings of pride in such an extraordinary effort were shared within the company and continue to serve as examples of dedicated customer service. Put together, an important element of Huawei’s customer relationship engagement is not to argue too much with the customer and consider their wishes to be the company’s commands.
But there is also a second element to how Huawei manages their relationships with customers, which is not simply being a follower of the customer’s desires. Putting the customer at the centre in everything they do, the company does indeed put the interests of the customer first, but sees this happening in two rather distinctive ways. After all, they argue, accommodating the desires and needs of customers directly and immediately indicates that, as a company, you care about what drives the customer. But caring also involves more than simply responding to the customer. In fact, it also has a (pro-)active aspect, where the company shows benevolence towards the customer by telling them what they need and why. It’s this attitude that leads Huawei to invest so much in their R&D, to ensure that they innovate and are able to go beyond simply serving the immediate desires and concerns of their primary stakeholder. Note that Huawei is a private company and so does not have to satisfy shareholders, which is usually the case when a company goes public (De Cremer, 2018). As rotating CEO Guo Ping mentioned in 2014: “We should not aim to simply please our customers. To be accountable for customer satisfaction, we need to take their perspectives into consideration, and then draw clear lines for product quality and innovation that we will not cross.”
As Ren Zhengfei has repeatedly argued, Huawei’s “R&D must become the ‘engine’ that drives our company forward to the future. Our R&D must rely on two drivers – customer needs and technological innovation – to build a powerful basic platform.” It is a well-known fact that Huawei in the late 80s and early 90s tried to invest, whenever possible, as much of their small profits in R&D, which Chinese companies at that time did not bother to do. Most of these companies accepted the fact that foreign companies were superior in R&D and therefore focused solely on low quality and low prices. Huawei’s investments have always been more than 10 per cent of their revenue and the company aspires to doubling those investments in the next 30 years (depending, of course, on global and political challenges). What is specific about Huawei’s approach is that they want to foster the development of creative ideas and implementation of innovation itself in the purest form possible (De Cremer & Tao, 2016). Therefore, in line with their intellectually driven work climate, they use 30 per cent of their R&D investment for fundamental scientific research. Decisions such as this fuel the motivation of the company to also inform their customers what it is that Huawei thinks they need and guide them in those investment decisions – sometimes at the risk of challenging the desires of their customers.
In conclusion, any company interested in sustainable and long-term relationships with its customers should truly embrace the value of customer “benevolence”, which implies that, at the same time, firms influence their customers’ choices (by means of innovation), while also being focused on accommodating customer needs and demands. Companies need to constantly explore and innovate together with customers to enable an intelligent world. And, in this process, the responsibility of companies in their relationship with their customers is to be an enabler and driver of this intelligent world.
About the Author
David De Cremer is a Provost’s chair and professor in management and organizations at NUS Business School, National University of Singapore. He is the founder and director of the corporate-sponsored “Centre on AI Technology for Humankind” at NUS Business school. Before moving to NUS, he was the KPMG endowed chaired professor in management studies and current honorary fellow at Cambridge Judge Business School. He is also a fellow at St. Edmunds College, Cambridge University. He is named one of the World’s top 30 management gurus and speakers in 2020 by the organization GlobalGurus, one of the “2021 Thinkers50 Radar list of 30 next generation business thinkers”, nominated for the Thinkers50 Distinguished 2021 award for Digital Thinking (a bi-annual gala event that the Financial Times deemed the “Oscars of Management Thinking”) and included in the World Top 2% of scientists (published by Stanford). He is a best-selling author with his co-authored book (with Tian Tao and Wu Chunbo) on “Huawei: Leadership, Culture and Connectivity” (2018) having received global recognition. His recent book “Leadership by Algorithm: Who leads and who follows in the AI era?” (2020) received critical acclaim worldwide, was named one of the 15 leadership books to read in Summer 2020 by Wharton and the kindle version of the book reached the no. 1 at amazon.com. His latest book is “On the emergence and understanding of Asian Global Leadership”, which was named management book of the month July (2021) by De Gruyter. His website: www.daviddecremer.com
References
- Davenport, T.H., DalleMulle, L., & Lucker, J. (2011). Know what your customers want before they do. Harvard Business Review. Retrieved from: https://hbr.org/2011/12/know-what-your-customers-want-before-they-do
- De Cremer, D. (2017). Making customer centricity work for your company. The European Financial Review. October-November, 64-7.
- De Cremer, D. (2018). On the joy of not being a listed company. The World Financial Review, March-April, 26-9.
- De Cremer, D., & Tao, T. (2015). Leading Huawei: Seven leadership lessons of Ren Zhengfei. The European Business Review, September/October, 30-5.
- De Cremer, D., & Tao, T. (2016). Creating Effective Organizational Systems through Experimenting with Human Nature. The European Business Review, November/December, 6-10.
- Grant, A. (2021). Think again: The power of knowing what you don’t know. Viking Books.
- Hyken, S. (2018). What customers want and expect. Forbes. August 5. Retrieved from: https://www.forbes.com/sites/shephyken/2018/08/05/what-customers-want-and-expect/?sh=22be1e0b7701
- Tao, T., De Cremer, D., & Chunbo, W. (2017). Huawei: Leadership, culture and connectivity. Sage Publishing.
