Where Does Innovation Come From Nowadays?

By David De Cremer 

For innovation to take place in the new technological era, collaborations that are open and flexible need to develop, the author argues, as those are the best conditions for all parties involved to learn, pursue their own interests whilst creating shared value for society. A Chinese company that has been focussed on developing this type of innovative process and outcome is Huawei.

We live in a world that is constantly changing. Global forces influence local practices and new structures are quickly emerging to replace more traditional ways of working. With change also comes the need to stimulate and explore new ways of generating knowledge that will lead to innovative and successful approaches to the new situation that has emerged. How can our institutions in such challenging conditions survive to remain innovative?

It is important to realise that innovations in today’s world depend increasingly on how organisations operate and interact within networks of firms and manage to coordinate such interactions in optimal ways. This reality indicates that today a complex ecosystem has emerged when it comes down to innovation. And, even more importantly, because of the necessity to work and function within networks, everyone has their place in the process leading to innovation. Two important institutions that have a significant impact on how innovation is transforming business and society concern companies and academia. In the last decade, the collaboration between the corporate and the academic world has intensified because we want our basic research to generate more practical applications and research funding for this fundamental type of research – usually provided by governments – is gradually decreasing. A Chinese company that has been focussed on developing and contributing to this type of collaboration is Huawei.

It is important to realise that innovations in today’s world depend increasingly on how organisations operate and interact within networks of firms and manage to coordinate such interactions in optimal ways.

Huawei is Chinese in its foundation but has a strong global appeal (more than 40 000 non-Chinese employees – out of 170 000 – are employed) that contributes to its successful R&D efforts (Tian, De Cremer, & Chunbo, 2017). In the fiscal year of 2017 Huawei´s revenue reached CNY603.621 billion (US$92.549 billion) and CNY56.384 billion (US$7.276 billion) in net profit. With respect to promoting innovation by means of research, the Huawei innovation research programme is the company’s flagship funding initiative. It provides funding opportunities to universities and research institutes. The reason for such an initiative is the idea that for innovation to emerge companies need to have an open and flexible mindset to prepare people for a world that we do not know yet.

To promote such reality, the business world has started to explore the philosophy that to achieve innovation for the good of the world, collaboration is the name of the game rather than only competitiveness. In fact, loud voices are saying that to achieve innovation in today’s world it is necessary that organisations seek to influence each other by investing in knowledge creation and dissemination – something the Huawei innovation research programme aims to do.

Is Huawei open to influence others and being influenced?

Being open to influences from outside and contributing to the collective resource of wisdom to promote innovation is nevertheless also related to the mission and self-interest of any organisation.

Huawei as a company is heavily influenced in its operations by the ideas of its founder Ren Zhengfei. By some described as a romantic soul, Ren Zhengfei adopts an outward perspective with the aim to learn from the world around him. Being a first-generation entrepreneur, he still remembers fondly that when China opened towards the rest of the world in 1978, the Chinese people did not really know what the world was like. This reality made it not easy to decide what was normal practice and what not. A perfect illustration of this kind of uncertain thought is the following story. When he was young many people in China did not have much to eat, so he was convinced that everyone in the world was hungry like they were. At the end of the eighties Ren Zhengfei was able to travel to the US and encountered the bread roll dilemma. While sitting in a restaurant he noticed that bread rolls were, on the table, without him ordering them. He wondered whether he would have to pay if he would eat them (as was the case in China). Ren Zhengfei decided to eat the bread rolls and to his big surprise the waiter brought more. Even more surprising, he did not have to pay for these breads.

One defining characteristic of the Huawei culture is that it brings together opposing forces and tendencies.

This experience led Ren Zhengfei to decide adopting an open and welcoming mindset as he realised that the world had many ideas and other ways of business to offer. Hence, Huawei as an organisation, as result of their founders’ experiences has been motivated to foster an open mindset to learn and influence. Of course, being open to influences from outside and contributing to the collective resource of wisdom to promote innovation is nevertheless also related to the mission and self-interest of any organisation. Indeed, organisations can be characterised by a collaborative mindset but at the same time each also pursues individual influence and interest. Huawei acts very much in line with this idea that collective and self-interest are aligned. One defining characteristic of the Huawei culture is that it brings together opposing forces and tendencies (De Cremer, & Tian, 2015). One opposing force that is salient in the company culture is the simultaneous tendency to cooperate versus compete. The idea is that in striving for competition respect should also be shown for its opponents and it is this mix of being competitive but at the same time understand the value of the efforts and ideas of others that drives the company in its pursuit for excellence. This perspective on business is inspired by the heroic tales of the Glorious Revolution that took place in England in 1688. The tale tells the story of how King James II of England was overthrown by a union led by William of Orange in 1688, which was also referred to as the bloodless revolution because the victory of William of Orange was achieved without bloodshed.

Can Huawei guide innovation with purpose?

A second important issue that needs to be taken care of with respect to innovation management concerns nurturing the innovation ecosystem in responsible ways so that it remains fit for purpose. Indeed, innovation usually ends up being used in ways that were not predicted when it was initially discovered. For this reason, companies and their collaborators need to take responsibility to continuously evaluate the potential consequences of their investment in making knowledge breakthroughs. As a company this implies that one works together with reliable suppliers and demonstrates humble and value-driven leadership towards both its employees and the market in general.

The importance of how companies stand for their values when interacting with their suppliers was recently illustrated again when Microsoft demands from their suppliers that they pay their employees at least 12 weeks maternity leave. If they are not willing to do this then Microsoft will not give them a contract. Microsoft wants to work only with suppliers that are value-driven in a way that they take care of the well-being of their employees. Huawei has taken this approach as well in their business with suppliers. Specifically, all suppliers must adhere to a sustainability agreement with Huawei if they want to do business with them. Such an agreement entails that Huawei audits the performance of suppliers in terms of labour, human rights, the environment, social impact and their ability to comply with the Supplier sustainability agreement. In addition, each supplier is also supposed to sign an honesty and integrity agreement that implies a commitment to the values of fairness, justice, and integrity and a rejection of bribery, unfair competition and fraud (De Cremer, 2016).

Taking a responsible attitude towards others has become an important aspect of the type of leadership that Huawei’s wants to convey. Ren Zhengfei promotes the value of talking from the core to do “good” for the organisation throughout the company. According to him, the best way to achieve this is the display of humble leadership. He is known to frequently apologise himself to clients if poor quality in terms of service and products is detected. In fact, this pursuit of trying to deliver the best quality possible has led Huawei to grow to a high international status faster than any other Chinese company. Ren Zhengfei thus wants to demonstrate humility to the market.

At the same time, it is also important to respect one’s own employees. In this respect, Ren Zhengfei is always quick to add that he may not be that good a leader as others describe him to be. He engages in many humble efforts not to feed the myth of his leadership and rather likes the companies track record speak for itself. After all, it is not about himself or any other executive leader. This attitude is very much reflected in the communication of Ren Zhengfei that he is not a technical expert, and that he believes that the combination of his management skills to organise a company and the IT background with their specific technical skills of his executives and employees is the one thing only that can create wonders.

How does Huawei pursue knowledge in collaboration with others?

With today’s rapid change in technological developments innovation does not happen anymore within the silo of universities or companies. Real innovation materialises when universities, (public or private) research institutes and companies address shared problems in collaborative ways that contributes to and satisfies the interests of each party involved. The locus of innovation is thus shifting and requires that universities and companies need to restructure their ways of interacting and collaborating (see also MacCormack, Forbath, Brooks, & Kalaher, 2007).

First, the working relationship between universities and companies is not one of outsourcing tasks from one party to another party but one of co-creation. If both parties would adopt a mindset of “outsourcing” then usually the primary thought is that collaboration is created simply to lower costs. In fact, such a financial mindset is not helpful to create conditions for breakthrough innovation to happen. Second, the collaboration between universities and companies needs to be structured in such a way that they build collaborative capabilities by exchanging thoughts, experiences and even failures to each other to ensure that both parties in collaboration are equipped for the innovation challenge.

Huawei has built a reputation to organise and build collaborative capabilities where their research partners are not regarded simply as suppliers but as equal partners who focus on the shared ambition to improve knowledge that can feed new developments in their industry. This strategy is clearly exemplified by Rahim Tafazolli, director of the 5G innovation centre at the University of Surrey, who noted at a The Times Higher Education workshop in London in 2018: “We don’t work for Huawei, we work with Huawei. Huawei researchers work hand in hand with our researchers. They work on the same problem and come up with solutions [and] publish joint papers ….  it is not one-sided.”

How do you organise an open collaborative work culture across institutional boundaries?

The one characteristic that identifies successful companies to succeed in collaborating with “outside” partners in creating new knowledge required for breakthrough innovation to emerge concerns whether your organisational leadership provides purpose, meaning, and direction. Indeed, leadership is needed to make sense of things and provide vision, so we know what we are striving for and why. If your employees understand the “why” or “purpose” of your business, they will have a clearer focus on the goals you want to achieve. And, in a way, this will make them more agile to identify different opportunities to develop and materialise those goals. It is in this kind of culture that employees find fertile ground to grow their own skills, develop their view on the business world and its markets, and encourage them to act as entrepreneurs contributing to both the organisational and market interest.

For innovation to take place in the new technological era, collaborations that are open and flexible need to develop as those are the best conditions for all parties involved to learn, pursue their own interests while at the same time create shared value for society.

Being an employee-owned company, Huawei’s motivation system relies on providing employees a sense of entrepreneurship where new and creative ideas that work are rewarded. For the company to identify such new ideas, they adopt the approach that they need to listen to employees and customers and use those insights to pave new ways of developing knowledge. This collaborative effort within the company facilitates the mindset of the company to identify shared interests in creating value withtheir competitors, research centres and universities. It is considering this spirit that Huawei created innovation research programmes that provide funding opportunities to universitiesand research institutes.

Conclusion

In our globalised business world, a new innovation ecosystem has developed in which collaborations between different industries are needed for knowledge breakthroughs to happen. Companies like Huawei have learned to adopt mindsets that corporations can create shared values with the more traditional research institutes because it not only helps companies to grow as learning organisations, but also to invest efforts and resources into basic knowledge where its practical implications are not necessarily clear on the short term. For innovation to take place in the new technological era, collaborations that are open and flexible need to develop as those are the best conditions for all parties involved to learn, pursue their own interests while at the same time create shared value for society.

About the Author

David De Cremer is the KPMG chaired professor in management studies at the Judge Business School, University of Cambridge, UK, and an affiliate at the Justice Collaboratory at Yale Law School, Yale University. He has published over more than 250 academic articles and book chapters and is the author of the book Pro-active Leadership: How to overcome procrastination and be a bold decision-maker and co-author of “Huawei: Leadership, culture and connectivity”.

 

References

1. De Cremer, D., & Tian, T. (2015). Leading Huawei: Seven leadership lessons of Ren Zhengfei. The European Business Review, September/October, 30-35.

2. De Cremer, D. (2016). Corporate social responsibility in China: The Huawei case. The European Business Review.September/October, 61-65.

3. MacCormack, A., Forbath, T., Brooks, P, & Kalaher, P. (2007). Innovation through global collaboration: A new source of competitive advantage. Harvard Business School (no 07-079), Boston, MA.

4. Tian, T., De Cremer, D., & Chunbo, W. (2017). Huawei: Leadership, culture and connectivity. Sage Publishing.