HUAWEI CEO Ren Zhengfei just warned of tough times ahead, and called for his company to go into survival mode!
Here is what you need to know…
HUAWEI CEO Ren Zhengfei Warns Of Tough Times!
On 22 August 2022, HUAWEI founder and CEO Ren Zhengfei posted a memo on its internal network, stating that “The entire company’s business policy should shift from the pursuit of expansion to the pursuit of profit and cash flow“.
In Ren’s opinion, the global economy will continue to decline and be in the doldrums for the next ten years, putting HUAWEI under great pressure.
He also said that it is unclear if HUAWEI can survive the 2023-2024 financial year, partially blaming its woes on a “continued blockade” by Western countries.
Therefore, he says HUAWEI must focus on its own survival, and shift from expanding to pursuing profit and improving cash flow over the next 3 years. To that end, the CEO said that HUAWEI will completely abandon its business in certain countries.
The HUAWEI CEO also said that the “chill” in business sentiment to be passed down to HUAWEI employees, linking their bonuses and promotions to business results. In addition, he called for responsibilities to be consolidated, which sounds like euphemism for job cuts.
This alarming memo by its CEO comes after HUAWEI – China’s largest company – saw revenue decline by 14% in the first three months of 2022, with its profit margin narrowing to 4.3% from 11.1% just a year ago.
The HUAWEI CEO appears to believe that China will experience a much longer and persistent economic slowdown spreading far beyond the current collapse of its real estate sector.
It is surprising to note that Chinese censors has not removed the memo, which suggests the HUAWEI CEO has enough clout to speak openly. His memo went viral on Chinese social media, and has been discussed and shared by more than 100 million Chinese netizens.
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HUAWEI CEO Ren Zhengfei Tough Times Memo : Key Points
Here are the key points from HUAWEI CEO Ren Zhengfei’s “tough times” memo, machine-translated from NetEase:
Live with quality in the next three years
We have to see the difficulties faced by the company and the difficulties in the future. The next ten years should be a very painful historical period, and the global economy will continue to decline. Now, due to the impact of the war and the continued blockade and suppression by the United States, the world’s economy is unlikely to improve in the next 3 to 5 years. Coupled with the impact of the epidemic, there should be no bright spot in the world. Then the consumption power will be greatly reduced, which will not only put pressure on the supply, but also the pressure on the market.
Under such circumstances, Huawei’s overly optimistic expectations about the future will be lowered. In 2023 and even 2025, we must take survival as the main program to survive, and survive with quality. This slogan is very good. Every business must be carried out carefully.
If we have a little bit of hope in 2025 as planned, then we must first find a way to get through these three difficult years, and the basis of survival must be adjusted to focus on cash flow and real profits, not just sales revenue. The respite period of our life is 2023 and 2024. We are still not sure whether we can break through in these two years, so every mouth should not tell stories, but must talk about realization, especially when conducting business forecasts, do not No more illusions, telling stories to deceive the company, losses will be deducted from your food package, first of all, you must survive, and if you survive, you will have a future.
Blind investment business to shrink
The 2023 budget should maintain a reasonable pace, blind expansion, and blind investment in businesses should shrink or close.
The entire company must use the budget effectively, and cannot blindly close all projects. The manpower saved will go to the front line, continue to optimize the organization’s business, rationally staff the ICT infrastructure, or our black land granary. Competitive complex hardware platforms and complex software platforms, and the projects that hang on to ride on them must be picked out. The legion is to build a basic information platform and sell ICT better. The infrastructure is not for the ecology. The terminal is the foundation for our rise and breakthrough in the future, but it should not be blind. Now we need to narrow the front lines, concentrate our troops to fight the war of annihilation, and increase profits.
Huawei cloud computing should focus on supporting Huawei’s business development in a down-to-earth manner, and take the road of supporting the industrial Internet. Digital energy has increased investment in the strategic opportunity window, created greater value, contracted institutions, and strengthened combat teams. Smart car solutions cannot be rolled out on a complete front. It is necessary to reduce the research budget, strengthen the business closed loop, and take a modular approach to R&D, focusing on a few key components to be competitive, and the rest can be connected to others.
In addition to the main goal of continuous investment for survival and profitability, businesses that cannot generate value and profits in the next few years should be scaled down or closed, and human and material resources should be concentrated on the main channel. We must face the reality and not be too far away. The great ideal is to cut through the mess quickly, and the surplus personnel will be adjusted to the strategic reserve team, and then they will be combined into reasonable positions to grab food.
The peripheral business must be taken out of the strategic core. After the marginal business is taken out, we first evaluate whether it can be done well and how much resources are needed to do it well. If it is not possible to do a business with huge resource consumption, it is better to open it up and let others do it after closing it. We must do it, and if we do not do well enough, we will reorganize the combat team and change cadres. If there are some windows of opportunity, we expand the strategic resource pool of strategic reserve teams and cadres and experts, and form commandos to attack in the window of opportunity.
Adhere to seeking truth from facts, and shrinking in the market must be firm. We used to embrace the ideal of globalization and aspire to serve all mankind. What is our ideal now? Survive and earn a little wherever you have money. From this perspective, we need to adjust the market structure and study what can be done and what should be abandoned.
Give up part of the market
The first focus is on value market value customers, and the main force is used in the middle section of the normal distribution curve. In some countries, we completely give up in the market. We also have a fat meat market, and the people who used to eat bones are transferred to eat fat meat.
Second, for hard-fought countries and regions, as an assessment and training base for new cadres to be promoted in the future, some countries have low output. Although we still have to do it, should we no longer send soldiers to guard the top of the snow, because he will still be a soldier after he comes down? Xueshan Mountain is a test of people, and potential new cadres will have the opportunity to be promoted to army commander. Because it is easy to integrate a small country, he calculates from the estimated budget, contract, tender delivery, working hour quota, and the solution is all done together. When I came back, I passed 5 and 6 on the cadre’s resume and passed the threshold of 11 generals in one day. Of course, some employees have been on the frontier for a long time, and their incomes have decreased when they return to China. There is also the issue of children going to school.
Third, employees returning from overseas should have priority in obtaining skills training and job opportunities. Employees returning from overseas must have a period of protection to protect them from their posts and ensure that they receive certain training. The skills of personnel in difficult countries may be worse than those in China, because they do not have a realistic combat environment. How can they improve? Just like a soldier on the plateau, although he stood very high, he did not absorb any cosmic energy. They paid the price. They could not take the exam as soon as they returned to China, and then they were eliminated. No one wanted to go to such difficult areas, so we have to It is guaranteed that the returning employees have job arrangements and a relaxed study time. As for his ability to catch up during this period, it is another matter.
Financial planning needs to be done for cash flow. In times of crisis, the main purpose is to make blood. Although we say that it will improve in 2025, what if there are no shells by then? So that’s a wonderful plan, we have safe food measures.
The company has two major expenditures to distribute dividends to employees, including wage stability, which is to enhance internal confidence and cohesion, and repayment of loans to banks, which is to enhance the society’s trust in us. For projects that already have obvious potential risks, don’t have any illusions, and surface them as soon as possible, let the audit come to a conclusion, and quantify the risks. At the same time, it is still possible to continue to manage these assets that have been eliminated. Through management, risks can be turned into appropriate returns. We should not have a bubble in our hearts. When we look at the report, we will be very determined, but we will not actually be able to make money. to the money.
Let the chill pass to everyone
Consolidate responsibilities, and link bonuses, promotions and promotions to business results, so that the cold will be passed on to everyone.
First, in this year’s and next year’s assessment, the weight of cash flow and profit should be increased. It is better for sales revenue to decline a bit, but profit and cash flow to increase. The bonus for operating profit growth should be a little more, so as to encourage everyone to compete for profits.
Second, each responsibility center signs the assessment responsibility letter. The company should aim at the KPI-based reciprocal reward mechanism. The normal promotion and upgrading will remain unchanged next year, but the link with the equivalence of responsibility should be strengthened, which makes people feel cold year after year. , but we need to be patient and enthusiastic in our transition. I once told the executive board that the basic salary framework should not be changed. This is a rigid indicator, but if the employees are excellent, they can be promoted and upgraded, and the bonus can be very flexible. Why is it elastic? Encourage everyone to go to the battlefield to grab food, the front line is different from the agency.
Third, the bonuses of various businesses this year must widen the gap, and it is absolutely not allowed to force everyone to achieve the short-term goal of grabbing food. In the past, the company’s policy was basically to settle things down. Everyone didn’t feel the cold in winter. Everyone covered the quilt, but it was a little thicker and thinner. At the end of this year, businesses with more profit and cash flow will have more bonuses, and businesses that cannot create value will have very low bonuses. They don’t even force the business to commit suicide and pass on the cold.
At present, we have to survive, not to fight for our ideals. The legion competition is the year-end bonus, because the bonus is not given by the company, but the profit earned by the legion itself, and part of it is handed over to the company. If we cannot earn food, we must dare to Bonuses are not given because the basic income of the employees covers the necessities of life. Of course, some strategic businesses cannot create value in the short term, which we can determine through evaluation, but many marginal businesses with poor performance must be cut off. This is adjustment, consolidation, enrichment, and improvement.
Invest at all costs at the point of survival crisis
Quality is the primary productive force. We must adhere to this line. R&D must be responsible for the quality and performance of products, and we promise that service experts must have comprehensive capabilities. Poor quality products are a shame for R&D personnel. This sentence should be posted on On the wall of the R&D office area of the R&D office, the rate of network failures around the world is getting higher and higher, and an accident may destroy the trust system of the entire market.
100-1=0, for our research and development, the research and development of single boards, the research and development of single devices, and the research and development of systems must put quality first. Quality is the best support guarantee for R&D and manufacturing personnel to market service personnel. If the quality of the product is not good, it is equivalent to letting the brothers brave the hail of bullets, ice and snow, hot and sweltering heat, and the new crown virus is charging on the front line. Therefore, we need to establish a reverse assessment mechanism. The first-line reverse assessment should not only assess the service organization of the agency, but also extend to the product line. If the quality is not good in the office, then the front line should be narrowed and the competitiveness should be improved.
We need to improve the status of the service system, and service experts must have a comprehensive ability to judge the network experience of accidents. In the past, we paid more attention to R&D than service, but now we also need to pay attention to the service system.
Reasonable, scientific and reasonable control of inventory. We must change from panic-stricken self-rescue in the past to high-quality self-rescue. We must pay attention to reducing inventory reasonably, and do not cause insufficient profits and tight cash flow of the company due to excessive inventory, which constitutes our new crisis. We can invest at all costs on strategic key opportunities and existential crises, but we cannot spend money on non-strategic opportunities.
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