Legislating an Ideology: How the 'Huawei Basic Law' Laid the Cultural Cornerstone of a Global Empire

Prologue: "Growing Pains"

In 1997, Huawei's sales reached ¥4.1 billion. By 1998, that number had skyrocketed to ¥8.9 billion. The company was expanding at an unprecedented rate, with its workforce ballooning from a few hundred to several thousand.

Yet, beneath this veneer of prosperity, Ren Zhengfei felt a deep sense of unease. He noticed that with the massive influx of new employees, the simple, hardworking culture of the early days, where "everyone was a striver," was being diluted.

Some employees had become "slick." They cared more about their titles and salaries than the customers; they learned to pass the buck instead of proactively solving problems; some veteran employees were resting on their laurels, having lost their initial passion.

What alarmed Ren Zhengfei even more was the emergence of various opportunistic ideas within the company. Some advocated for the company to go public to "make a quick buck" from the capital market; others suggested venturing into real estate to earn easy money; still others believed R&D investment should be relaxed in pursuit of short-term profits.

These ideas were like termites, eating away at the foundations of Huawei. Ren Zhengfei realized the company was showing early symptoms of "big enterprise disease." If left unchecked, this high-speed vessel called Huawei could very well deviate from its course or even disintegrate due to internal ideological chaos.

Late one night, tossing and turning, Ren got out of bed and called a consultant friend. In a near-helpless tone, he said, "The company is growing too fast, and I'm losing control. Can we find a way to solidify the successful genes of Huawei's founding, to make them a system that no one can change, no matter who comes and goes?"

This question ultimately led to a milestone in the history of Chinese corporate management—the "Huawei Basic Law."

Act I: A Troop of Professors Enters Huawei

To "legislate" an ideology for Huawei, Ren Zhengfei decided to seek "external brains." He turned to several renowned management professors from Renmin University of China, including Peng Jianfeng, Bao Zheng, and Wu Chunbo.

In early 1998, a consulting team of top scholars made their grand entrance into Huawei. Their mission was to distill the core elements of Huawei's success through months of in-depth interviews and research, systematize and theorize them, and ultimately create a programmatic document to guide Huawei's future development.

The process was filled with intellectual collisions and debates.

The professors came armed with cutting-edge management theories, while Ren Zhengfei and his executives brought their simple, practical experience forged in the crucible of the market.

At one discussion, a professor quoted Peter Drucker's classic theory, speaking at length about how "the customer is God." After listening, Ren Zhengfei shook his head and offered a different perspective: "We don't think the customer is God. The customer is our bread and butter, and we must serve them wholeheartedly. But our relationship with them is one of equal business partnership, not master and servant. We cannot abandon our principles just to cater to the customer."

On another occasion, while discussing the company's strategic direction, a professor suggested Huawei should pursue being the "industry leader." Ren again countered: "We don't seek to be far ahead. Technologically, we only need to be half a step ahead of our competitors. Being three steps ahead makes you a 'martyr.' We need to put more energy into understanding customer needs."

Such intense ideological debates happened almost daily. The consulting professors were amazed to find that although Ren Zhengfei had never systematically studied management, his understanding of the essence of business was astonishingly insightful and forward-looking.

After eight months of repeated discussions, debates, and revisions, the draft of the "Huawei Basic Law" was finally ready. It systematically answered a series of fundamental questions for Huawei, such as "Why do we exist?", "What are our core competencies?", and "How do we distribute value?"

Act II: an "Unconventional" Corporate Constitution

The "Huawei Basic Law" consisted of six chapters and 103 articles. It was not a cold manual of rules and regulations, but a corporate "constitution" filled with philosophical reflection and idealism.

Several of its core tenets were considered quite "unconventional" at the time:

First, it clarified that Huawei's pursuit was to "become a world-class equipment supplier," not simply "profit maximization." The very first article stated unequivocally: "In order to make Huawei a world-class equipment supplier, we will never enter the information services industry." This sentence drew a clear, insurmountable red line for Huawei's future strategic development.

Second, it introduced the concept of "capitalizing knowledge." The Basic Law explicitly stated: "We believe that labor, knowledge, entrepreneurs, and capital together create the total value of the company." It elevated "knowledge" to a level of importance equal to "capital" and designed a unique employee stock ownership plan that allowed knowledge workers to share in the company's growth by holding its shares. This became the theoretical basis for Huawei's "all-employee ownership" system.

Third, it established the core value of being "striver-oriented." The Basic Law unequivocally stated that Huawei must provide the best returns for "strivers" who identify with the company culture and contribute to its success, while resolutely eliminating those who do not. This provided the legal basis for Huawei's formidable "wolf culture" and its system of promoting and demoting cadres based on performance.

Fourth, it emphasized the importance of "self-criticism." The Basic Law positioned "self-criticism" as the "eternal driving force" for the company's progress, requiring everyone from top management to ordinary employees to maintain an open and reflective mindset at all times.

This Basic Law, like an ideological "headband," set boundaries and calibrated the direction for the rapidly growing company.

Epilogue: A Victory of Ideology

On March 23, 1998, the "Huawei Basic Law" was formally adopted. It wasn't locked away in a safe but was printed into booklets and distributed to every Huawei employee, becoming required reading for new hires.

Its creation was of monumental significance.

First, it successfully transformed Ren Zhengfei's personal management philosophy into the collective will of the entire organization. From then on, Huawei's decisions no longer relied on the "brilliant prowess" of one man but had a set of standards for right and wrong that could be followed and passed down.

Second, it acted as a filter, attracting and retaining those who truly identified with Huawei's values while weeding out opportunists. It forged a "Huawei legion" with a unified goal, a firm will, and immense combat strength.

More importantly, it helped Huawei successfully navigate its "growing pains." In the two decades that followed, no matter how the external environment changed or what internal personnel shifts occurred, Huawei was able to maintain its core strategic focus and cultural nucleus, ultimately growing into a globally respected technology giant.

As the "Huawei Basic Law" states in its opening: "Resources can be depleted, but only culture can endure and flourish." This corporate constitution, a piece of legislation for an ideology, proved to be the most valuable asset Ren Zhengfei left for Huawei, and the ultimate secret to its ability to traverse cycles and build an enduring legacy.

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Key Takeaways

1. Culture Needs Top-Level Design: When a company reaches a certain scale, the founder's vague, scattered ideas must be systematized and institutionalized into a "corporate constitution" recognized by all, in order to ensure organizational cohesion and the right direction.
2. Establish a Pursuit Beyond Profit: A great company cannot solely aim to make money. It must find a higher-level mission and vision to attract the best talent and inspire sustained passion for striving.
3. Value Distribution Determines Everything: How to evaluate and distribute value is the core of business management. Through its value distribution system of "capitalizing knowledge" and being "striver-oriented," Huawei successfully tied the personal interests of its employees to the company's long-term development, forming a powerful community of shared destiny.