Insider Talk: How Can LeTV Surpass Huawei In Smartphone Business?

(Chinese Version)

Editor s Note:

As did Huawei, LeTV relies heavily on mobile carriers. This might have something to do with its president Feng Xing s background in Lenovo. In this issue of TMTpost s column Insider Talk, we invite a high-level executive of Huawei s Global Service to, rather boldly, give LeTV some experience from the aspect of Huawei to help it surpass Huawei. LeTV s smartphone business has always sparked lots of controversy, and not regarded as very promisingamong many pundits. So how exactly can LeTV make best use of its own advantages? What can it learn from its competitors? How exactly can it do to surpass Huawei? Let s find out.

Speaking of smartphone makers, many people might think of Huawei, the Chinese smartphone maker that rises abruptly based on its accumulated strength and soon outperforms its competitors. It is widely accepted that Huawei is one of the most excellent Chinese private enterprises. Based on militarization management, strong execution and ability to adapt, Huawei is undoubtedly top one even around the world in terms of business and service.

In this case, for Chinese enterprises with the same “corporate gene” as Huawei, they can no longer adopt similar strategies to compete with Huawei. Instead, they need to seize the opportunity for “disruptive innovation” (an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market leading firms, products and alliances) once the market changes tremendously and develop new business models so as to surpass Huawei.

When it comes disruptive innovation, many people might think of Kodak, which mistakenly stuck to film cameras and failed to adapt to the digital camera era. However, I don t find Kodak s example novel enough. Kodak failed not because it suddenly became silly or arrogant. Instead, Both Kodak and Huawei are run by a very talented and persistent group of people. As a matter of fact, Huawei has come up with all kinds of “self-consistent” methods and theories to face up to new technology and concept.

New enterprises will have to develop a very clear strategy and development path in order to surpass traditional tech giants. When we look back, we may find that most traditional tech giants fail almost overnight. Although leaders of traditional tech giants might be aware of new technology and disruptive innovation and mobilize adequate amount of resource to enter new market, most of their attempt ended up putting new wine in old bottles, since the vested interest in traditional technologies and products were so huge and nobody were truly willing to change, embrace disruptive innovation and develop new business models. This is why new entrants such as LeTV has the opportunity to expand their market and even make a difference.

Huawei s advantages and disadvantages

As is known to all, quick ability to learn and strong execution have always been the two biggest advantages of Huawei. However, Huawei lacks the ability to create original technologies, products and services. When many pundits doubted if Huawei could successfully transform itself from a toB machine manufacturer to a toC smartphone maker, Huawei, based on advantages in telecommunication, supply chain and execution, quickly learns from Xiaomi s digital marketing experience and manages to become the number one smartphone maker in China.

As a matter of fact, Huawei did even better than Xiaomi in terms of digital marketing. While there are numerous articles saying bad words about Xiaomi, few critical articles about Huawei are widespread on the internet. Even well-known journalists who don t rely on Huawei to make a living haven t publicly criticized Huawei yet.

When it comes to innovation, however, Huawei seems to be better at clear-cut technological upgrading than divergent innovation in IT field.

What about smartphones, then? Hardware and chip have always been two of the core advantages of Huawei, yet its weakness lies in screens since Samsung isn t willing to sell its Amoled screens to Huawei. This is why Huawei seldom release smartphones with Amoled screens or 2K screens. However, if LeTV aims to carry out some really disruptive innovation, it can focus exactly on these three aspects.

Generally speaking, when traditional dominant enterprises embrace innovation and carry out new businesses, it follows that revenue from its traditional business will drop a great deal. In this case, even if opportunity for disruptive innovation has already occurred, traditional dominant enterprises would find it hard to learn, follow and adapt. When a company is good at hardware, it will inevitably be poor at software.

Software and content are at the core

As a matter of fact, Huawei is also the number one software company in mainland China, especially in terms of high-value software related to telecommunication, though Huawei relies highly on IBM s IPD software development model, its software system is completely enclosed and its development mechanism, cultural gene and delivery service are in stark contrast to that of fast-upgrading APPs. In addition, when developing telecommunications software, the goal is clear and standard already set; yet, when developing APPs, user scenarios are fast changing, customized development and open source platform are needed, and knowledge is upgraded through sharing.

Few people actually know the real function of pre-installed APPs in smartphones. Smartphone makers like Xiaomi and Huawei could continue to make two to three dollars every month for each smartphone we sell through pre-installed APPs and APP Stores. This business is not restricted by China s law yet, and is actually quite lucrative. However, this can t be classified into software business at all. Real software business, however, is increasingly based on communication and information service scenarios.

For one thing, software business is increasingly based on communication scenarios and toB solutions. For example, former Huawei employee Peng Yulong s company UCPASS developed Enterprise IP Telephone System, the very customized user telephone call system Alibaba Taobao, Uber, Didi as well as tens of millions of other enterprises adopt.

For another, software business is increasingly based on information scenarios and mobile consumers habit. Google once carried out such service in its prototype smartphones. From smartphone users perspective, such smartphones will be able to gather all your operations, travel and traffic information and pre-collect all kinds of information you might need and show them on the homepage. For example, when you are on a business tour to Shenzhen, your smartphone will show the weather, car-hailing, traffic takeaway food and hotel-booking information, even local news and industry news, all on your homepage when you land in Shenzhen. As a matter of fact, smartphones might be smarter than above mentioned and provide even more thorough prediction.

LeTV's way out

A while ago, it was reported that OPPO, another major Chinese smartphone maker, invested and encouraged TouTiao and YidianZixun to compete. However, I believe actually the other way around is true. Xiaomi has invested in YidianZixun a long time ago, yet it fails to recognize its value. As a matter of fact, personal customized information service providers like TouTiao and YidianZixun are exactly what LeTV is in dire need of.

If Google decides to establish a base station, then it could become the number one mobile virtual network operator in the world and be on an equal footing with all major mobile carriers, because Google s software and contents can actually totally replace channels provided by all major mobile carriers.

When it comes to chips, as Huawei s own Kirin chip is getting maturer, it is increasingly adopting the chip in large scales, which gurantees Huawei a space in future competition. At the same time, however, Huawei is caught in a blind competition with Qualcomm for higher chip performance, while OPPO s strategy has always been selling smartphones with second-class chips at the price of those with first-class ones. In addition, OPPO s suppliers are also second-class as long as they have been a supplier for major manufacturers. Since LeTV is no better in hardware, manufacturing and supply chain, it is worthwhile to learn from OPPO from this aspect.

Smartphone screen has always been an annoying problem Huawei, because screens can take up as much as forty percent of its total cost. Huawei can t purchase large number of high-quality screens from Samsung because its relationship with Samsung is getter even worse after rounds of lawsuits and fierce competition. As iPhone7 also adopts Samsung s Amoled screens, they have already become standard for high-end smartphones.

Thus, Huawei has always been claiming that 2K screens are already enough for smartphones and screens with even higher resolution is unnecessary, while such claim is at odds with Huawei s emphasis on “4K large screens and video channels” in its mobile carrier business. LeTV, however, has huge advantage in video content and screens, thus it should seize the opportunity and promote its brand awareness by combining its smartphones with its “great” screens and contents.

Still actions speak louder than words. It is high time LeTV made good use of teams from Huawei, Lenovo and OPPO and learnt from Huawei s marketing strategies, Lenovo s supply chain management experience and OPPO s channel and distribution experience. On that basis, if LeTV continues to excel in software and information service, it will ultimately stand out.

For sure, LeTV s ecosystem is still not mature enough and its all kinds of businesses are like seven pieces of jigsaw puzzles not combined together. To stand out, LeTV will have to adopt a proper business model, improve user experience when watching videos and firmly base its business on smartphones. Only then can LeTV achieves a successful “chemical effect”, instead of a “physical” one. While a chemical effect will seamlessly combine LeTV s different business together, a physical one will only make its advantages offset each other and bring it to an ultimate failure.

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[The article is published and edited with authorization from the author @Chenxuan, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.