John Roese served as chief technology officer at Nortel Networks and received OBJ's Forty Under 40 award prior to joining Huawei as senior vice-president and general manager of North American R&D last summer.
Mr. Roese was in Ottawa Tuesday to deliver a keynote speech at the annual general meeting of the International Institute for Communications. Prior to his address, he spoke with OBJ about Huawei's future in Ottawa and how the company fits in with this city's tech sector.
Below is an edited transcript of that conversation.
OBJ: What is the difference between working for Nortel and Huawei?
Roese: (Huawei is) a company that is fast-growing and doing quite well, and the other was a company that was, let's say, struggling to turn itself around.
Huawei resembles what Nortel looked like a few decades ago, which was a very engineering-focused, technology-focused company ... In the later days, it became more of a finance company, a marketing company and a selling company, and a lot of people attribute (its) disappearance to losing its technical focus around innovation.
Huawei, on the other hand, (has) 120,000 employees (of which) 55,000 are in R&D and all of the senior managers are R&D people. It is a very technology-oriented company.
OBJ: You've said that Huawei is not a research organization, but rather a company that commercializes advanced technology. Can you explain the difference?
Roese: I distinguish between research and applied technology. We are much more heavily weighted towards applied technology. We will create technology - we are clearly engineers - but ... we believe there is a bigger ecosystem beyond us, which includes all the academic institutions, other research environments, which do a fine job of the five and 10-year time horizon activities. We have relationships with hundreds of universities around the world, and our pipeline has been built using a very large (innovation) ecosystem that feeds into a very large applied technology organization whose job is to take the raw material that comes out of research and turn it into something that is disruptive and innovative and can ultimately become a product.
A lot of companies will publish a press release saying, "We've put out a five-gigabit cellular wireless link." Well, that's nice, but you can't turn it into a product. It's a "hero project." You've just wasted a whole bunch of engineering to prove something that theoretically everyone knew was possible. That's nice, but it is marketing. We would rather spend our time building a commercially available hundred-gig optical system.
OBJ: Do you believe that's a unique philosophy within the telecom sector?
Roese: Absolutely. There are a lot of companies that say they do the same thing, but in candor they either use their most advanced technology resources to support legacy products ... or they do too many hero projects or research work at the expense of building great technology.
When I went to Nortel, out of almost $2 billion in R&D, 55 per cent was being spent on legacy products that were in decline. Forty-five (per cent) was being spent on mainstream products and zero was spent on emerging technologies. We balanced that to something called 20-60-20, where 20 per cent was spent on emerging technologies (such as) LTE, carrier Ethernet and unified communications, 60 per cent was mainstream and only 20 per cent on legacy.
I think many of the western companies are out of balance. They are either doing too little advanced technology, or doing it in a way that's inefficient.
OBJ: Beyond the benefits of direct employment, what is the local significance of Huawei's Ottawa presence?
Roese: Huawei aspires to be an anchor tenant. We're here for the long term ... Big anchor tenants are critical. They drive the supply chain to Ottawa, they create an environment where startups can build an accessory to a bigger system and do work locally. They fund the universities in terms of research projects, they create a pipeline where graduates can come and work.
OBJ: Earlier this year, Terry Matthews suggested Ottawa is becoming an R&D outpost, without any corporate decision-making presence. He was speaking more about this year's acquisition activities, but Huawei is a Chinese-owned company with its Canadian headquarters just outside Toronto. Would you agree with that assessment of Ottawa's tech sector?
Roese: I think Terry is correct on a macro level. What you've seen is a series of acquisitions of Canadian companies, and what has happened in the R&D sector is that they've become outposts. I agree with that. From a Huawei perspective, it is a little bit different. Clearly, our headquarters are in Shenzhen, China. Our Canadian headquarters are in Markham. The difference is that ... when we look at what we do in North America, it is not piece-work. It is extremely strategic innovation work. In the U.S. and Canada, almost all of our next-generation processors, which are the most important component in our routers, most of our optical technology, a large proportion of our wireless technology, and a huge chunk of our cloud technology, the initial innovation and leadership is being driven out of our abilities in North America, between Ottawa and our seven sites in the U.S.
If you look at some of the other companies that are in the region, some of them are doing it that way. Ciena, with the Nortel acquisition, picked up a very good group of optical inventors. I can't comment on the other ones, but I don't believe the other pieces of Nortel ended up in a similar state. And clearly, some of the other acquisitions that occurred, the primary innovation of the parent company is not happening in Canada. In Huawei, in some of the product segments, the primary innovation of our product lines is happening here. It's a very different role for an "outpost."
OBJ: Huawei received $6.5 million from Ontario taxpayers to support its Ottawa R&D centre. Did the company receive similar government grants for its seven U.S. R&D centres?
Roese: No. We get some tax credits (but) the Canadian structure for incentives for R&D is better than the U.S. (In Canada,) provincial and federal programs are well-structured, well-managed and targeted in the right place ... Canada is one of the most hospitable places to do R&D in terms of government support for advanced technology and innovation.