Global Lenovo

Global Lenovo
How to
Internationalize
a Chinese Company
Since its merger with IBM's PC division, Lenovo had
a hard time resolving cultural differences between the
two companies. However, Lenovo made an impressive
comback grabbing the No. 2 position in the PC industry.
Let's discuss how they did it.
By Qin Shan
SYNDICATION/china entrepreneur PHOTO/GETTY IMAGES, CFP
Yang Yuanqing, CEO of
Lenovo is trying to create a
truly global company by
blending Eastern and
Western management
styles.
Global Lenovo
Lenovo kickoff ceremony . Held in
Raleigh, North Carolina, April 17.
Chinese enterprises are fully aware that
tion faces numerous difficulties. First, the
internationalization has reached the point of
lesser-known Lenovo merged with the
changes for Yang Yuanqing and his top man-
no return; but few of them are actually choos-
famous IBM; this allowed them to enter
agement team, were reviewed to ascertain
interviews in China and the US, including the
ing to go international. Even though Huawei
developed markets from a base in an emerg-
whether or not Lenovo had improved. Now it
Technologies' focus is on technology and
ing economy. At present, brand building for
seems that Lenovo has the chance to be a
Lenovo's emphasis is on trade and technolo-
Lenovo still has a way to go. Second, entering
market leader while it occupies the second
gy, it is their exploration of internationalization
local markets abroad via merger requires a
position in the industry at the moment. Its
that is worth knowing, especially Lenovo's.
different organizational structure and a new
corporate culture has become fresher, but it is
Since Lenovo announced its merger with
management model. The two parties will
still far from celebrating. Even if Lenovo
IBM's PC Division in December 2004, it has
coordinate their efforts deeply but certainly
attains global market leadership in the future,
experienced two foreign commanders leaving
conflicts will emerge in developing the local
it cannot afford to relax. As Liu Chuanzhi said:
office (Stephen Ward and William Amelio).
and global markets that will require a lot of
"Only those who are not rocked off the boat
The former commanders returned and then
knowledge, patience, and communication.
are the ones chosen by the times."
subsequently left. (Liu Chuanzhi retired as
This is different from the conventional pattern
At the Lenovo Kick Off in the USA, the staff
has been interpreting Lenovo's product cul-
chairman of the board in 2005, resurfaced in
in the past of gradual expansion by interna-
Feb. 2009, and left again in Nov. 2011.) A
tional companies. Third, as the smart phone
ture in a relaxed way. Before the meeting, a
similar "gone, then here, then gone again"
and personal computers industries have
sound technician was clipping a microphone
experience happened to Yang Yuanqing, who
developed so quickly with so many revolu-
on Yang Yuanqing.
took over the position of chairman in 2005,
tions, profound thinking is required to grasp
then became the CEO in Feb. 2009, and final-
the strategic opportunity while solving the
ly acted as CEO and Chairman in Nov. 2011.
The Fastest-Growing Company
problem of cultural and managerial thinking.
"The past year was the most exciting for
Obviously it is not simply personnel or posi-
After all, upstarts like Apple and Samsung
me," said Yang Yuanqing. At that moment, he
tion changes. The deep-seated reason behind
have already gained much attention and
and Liu Jun had flush faces, as if they had
these changes is cultural integration, which
reaped much of the profit.
been drinking. In fact, however, there was no
However, Lenovo still passed all the tests it
wine. The scene was the 2012 Lenovo Kick
of the merger. After all, there were many
faced, even though its efforts were in flux,
Off. Obviously they were deeply moved by
obstacles to overcome, and they did not
going through numerous challenges, includ-
the atmosphere at the event. Like a chief
ing those mentioned above. A new chapter
commander inspecting his capable troops as
deeply worried Liu Chuanzhi at the beginning
resort to sensationalist statements; one careless move may have well resulted in losing the
would certainly cover the events of the past
they draw their swords, he was encouraged
whole game.
half year when Yang Yuanqing was solely
as well as excited by what he saw.
It is evident that Lenovo's internationaliza-
managing the company. Details from our
Emerging Markets Insight
13
That was Yang's peak moment. He had
Global Lenovo
never stood so near to Lenovo's dream — to
couldn't have imagined the hardships and
Being number one in the industry is of real
be number one in the world. It was a critical
pain ahead when he insisted on making the
significance for a Chinese company: Its new
time for Lenovo to rise to the top while it
purchase. He experienced such moments as
products and advanced technologies can be
remained in 2nd place. But it would be only a
being entrusted with a mission at a critical and
more easily promoted around the world, and
matter of time before Lenovo could realize
difficult time;He felt like he was standing at
its brand more easily recognized. For years,
that dream if it kept on developing at its cur-
the edge of an abyss, and he had many
Chinese enterprises like Lenovo and Huawei
rent rate.
sleepless nights, as he kept waking up from
have taken different paths of internationaliza-
It has not been easy to become what
nightmares.
tion. Huawei, by attempting the steep north-
Lenovo is today. Yang thought being number
But all these issues he was experiencing
ern slope, has been praised and encouraged
one in the world was an unrealistic target
are gone. For ten consecutive quarters,
all the way, while Lenovo, by taking the circu-
three or four years ago, when Lenovo was
Lenovo has been the fastest-growing compa-
itous route via the southern slope, had stirred
getting into deep trouble. At that time,
ny among major PC manufacturers, reducing
serious criticisms and doubts. Today, Yang
Lenovo's sales were trailing the number one
its gap with the world's number one manufac-
finally has the chance to prove Lenovo to the
firm by 13 percent.
turer, to 9% last year. It has improved this
world, and believes that Lenovo represents a
year, further reducing the gap to only 4%
new level of company management.
In fact, he was left to manage the company
alone again, during the past half year — On
today. Lenovo has ushered in its golden age,
November 2, 2011, Lenovo announced that
reminiscent of IBM in the 1960s and 1970s.
Yang would serve as both CEO and Chairman
As for Yang, his growth during the recent
Has Lenovo been able to stand on the top
of the industry to overlook its opponents and
lead vigorously and boldly? The answer is no.
of the group while Liu Chuanzhi would be
years of internationalization cannot be com-
This is the ongoing dilemma for the IT indus-
stepping down from chairmanship to become
pared with those during his career over the
try — at no time can any firm relinquish its
the honored group chairman.
past 23 years. Today, he learned how to
sense of crisis. Today's IT industry is experi-
Looking back further, Lenovo has been con-
retreat in order to advance, how to conquer
encing a tremendous revolution — wave after
fronting obstacles in merging its international
the unyielding by yielding, enjoying praise
wave of mobile internet technology is
culture and management acumen since the
from both the eastern and western worlds
approaching, and the traditional PC market is
moment it purchased IBM's PC Division. Yang
while on his stage.
under attack. Everybody is discussing the
Lenovo's CEO Yang
Yuanqing has to find a way
to go beyond the everchanging PC industry.
Emerging Markets Insight
14
Global Lenovo
How
Lenovo
implemented
IBM
merger
2004
2005
Dec. 8
Lenovo starts
to negotiate
with IBM
May 1
Lenovo and IBM
announce the merger.
Lenovo becomes the third
biggest PC company
2008
2009
2007
Jan.
Lenovo launches
mobile business.
Loses money in
the first year
William Amelio
resigns. Yang
Yuanqing and Liu
Chuanzhi return
to Lenovo
2010
Mar. 25
Announces entrance
into developed and
emerging markets
Dec. 21
Steve Ward
resigns.
William Amelio
becomes CEO
Oct.
Tries to acquire
Packard Bell with
Acer, but fails
Apr.
Launches consumer
product group
2006
Feb.
Introduces many
Lenovo
products
2011
Apr. 19
Launches mobile business
in China and introduces
mobile device i.e. LePhone
Jan. 27
Lenovo merges
with NEC
Jun. 1
Acquires
Medion AG, a
German mobile
company
Jul. 8
Listed in
Fortune's 500
Oct. 13
Lenovo becomes
second biggest PC
company
according to IDC
possibility that operating systems and busi-
ber one" are the most encouraging phrase in
ness models will be very different in the post-
commercial world. In addition to temptation,
and was firmly confident in what he believed
PC Era (Yang defines it as the "PC+ Era").
however, the tests and challenges in retaining
in, sometimes even going beyond Liu
Windows 8, cloud services, and even the solid
the honor also deserve attention.
Chuanzhi's control. At that time, it was evi-
Wintel Alliance will eventually break down,
He developed a fast moving and forceful style
dent that he was not a master of flexible
creating a whole new world. While Lenovo has
The Growth of Yang
management, which created conflict between
been striving to catch up with Hewlett
Yang received many more compliments at
him, the board, and the former CEO. He had
Packard, the number one firm in the industry,
Lenovo's Kick Off in North America on April
with its tablets, Apple has become the new
18. The moment he walked off the stage
industry leader. During discussions at
upon finishing his speech, the staff of the
When Amelio Took Power
Lenovo's top management meeting, much
North American region all stood up to applaud
Once he took the position, Amelio, who has
time has been spent defining who the most
their "captain." Yang had won recognition in
a strong personality, immediately started
placed himself and even Lenovo in danger.
the most-developed commercial country
reforming Lenovo's supply chain. Within two
Moreover, outsiders have been concerned
which could be considered a successful "con-
short weeks in August 2006, five senior man-
that Lenovo, which has focused on the PC
quest." This surprised Yang's colleagues,
agers were replaced by new hires from Dell.
business since its inception 28 years ago, may
"Sitting there, I hadn't even realized that the
At that time, this move was interpreted by
lack the genes for innovation and reform. For
people around me had all stood up."
likely major competitor of Lenovo will be.
years, Lenovo has been labeled for its "trade-
Amelio as a restructuring to offset Lenovo's
Gerry Smith, Lenovo's senior president in
weaknesses. However, it produced organiza-
technician-technology," and its creative prod-
charge of its global supply chain, told China
tional storms inside Lenovo. Many managers,
ucts have not received much attention.
Entrepreneur, "Yang is a good leader. He has
including Liu Jun, senior vice president in
Business history shows that being number
one in an industry may lead to an enterprise
suddenly being overrun with internal and
become more confident and better at team
charge of Lenovo's global supply chain, were
building."
removed. Liu Jun withdrew from business
Winning praise from his international team
management, saying he was going to "study."
external difficulties. Externally, the number
did not come easily for Yang. Apart from
At Lenovo Kick Off in the US, the employ-
one enterprise has to take on extra responsi-
moving to America and starting to learn
ees were interpreting Lenovo's product cul-
bilities associated with its new status; inter-
English, he has had to blend management
ture in a relaxed way.
nally, conceit can arise as a byproduct of
styles of the east and west, which he says
achieving its number one status, producing
really challenges him.
slow responses and disorientation which can
Amelio's move was obviously unexpected
by Yang Yuanqing and Liu Chuanzhi. Liu
Before the acquisition of IBM's PC Division,
recalled, "I felt unsettled by the news because
Yang Yuanqing was great at business man-
I thought talented managers had been ruined
"Indeed, the most difficult time comes only
agement. He started his career as a sales-
by Amelio. So I asked Chen Shaopeng, then
after becoming number one," said Yang
man, enjoying the feeling brought by winning
president of Lenovo China, to explain the
Yuanqing. The words "being the world's num-
territory through hard and vigorous fighting.
Lenovo supply chain to Amelio. But Amelio
make it more challenging to innovate.
Emerging Markets Insight
15
Global Lenovo
didn't listen and believed that he understood
business management and international
management much better than the Chinese.
At the Kick Off in the US,
Lenovo's staff take in
Lenovo's culture.
"Liu continued that he then appealed to a
board member representing TPG, the investment group that jointly implemented the
merger of IBM with Lenovo, to convince
Amelio. But the Westerners thought the same
way Amelio did. "He said that Chen Shaopeng
is in charge of marketing in China and talked
to the CEO of an international enterprise.
'Isn't this ludicrous?'"
"He even said this out of respect for me."
Finding no solutions, he realized how big a difference it was for people to differentiate normal people from angels. He drew the bow but
didn't shoot.
"It is not the right time to fight," Liu warned
Yang Yuanqing. What he did was appease the
staff he had let go. Managers like Song Hong
business. Instead, we let the board under-
least in the eyes of Liu Chuanzhi. "As chair-
and Guo Minglei from the supply chain divi-
stand the situation. Once they discovered that
man of an IT company, one must have a
sion all entered Hony Capital, an entity con-
Amelio was not competent, he would be
sound knowledge of technology," noted Liu.
trolled by Lenovo.
replaced." As Liu explained to Yang at the
"Yang Yuanqing is such a talent. He has paid
Despite Liu's warning, the young manager
time. However, Yang was not able to reflect
attention to business and already developed a
Yang Yuanqing couldn't keep calm. The con-
calmly on Liu's words or detach himself from
good understanding of IT in the past few
flict between him and Amelio soon became
the losing markets of Lenovo. When noticing
years. Appointing him to be chairman of the
public. The areas of conflict not only involved
that promotion of the European trade model
board — working with the CEO in managing
personnel appointments, but also business
was not so successful, he actively submitted a
the entire business — allowed him to feel the
operations.
request for a leadership position in Europe.
depth of the waters, to know the top man-
Half a year later, the business in Europe began
agement team, and to succeed as CEO."
After so many years of working for Lenovo,
Yang was far more familiar with each case
Yang has become more sophisticated after
to prosper.
and every detail of the business, more so
He became more confident, and brought
all his struggles. He has tried — or at least
than he was with the palm lines of his own
evidence to testify to the board about the
pretended — to soothe his nerves. Moreover,
hands. He would always give strong respons-
CEO's incorrect decisions. Conflicts surfaced
he started to tell jokes with foreign col-
es when Amelio made short-term decisions,
with the board, where he bluntly spoke of
leagues, who have found that YY has become
such as strengthening the business with key
Amelio's mistakes and problems. The result
more easy-going. (The pronunciation of Yang
accounts where IBM had advantages, and he
was that Yang brought trouble on himself. The
Yuanqing is too difficult for foreigners, so they
was only looking at the short-term benefits.
board hoped Liu Chuanzhi would become the
just call him YY for short, which he happily
This was the direct cause of Lenovo's issues
chairman again instead of Yang Yuanqing. Liu
accepts.)
after the financial crisis.
restrained his anxiety and remained compla-
They began to talk about the weather and
"Yang Yuanqing was a real CEO, for he
cent. It was at the expiration of the terms in
family matters, and became personal friends.
always led at the forefront," according to one
office for Amelio in 2009 that he agreed to
Yang also invited his employees to meals at
former executive of Lenovo. "There was still
serve as chairman again, on the condition
his home. At times of interest, he himself
nothing immediately wrong with the CEO's
that Yang Yuanqing would serve as the CEO.
does the cooking.
business strategy. It was not even bad before
The board eventually agreed after a period of
the financial crisis. What we could see as
lengthy negotiations.
Qiao Jian, the senior vice president of
Lenovo who has followed Yang Yuanqing for
problems were not what the international
years, is one of the executives who moved
directors could see. To complicate things, at
Birds Of A Feather
earliest to the US. She observed, "He has
that time, we could not get our hands on the
Yang Yuanqing's stumbles were needed, at
become tolerant. He used to possess a quick
Emerging Markets Insight
16
Global Lenovo
Lenovo is on the rise and continues to
attract and retain talented executives
around the world.
temper. Once he gave out an order, everyone
before in regards to basic management, the
plans. Liu even organized several small inter-
had to act at once. But he has changed after
role of one who knows the mechanics of the
nal meetings before announcing the news of
trial and error over the past few years.
system, as well as how to build a team and
his return. Their biggest worry was whether
Realizing that each person is independent and
how to make strategic decisions. An enter-
foreign executives would decide to leave, fol-
is able to work by him or herself, he has
prise like Lenovo will not be easily shaken."
lowing Amelio's example, as well as figuring
begun to rely on his team, respect everyone,
Once Liu laid the foundation and Yang reno-
and listen patiently to different ideas.
vated it, Lenovo had a better management
At that time, the most important thing Liu
Yuanqing is very different from those CEOs in
team than ever before. The only exception
did was urging the board to agree to give for-
other companies in China that I see who still
was when the President and COO of Lenovo
eign executives bonuses in cash instead of
shout out orders like an emperor in their
Group, Rory Read, left for AMD in 2011, and
stock options. "The foreign executives went
office."
Yang had to take on the work of his former
along with the cash idea, but members of the
board who had a background in private equity
out how to keep them engaged.
This type of flexibility allowed Yang
associate as well. Liu had hoped that upon
Yuanqing to earn the title of an outstanding
finding a candidate with strong strategic
were used to attaining stock options. In the
leader to his team. "Yuanqing allows me
capabilities for the company, Yang would only
end, I nearly had to force all members to raise
enough freedom to realize my own idea in my
work as executive chairman, and focus on
their hands to agree to my idea."
way; he has this sort of confidence in me. But
technology development and business inno-
Later on, Yang succeeded in building a new
when our team falls behind, he is able to ask
vation. People familiar with the matter ana-
team. Upon the formation of the Lenovo
challenging questions, and work with us to
lyzed that the candidate should be either
Executive Council (LEC) at the beginning of
find ways to improve. Once you have accom-
Chen Shaopeng or Liu Jun, though Chen had
2009, all major decisions were discussed by
plished the task he assigned, he gives you
already been asked at the end of the previous
council members to ensure well-rounded con-
more room for freedom." David Schmoock,
year to join Legend Holdings Ltd.
siderations for all strategies while, at the
President for North America, expressed this
same time, fostered a sense of ownership
with a sense of great achievement and satis-
Rebuilding Culture
faction.
Looking back to Feb 2009 when Liu
trast to Amelio's time when each member
Meanwhile, Liu thought it was time to let
returned to his post as chairman, he and Yang
operated under their own quotas. This work-
Yang Yuanqing free to go do his own work.
were feeling a lot of pressure. In order to do
ing style was not smoothly implemented at
"He has gotten a deeper understanding than
things well, the two made comprehensive
the beginning. "It was difficult for me at first
Emerging Markets Insight
amongst members. This was in direct con-
17
Global Lenovo
David Schmoock, president of Lenovo
North America who is having his head
shaved bald, was one of the heroes for
Lenovo's leaping development.
its." He illustrated with an example. Once, he
target was not acceptable. "This different
each other. Lenovo was in danger then and in
was trying to contact his new boss during an
understanding of standards has probably
the red. Everybody was unhappy and attend-
emergency, when Amelio was on vacation.
impacted strategy formulation and employee
morale."
because we on the committee didn't know
ing meetings was difficult," recalled Milko van
His secretary was unable to tell him where he
Duijl, the senior vice president of Lenovo
could find him. "At that moment, I felt hugely
Upon taking office, Amelio had tried to
Group.
depressed. I realized that I had not taken a
solve these issues, clarifying the role culture
Lenovo during this time was lacking internal
holiday in four years. When a foreigner gets a
played in an enterprise as well as defining the
motivation to sustain the system and get out
better job title, higher pay, a more comfort-
culture at Lenovo. He invited Liu, as the
of the downturn.
able job, and yet has fewer responsibilities,
founder, to explain the Lenovo culture.
One former executive said, "Lenovo had
why should I stay?" He finally chose to leave,
However, Liu refused, "it was inappropriate to
been cultivating talents diligently. It tolerated
though he still suffers a deep psychological
praise Lenovo culture when contradictions
some of your shortcomings, but when you
blow several years later.
were everywhere."
made some achievements, you would be
Though he feels regret, Liu believes that
Liu continued, "There should be three prin-
given more challenges." This executive even-
such a process was unavoidable. "If you just
ciples when preaching culture. Firstly, leaders
tually left Lenovo in 2009, but he was still
stand up and speak, you won't be recognized.
set examples; secondly, executives must be
grateful for his growth while working at
After all, you must let everyone know who
consistent and unified; and lastly, culture
Lenovo during those years. "Amelio, however,
you are and you must earn their trust before
should be preached from the top down. All of
was a professional man and thus, required
your words can have meaning."
this couldn't be done by Yang at that time
achievement from others. He was unable to
In the Lenovo culture following this, a say-
tolerate your shortcomings, which put a
ing turned up: "we do what we say," reflecting
After Liu's comeback, he rechecked
even if he wanted to."
damper on morale." As a result, when Amelio
the cultural difference between Lenovo and
Lenovo's 4P culture: PLAN before we pledge,
moved around Lenovo's employees, a great
IBM. IBM tended to set a very high target, but
PERFORM as we promise, PRIORITIZE to
many of them chose to resign.
considered accomplishing 80 percent of the
benefit the company, and PRACTICE
The former executive continued, "There
work as acceptable, and 90 percent as won-
improvement everyday. Different from
were many contradictions. The first one was
derful. This was not the case at Lenovo.
Amelio's time, Liu now personally goes to
distrust. Your abilities were not recognized.
Lenovo was known for its execution ability,
each main sector to preach Lenovo culture.
The second was the differences in work hab-
and attaining less than the 100 percent of the
Being good at this, he always tells the story of
Emerging Markets Insight
18
Global Lenovo
when he had just set up the company. He
harmony and trust among all employees. But
One year later at the kick-off, the promises
couldn't afford to buy good cigarettes, but
in the end, it is only through sharing a com-
were all fulfilled. Yang's promise was realized.
when he did, it was only for when he enter-
mon goal that Lenovo can achieve the "com-
"David is a person with many merits. Apart
tained his customers. "It was hard to distin-
rade" relationship it wants its employees to
from being able to pressure his team, he
guish when I smoked due to business needs
have with each other and the company itself.
knows how to motivate them." Qiao Jian con-
or my own desire. I decided to give up smok-
fessed to China Entrepreneurs that David
ing at the end." Through examples, Liu
A Full Counterattack
Schmoock was one of the heroes for Lenovo's
aligned every employee with Lenovo culture.
You can see the process of how the execu-
leaping development, because he took the
The intention of Liu's preaching was to instill
tives were able to bring about the growth in
company from red to black in the first year,
the words that were so popular among senior
the North American market. At the North
achieved profit in the second, and increased
employees: "Do what we say, form support
American Lenovo swearing-in ceremony,
profits by a large margin in the third. At pres-
teams, and review decisions" into the mind of
David Schmoock, senior vice president of
ent, the market share of Lenovo in North
foreign employees as well. Today, most of
Lenovo Group and president for North
America has hit a record of 7.5 percent, quite
Lenovo's country managers around the world
America, had his head shaved bald by Yang
close to Lenovo's objective of attaining 10
are local, which is quite different from other
Yuanqing and others. "That was the conse-
percent market share overseas.
transnational enterprises. It's impressive that,
quence of a bet," said David Schmoock, with
A few glasses of wine, a swimming pool,
in Lenovo offices all around the world, its
his hand on his own bare head, "I have to get
and two cars were not the only things that
employees, regardless of nationality, are able
used to it."
were responsible for the $1 billion growth. In
to recite the 4P culture. As for the foreign
The bet took place at a retreat for top man-
executives, Liu has set higher expectations of
them: Each must possess a sense of "ownership."
The world economy is developing as is the
enterprise management model. In the 1980s,
Japanese enterprises emphasized a family
code of management, which resulted in the
fact, those from Lenovo's supply chain earned
the most thanks at the ceremony in the US.
Most of Lenovo's managers
around the world are local,
which is quite different from
other transnational enterprises.
impossibility of shedding off redundancy
As Schmoock had said, his accomplishment
of the objectives had depended upon other
teams' support. Last year, nearly all the major
manufacturers raised prices at distribution
channels because of a shortage of hardware
as a result of the floods in Thailand. Lenovo
was an exception, which was, without dis-
when needed. Then the professional man-
pute, the most solid support for David who
agement model from the West seemed to be
agement, meeting one year after Schmoock
had been earnest about seeking cooperation
more popular. However, even this style of
made up on the deficit of the North American
from distribution channels. What was more is
management has been questioned, since it
market. At the meeting, somebody quipped,
that the indices of shipping time, product
can't match the sense of employee loyalty
"David, you must be able to achieve more."
quality, and product return rate of Lenovo
"I can try," he nodded.
were the best according to unpublished data
hopes to come up with a new kind of man-
"If you achieve the goal, I'll reward your top
from retail sales cooperation channels.
agement model that balances the two man-
sales with two cars," said Yang Yuanqing, sit-
"The current team spirit is exciting. It is like
agement styles of the Japanese and the
ting nearby. David Schmoock agreed and at
IBM in the 1960s and 1970s, valuing talent
Western.
the end he got a Ferrari and an Aston Martin.
and sharing encouragement. I like such an
This requires Yang Yuanqing to create a
At another get-together, the senior executives
atmosphere," said Thomas Looney, who is in
better stance. Liu explained, "Lenovo is
began to holler when they had a little too
charge of key accounts in North America, "All
undoubtedly an enterprise dominated by
much drink. "David, you can realize a much
of us are fighting for better goals." Take the
Chinese. So, in order to create a sense of
higher goal." This time, the goal doubled that
channel policy for example. Originally, 27
(family and) company ownership, the process
of last year's. "OK, but you have to support
channel programs were set by different
may be an ambitious one. Thus, to make the
me," said Schmoock, "and give me an even
departments for their own reasons, conse-
foreign staff realize that they are indeed
bigger reward, Yuanqing."
that family style companies have. Lenovo
quently, the channel policy was not clear and
respected, Yuanqing needs to be more toler-
"What reward do you want?" Immediately,
kept changing, resulting in non-cooperation of
ant; he may even need to pay more attention
Schmoock called his wife, who said that they
channels. Now it has changed, "the only prin-
to his international team than he would the
needed a swimming pool. Yang consented. "If
ciple is to satisfy the needs of the channels as
Chinese staff."
I really make it, your teams have to give me a
well as the needs of Lenovo at the same
hand and shave my head," added Schmoock.
time."
Yang has tried various methods to facilitate
Emerging Markets Insight
19
Global Lenovo
Actually the overall situation at Lenovo was
model and the relationship-oriented model.
tem with pressure from the top could guaran-
improving, in addition to its growing North
The strategy of "attack and defend" was also
tee progress," according to Chen Xudong, the
senior vice president of Lenovo and president
American market. Lenovo had turned from
put into action. On the defense side, the abili-
defending to attacking since the pair of Liu
ty to maximize profits was the main focus; on
of China. Of course, the most critical compo-
Chuanzhi and Yang Yuanqing took up their
the offence or "attack" side, rather than pur-
nent is that this practice goes with the payroll
offices again. They made up the deficits and
suing short-term profits, the focus was to
program.
achieved surpluses within a year, outpaced
increase the market share to greater than 10
their competitors for ten consecutive quar-
percent via continuous investment.
Simply put, employees' salaries came
largely from bonuses. There is a big gap
ters, and rose to second place from fourth in
In order to create trust amongst employ-
between the bonus rewarded to those who
three years. Such a radical speed of develop-
ees, those who were familiar with Lenovo's
met their targets and those who did not. The
ment was beyond the expectations of the top
way of doing business were sent to assist in
carrot-and-stick policy convinced those who
management at Lenovo. This quick and effec-
the emerging markets, in addition to inviting
initially had trust issues with Lenovo. "Since
tive development of the company was due to
various local teams to China for visits and
the merger with IBM, many have come and
Liu Chuanzhi's "three treasures" which were:
study. "Shaopeng was then in charge of the
gone. But the core managing team has stabi-
Building teams, forming sound strategies, and
emerging markets. On one hand, he made
lized and gone through numerous hardships
effectively leading teams. After LEC was
strategies and objectives for the markets of
together. Liu Jun and I have worked together
founded by Yang Yuanqing, the next thing to
different countries; on the other, he demand-
and will unite our teams, establish the product
do was to divide the markets into the devel-
ed that managers of these different areas
strategy, and decide on a staffing structure
oped and the emerging, implementing the
maintain close communications with the
when our work seems to be repeated, instead
two business models — the trade-oriented
assistants sent from China. Only such a sys-
of leaving areas open intentionally, enabling
Mini Interview ❶ Liu Chuanzhi
company had delved into the consumer
“If you are not rocked off
the boat, you are the one
chosen by the times”
market,) Lenovo would have more brand
Lenovo has a history of 28 years. Do you
think you are the one chosen by the times?
equity. More investment is still needed.
I think so. The word "chosen" is very
What they go by is to do whatever is need-
appropriate. Times are always changing. At
By Zhang Gang
ed for the future, not for the short-term
the beginning of China's reform and open-
stock market performance like in the past,
ing up, for instance, all of us were stepping
so they have done quite a good job.
What do you think about the changes of
Lenovo in the half year since you retired?
Generally, everything goes as planned.
Lenovo now focuses on building brand
equity and expanding the landscape of
mobile internet products. In short, they
have done everything that is needed for the
future.
forward with confidence. However, in the
process of reform and opening up, some
Lenovo has a need to be innovative. But it
was labeled early on as "trade-techniciantechnology." Does this mean that it is difficult
for Lenovo to take the path of technology innovation?
Lenovo still has to make breakthroughs in technology innovation.
The Chinese always say that "we'd
better return to our hometown with
How do you think Lenovo's brand awareness and influence in the world has changed,
after all these years?
Ltd., I still hoped for a break-
It is far from good, I mean international-
through in the industry. I'm not
ly. Our market share has reached 14 per-
satisfied with simply making
cent, but that is not the case for our brand
money. I hope I can make
equity because ThinkPad products were
breakthroughs in industry,
mainly sold to big business accounts,
especially in PCs, but this takes
whose total market volume is much smaller
time. We also need people like
than that of the consumer market. (If the
Yang Yuanqing.
honor." Even in Legend Holdings
Emerging Markets Insight
businesses began to be weeded out. There
were many people being weeded out as the
result of the contradictions between a
planned economy and a market economy;
later, some companies and business
people had to exit because of the
property mechanism and, in the
end, some had to exit because of
the wrong business strategy.
I think it is somewhat like standing
on a boat: If you
were not knocked
off, you are the
one chosen by the
times.
20
Global Lenovo
our rivals to prosper. Day by day, trust comes
absorbing talented executives, like Acer's for-
below its market performance. Lenovo gained
into being," said Peter Hortensius, president
mer CEO Gianfranco Lanci. At the Lenovo
access to Best Buy on condition that its prod-
of Lenovo Product Group.
Kick Off in Europe, Gianfranco Lanci was
uct price would be $50 lower than HP's with
It was comfortable for Yang Yuanqing to
appointed Lenovo senior vice president and
the same configuration. "You can imagine
manage the business again. Being chairman
president of Europe, the Middle East, and
what a loss it has been to give up $50 out of a
product retail priced at $500."
for several years made him a leader with
Africa (EMEA) to make up for Lenovo's weak-
long-term strategic insight. When he became
nesses in these markets. Lanci himself also
Moreover, the trailing opponent HP came
the CEO in 2009, he turned in a four-year plan
made it clear that he would put Lenovo in the
back, hosting the 2012 Summit of Technology
to the board covering annual market share,
top three in the market of EMEA before 2013.
Impact 2012 in Shanghai early in May, 2012.
turnover, and profit. Yang said, "This long-
He was highly praised and has even been
HP had been wavering in its PC strategy. But
term plan directed us to concentrate on
honored as King of PC in Europe by Yang
since Whitman took over the presidency, the
growth in the last two years, and then later
Yuanqing.
PC business of HP has gone on, further merg-
on, profit. Before, managers who managed
So does Lenovo have it in the bag? No.
ing its PC business with its printer business.
based on financial statements cared about
Yang Yuanqing was concerned with Lenovo's
This is a new business model for HP, which is
the top line and bottom line, turnover, and
brand promotion around the world. "Even
aiding it in competing with Lenovo.It was not
profits. Regardless of the quality of analysis, it
though we produced better products than
easy for Lenovo to outperform HP. But a big-
was very superficial. But now Lenovo pays
Apple, we couldn't achieve as much as Apple
ger challenge was looming.
attention to logic: If the strategy is correct in
did. Our brand influence is too weak around
logic, profit will follow."
Lenovo is on the rise and capable of
Interview ❷ Yang Yuanqing
the world," said the frank Yang. Outside
New Genes
China, brand awareness of Lenovo was far
It was still the Kick Off. Before the Kick Off
gic preparations have you made for this
change as internal discussions go ahead?
agent for HP. I made my contribution to
There are many advantages after you
HP's distribution channel in China. HP once
My first job at Lenovo was to be the
“I’m proud that I have
a hammer”
become a leader. The suppliers will give you
By Qin Shan
a better price. But your rivals and your cus-
Later on, it emphasized efficiency, which
tomers will have different expectations of
won short-term profits but sacrificed the
You said that "smart TV is PC," raising disagreements with others. Some remarked
that you see everything as a nail because
you have a hammer in your hand. What do
you think about that?
focused on people and innovation.
you. In other countries in the past, no one
future of the company. Sony was quite
regarded us as a major opponent. Now we
innovative before and produced plenty of
are in the spotlight, and more manufactur-
great products.
ers will take us as their rival, which will lead
But today, almost all the enterprises with
to fiercer competition. Our customers will
First, it's better to have a hammer in
a glorious history no longer are
also have higher expectations of us. There
hand than to have nothing. It is easy for
playing a leading role. They
are many negative reports about Apple, for
people to talk without action. I'm proud that
instance, and they may not be fair reports.
I have a hammer.
But this is the reality. For a leader or an out-
So my feeling is that
standing person, there are more
Lenovo should bal-
Second, hammering the nail is not the
have lost out to the innovative
Apple and efficient Samsung.
purpose. You have to know what your pur-
demanding requirements.
pose is. If you want to build a building, will a
ance efficiency and
And one little fault will be
hammer be enough? If not, you should
innovation. It is not
amplified if found by others;
have the correct tools in your tool box. And
an easy thing to
that is life.
manage the
this is our response. Smart phones and
Smart TVs are the buildings that Lenovo
will build.
From a follower to being a leader, Lenovo
may face different problems. What strate-
direction of an
The IT industry is constantly
changing; if companies aren’t on top
of the trends, they run the risk of
getting trampled by competitors. Do
you have any feelings about that?
Emerging Markets Insight
21
enterprise and lay the
foundation for its corporate culture and
management.
Global Lenovo
Lenovo's biggest concern is the weak brand awareness. Outside China, brand awareness of Lenovo is far below its market performance.
in Beijing started, Qiao Jian discovered a seri-
again stressed its cultural motto of 'we do
members to think about how to conceive a
ous problem when looking at the schedule
what we say.' But in fact, Lenovo has become
creative idea.
arranged for her by her secretary. She and
less tolerant of failure. Everyone tends to do
Yang Yuanqing were asked to rehearse twice.
things assuming there will not be a single mis-
Yang Yuanqing concluded Lenovo's achieve-
"It was about who stands where or which
take."
ments in the new areas. "By introducing
At the Kick Off of the new financial year,
hand you would hold up. Should senior exec-
An important move Lenovo took early this
smart phones of $158 to mainstream con-
utives be required to rehearse such little mat-
year was to add one more P — Pioneer, to the
sumers, our mobile internet business quickly
ters?" Qiao gave the order and the execu-
original 4P culture. Qiao Jian was not making
achieved its first victory. Our mobile business
tives' rehearsal was cut.
a tempest in a tea pot. Practically, daring to be
has entered the top three in the China market
a pioneer was just what Lenovo lacks in its
with the market share reaching double digits.
mobile internet strategy.
This was never realized by phonetic phones in
This move frightened the organizers.
Mentioning this matter, Jian later said, "I knew
I had frightened you. This has never hap-
Qiao said, "Now we are encouraging
the past 10 years, so this was a historical
pened in China before, correct? But anyone
employees to think out of the box and tell
breakthrough. As for our tablets, they have
with an IQ would remember where he should
them there still is a tolerant atmosphere."
risen to second place and play a leading role
among manufacturers adopting the Android
stand, which hand he should raise, and which
She even organized various training work-
button he should press. Even if they didn't
shops so that staff from different depart-
know and made some small mistakes, they
ments could communicate their ideas and
But it was superficially auspicious.
would be acceptably small mistakes."
strengthen the overall innovation conscious-
Smartphones with a price of $158 and other
"I thought it was serious, for this conveyed
ness of the organization. There is a training
hot-sellers have helped sales reach over
some horrible implications that no mistakes
activity named "Leader in Lenovo" for execu-
$940,000, which can be expected to exceed
were allowed at Lenovo," said Qiao, "In order
tives. In this activity, every participant is
$3.947 million at the end of this year (all data
to confront such difficulties in reality, Lenovo
involved and acts as a group leader, helping
provided by Lenovo), but Lenovo is not
Emerging Markets Insight
22
operating system in China."
Global Lenovo
authoritative in the high-end product area.
the iPhone in order to win the mobile internet
The sales of its tablets with the Android sys-
market, standing high as a giant at its debut.
said Chen Xudong.
Meanwhile, Lenovo will continue making
tem are not encouraging enough in terms of
But LePhone failed in its launch, with only
global market share, which is quite small
700,000 sold at the end of the year, lower
work with Intel to launch the smartphone
compared to that of Apple's iPad. Lenovo later
than the objective of 1 million. It was nothing
K800 based on an Intel design. It was
saw sharp sales increases, the result of the
less than a drama, with many twists and
revealed that K800 has powerful perfor-
decline in sales of competing products.
turns. A manufacturer of twenty some years'
mance. Besides the ability to multitask, it can
According to the market research agency
experience had made a foolish mistake at a
present content on screen, relying on Intel's
comScore's report on market share of tablets
critical time.
wireless display technology. The performance
new attempts in the smartphone area. It will
with Android in February, Lenovo took only 1
Blindly believing in their technology, they
of K800 needs more observation, but the
percent while Amazon's Kindle Fire had 54.4
neglected the process of product commercial-
cooperation between Lenovo and Intel shows
percent and Samsung's GalaxyTab series
ization and branding, from research to mar-
their ambition. If they make the best of this
trailed behind. In June, the figure for Lenovo
ket launch. "The process requires standard-
opportunity, both of them will embrace a
ization in areas such as quality control, and
bright future.
had climbed to 3 percent.
Lenovo adapted itself to changes by alter-
procurement of components. This applies to
Regardless, developing mobile internet will
ing its structure. In 2011 it formed Mobile
one machine as well as one million machines.
be a painful business for Lenovo. Yang
Internet and Digital Home Group (MIDH),
Otherwise, all you have is a conceptual prod-
Yuanqing was criticized by industry insiders as
mainly researching and developing terminal
uct," said Chen Xudong.
seeing everything as a nail because he held a
products for mobile internet use, including
tablets, smartphones, and smart TV, and providing cloud service by developing integrated
terminals and applications. Liu Jun is commander-in-chief of MIDH. The retired Liu
Chuanzhi feels hopeful about having a dedi-
hammer, saying that "smart TV is PC." But
"To our customers,
our partners, and our
government officials:
You are all our family."
cated organization for this new business.
Yang Yuanqing believes that it is still better to
have a hammer in hand than having nothing.
Internally, the building of an innovation system turned out to be more difficult than the
system of "doing what we say." "It has taken
a long time for us to know what innovation is,
"Putting one organization in charge of
what a pioneer is, and that we shouldn't allow
research and development, product, procure-
Lenovo Mobile, sold in March 2008 and
ment, and sales, just like when Yang
bought back at the end of 2009, took over
trying to ensure a company system that sup-
Yuanqing was managing one business unit
product commercialization for a short while. It
ports everyone's efforts to be a pioneer,
before, means the strategic planning will be
even evaluated whether or not LePhone
accommodating all or only some people to try
very straightforward. MIDH produces differ-
would meet the standards for going to mar-
it out." Lenovo, a mature organization, is
ent products from those produced at the
ket. But the fact was that LePhone appeared
sprouting green buds but it needs timely
Lenovo Research Institute. After thinking
after a high-profile launch — the timing was
auditing to avoid mistakes.
about developing a product, all matters relat-
all wrong.
any mistakes. Now that we've learned, we're
According to Yang Yuanqing, currently,
ed to procurement will be considered, allow-
Recently, Lenovo released its smart TV
ing no stocking of parts, which optimizes the
series, a result of the lessons taken from the
of products within a 12-18 month period. "In
supply chain.This is advantageous for com-
failure of LePhone and from Lenovo's first
my opinion, some technologies and products
peting in the market."
blueprint for mobile internet. It has been said
are of revolutionary significance."
Lenovo aims to launch three or four batches
The reason that MIDH excites Liu Chuanzhi
that the product is already "third generation"
These days, Liu is more relaxed about inno-
is mainly because Lenovo had once stumbled
and has been strictly checked by Yang
vative products. He said, "My years of efforts
with LePhone, which was launched on April
Yuanqing. Lenovo believes it has thoroughly
are not reflected through a physical product.
19th, 2010 with a high profile. Ma Yun, Cao
evaluated both the strengths and weakness-
What I'm striving for is to make an enterprise
Guowei and other business heavyweights in
es of the product.
last for 100 years." Lenovo is capable of doing
China attended the product launch. Liu
"The appearance of the smart TV may not
Chuanzhi, dropping his customary low-key
reflect any breakthroughs, but the content
firmly on the ground and march forward,
style, shouted out: "To our customers, our
and applications will be attractive to consum-
even in a passive situation." Liu Chuanzhi
partners, and our government officials: You
ers. Apple might make a good balance
believes that Lenovo needs to gather
are all our family. You power us; thank you for
between its products' appearance and con-
momentum, which is now more important
that." Liu hoped to take a bloody gamble with
tent, but for Lenovo this is still a challenge,"
than launching a revolutionary product.
Emerging Markets Insight
23
that. "We have been able to keep our feet