Lenovo is one of the world’s largest makers of personal computers. Formed by Lenovo Group’s acquisition of the former IBM Personal Computing Division, Lenovo is the biggest computer company operating in China and it has an ambitious agenda to boost its brand worldwide and break into key emerging markets. BCW spoke to Milko Van Duijl, Lenovo’s President Western Europe, North America, Japan, Australia and New Zealand and SVP of Lenovo Group, to find out more. Interview by Christian Harris.
BCW: That’s quite a job title. Tell us a little about your day job.
MVD: Ha ha! You know, the IT industry has enough acronyms. In the long room, it’s actually quicker just to list the regions and countries than having to explain what ‘developed markets’ means. But that is exactly what my day-to-day job entails. Working across borders whether by conference call or in person to manage my team in each of these zones that represent developed markets. As a result, I do travel a lot, but I feel it’s important to have physical presence and have the opportunity to speak to employees, partners and customers in each location.
Earlier this year we announced a new organisational structure based on market dynamics rather than geography with the creation of two new business units—one focusing on customers in developed markets, and the other focusing on customers in emerging markets. This new structure replaces the company’s existing regional market organizations and is designed to align the company more closely with its strategic direction and market dynamics to better serve customers.
With this borderless approach Lenovo can derive benefits from synergies among similar markets that may be separated by traditional geographies; by sharing best practices among teams that are serving customers that share certain characteristics; and by extending business models that work (transactional in China, the global commercial strategy) across larger organizations and customer bases.
As leader of the developed markets organisation, my focus is on the high concentration of global and large enterprise customer best served by our relationship business model and a more established distribution channel with a large number of channel partners that we address through our transactional business model.
BCW: What does Lenovo stand for as a company today?
MVD: Lenovo is dedicated to building exceptionally engineered personal computers. Our business model is built on innovation, operational efficiency and customer satisfaction as well as a focus on investment in emerging markets. We develop, manufacture and market reliable, high-quality, secure and easy-to-use technology products and services worldwide and we have major research centres in Yamato, Japan; Beijing, Shanghai and Shenzhen, China; and Raleigh, North Carolina.
The design and development of our ThinkPad laptops, ThinkCentre desktop PCs, ThinkVision monitors, ThinkStation workstations and ThinkServers are award winning. In 2008 we also introduced the IdeaPad laptop series and IdeaCentre desktop series, designed more for individual users and small businesses.
BCW: Do you think you’re out of IBM’s shadow yet?
MVD: I don’t believe it’s necessarily about Lenovo existing in IBM’s shadow, as we both operate on our own merits. We have a strategic alliance with IBM which enables us to provide a best-in-class experience for our customers. We have entered into significant, long-term agreements that give customers preferred access to IBM’s world-class customer service organization and global financing offerings, and that enables Lenovo to take advantage of IBM’s powerful worldwide distribution and sales network.
BCW: Lenovo operates all over the globe. Do you still consider it a Chinese company?
MVD: We have a unique company history with roots in both East and West. As a global company operating in worldwide markets, we are led by a diverse international management team and board of directors. Our chairman and CEO are from China, our COO is American, and our multi-national executive team are located around the world. We do not operate with a traditional headquarters.
BCW: How’s your Mandarin?
MVD: Limited! Fortunately for me, our business language is English and our Chinese colleagues have made tremendous efforts to learn English in a very short space of time. I envy their ability to pick up foreign languages quickly. I will continue to persevere with Mandarin though!
BCW: Do Lenovo’s marketing strategies differ around the world?
MVD: Our branding strategy and product positioning are global but our marketing plans and tactics are designed to address the specific markets and customer needs. We have found that needs are different in developed markets than in emerging markets. As a result we have adapted our organisation including marketing based on these needs.
BCW: Due to market conditions, have you had to make any drastic manufacturing decisions in terms of costs and skills?
MVD: Not dramatically. Across the globe we have a number of in house manufacturing facilities that serve the worldwide PC markets; we have not made any significant changes to our manufacturing policy since the expansions we made in 2008. We are more focused on continually improving the efficiencies of our existing facilities.
In Europe, in order to improve our cost competitiveness and further drive serviceability improvements, we will be changing our Contract Manufacturing (CM) partner to Flextronics. The transfer of production will begin during the last quarter of this year and will be completed by the end of January 2010. The existing customer base, product types and services will be supported by Flextronics.
This move allows us to centralise our European activities into one location and apply more lean principles to our management and manufacturing. We continually assess our global manufacturing footprint to ensure it’s fully optimised and best meet the current and future customer demand.
BCW: Are there any new trends in the marketplace? Emerging markets, perhaps? How do you intend to capture these?
MVD: I think trends in the modern day are more about evolutions of existing concepts rather than new inventions, but there are certainly a few highlights to keep an eye on. Windows 7 is certainly going to be a hot industry driver in 2010. Lenovo has a unique offering with our unique Windows 7 Enhanced Experience certification.
In cooperation with Microsoft we selected a number of models within our portfolio and we worked with Microsoft engineers to tweak and tune the software, hardware and operating system to maximise performance. The results are convincing. With many customers delaying OS updates because of the economic crisis and because of Vista, the path to Windows 7 is not a matter of if, but certainly when, and I would encourage customers to do so sooner rather than later. Escalating support costs of older systems running Windows XP is just one of the reasons.
Mobility will continue to be hot with connectivity and true all day battery life the leading requirements. We have already made great strides in mobility over the years and I believe that we lead the market in delivering innovation around mobility with best Wi-Fi performance, integrated WWAN and exemplary battery life. We continue this trend in the new netbook segment with our IdeaPad S10e, S10-2 and S12 laptops, the first of which recently won the T3 magazine ‘Computer of the Year’ at their Gadget of the Year Awards 2009. Regardless, we want to be trendsetters, not followers.
BCW: What worldwide market position does Lenovo occupy in workstations, servers, and laptops?
MVD: Our Think family (including servers, workstations and laptops), is repeatedly ranked as the undisputed premium-brand leader in the global PC industry, with products rated ‘best-in-class’ and ‘number one’ in survey after survey. We are the fourth largest PC vendor in the world in terms of unit shipment. In China Lenovo has been the number one PC vendor since 1997 and holds a 28.6% share of the PC market. I prefer not to discuss specific product segment market position, but I am very encouraged by our recent performance both globally and in my region, developed markets.
Last week reported our second quarter earnings. Our global performance, in the face of continuing economic challenges, has been tremendous. There have been challenges and I’m deeply proud of everyone in Lenovo for the dedication they have shown in turning around our performance and in creating sustainable business. Globally our market share is at its highest ever, 8.9%, thanks to a continued growth above market average.
BCW: You’ve just entered the fast-growing netbook arena. How’s that going?
MVD: Very well indeed. The netbook market is not only growing fast, but there is a lot of competition. However, our offering is very strong as we can provide customers the best package of performance, design and connectivity available on the market. The launch of Windows 7 will also enhance netbook functionality.
BCW: How realistic is the challenge of becoming number one in all markets?
MVD: Becoming number one PC vendor is a challenge, but a realistic one. However there are steps to be taken in achieving any goal. In this case, first and foremost, we need to continue to enhance our sustainable business during this challenging period. Once we have determined that the timing, economic conditions and business environment are favourable we can expand into areas where we have little or no penetration with the aim to increase our market share such as consumer retail in many developed market countries.
BCW: Do particular business sectors benefit most from your machines?
MVD: All business segments and sectors benefit from our machines; this is why we are successful in the commercial space. Our ThinkPads have been long recognised as the ultimate business tool. We aim to bring the best of ThinkPad to a wider audience so that all users can benefit for the 17 years of product development and refinement we have achieved with this brand.
BCW: What is the market need driving your business today?
MVD: Innovation that delivers a business benefit to the customer, whether it is simple connectivity to more advanced solutions that reduce TCO. We have software, solutions and services built around our hardware platforms to deliver on customer pain points. In order to drive innovation, we must and will continue to invest in research and development.
In fact, we invest more than 1% of our revenue in R&D, a high figure for a PC vendor, especially during challenging economic times. In order for us to continue this level of investment and deliver innovation to the market, we must continue executing a business strategy that is solid, profitable and sustainable in the long term. Above all, innovation must meet the customers’ needs at prices that are realistic.
BCW: Lenovo’s PC unit has been business focused, but that’s changing to include consumers. How is this happening?
MVD: Consumer demand for laptops is growing rapidly around the world and notebooks are one of our key strengths with ThinkPad heritage. We have also introduced the IdeaPad range, which offers a variety of form factors and functionality to address the consumer needs. While we have two product groups, Think and Idea, the teams around the world work closely together to create new innovations and improve existing ones.
BCW: Has aggressive price cutting affected Lenovo?
MVD: Yes and no. Of course aggressive price cutting usually impacts the average unit price which impacts us. But our objective is to build a brand known for its quality, reliability and ease of use. Call it a premium brand if you will, but without too premium prices. We do not intend to compete in the entry price segments; this is by choice, not because we can’t.
BCW: What new technologies can we look forward to from Lenovo in the near future?
MVD: Without wanting to reveal too much to our competition, we will be leveraging the announcement of Windows 7 and will feature our Lenovo Enhanced Experience, a unique certification on a selected set of machines that describes improved performance. We also continue to enhance our netbook portfolio to address that growing. You may have seen that we announced in the U.S. a new all-in-one desktop targeted at the business user. The ThinkCentre A70z will come to Western Europe soon.
Another area of investment is our environmental focus. Our objective is clear. We want to deliver the greenest products in the market. We already have more EPEAT Gold rated products that anyone else. Our new ThinkVision L2251x is the world’s first and only TCO Edge certified monitor. Our ThinkStation workstations and ThinkCentre desktops use post consumer recycled plastics, equivalent in some cases to 19 plastic water bottles per system unit. It is a challenge to please all quarters when it comes to environmental actions, but one objective we must all share in common is to significantly reduce the impact of IT on the environment. Currently our focus is in green product development.
BCW: What do you do when you’re not working?
MVD: I spend a lot of time in the gym. Especially as I’m travelling so much. It helps me to relax, to focus and to minimise the effects of jet lag. At home, I prefer to spend time with my kids and relaxing as much as possible.