Going back in 25 years, we see Yang Yuanqing, a salesman working for Lenovo, delivering devices riding a bicycle. Coming back today, we still see the man and he’s still with the same company, but the way he delivers things has changed a lot.
He delivers ideas and philosophy of the company, and his most frequently used transport nowadays is…a plane. During the interview, he said that his previous meal was served on the plane to Britain, and the next would be at a business meeting. In a day, he’s off to the airport to continue the delivery of information as the chairman of a company that is going worldwide – Lenovo.
The main strategy of the company, according to Mr. Yang, is to protect and attack. Along with his team, the chief executive plans to fight for domination in China, and then go worldwide where there are giants like Samsung and Apple waiting.
Every one of China’s billion citizens, all of them potential customers, is, therefore, no more than 30 kilometres from a Lenovo store. Today, the company serves even the most rural hamlet in China, delivering PCs to villages — by bike, if necessary.
Mr Yang argues that “both our protect and attack side is working very well”. According to figures from IDC, the research company, Lenovo is easily China’s leading computer maker, with more than a third of the country’s PC market.
But it also holds the top spot in four more of the world’s largest such markets, leading in Japan, India, Russia and Germany. Depending on which research group’s figures you look at, Lenovo is either the first or second-largest seller of personal computers in the world, locked in a battle with America’s Hewlett-Packard for pole position.
When Mr Yang speaks, these statistics and standings spill out constantly. He appears to suffer from a competitive corporatism, backing up almost all of his remarks with reference to Lenovo’s position compared with its rivals in a given market and territory. At first, this feels like a rhetorical crutch, a sort of oneupmanship, but this, Mr Yang explains, is how Lenovo thinks about how it turns a profit.
“If we cannot reach the top three, we will not do that business. Before we have 10 per cent market share, we don’t think there’s an opportunity to make money. After that … we shift to making profits.”
In January, Lenovo reported its third-quarter results, revealing a 34 per cent jump in profits to $205 million (£136 million), with revenue rising by 12 per cent to a company record of $9.4 billion.
Under the 48-year-old Mr Yang, who became chief executive in 2009, Lenovo has learnt lessons from Western multinationals, such as making clever acquisitions. Specifically, he points to its purchase of IBM’s PC division and ThinkPad laptop brand in 2004 for $1.25 billion. That deal transformed Lenovo from an unknown Chinese group into a global challenger.
Some see Lenovo’s rise to the pinnacle of the world’s PC league as a dubious achievement, a scramble for a bigger bite from an ever-shrinking pie. Sales of desktop computers are falling steadily, as consumers increasingly prefer to use mobile phones and tablets. So is Lenovo merely the standard-bearer for a dying industry?
“PCs will definitely not die,” Mr Yang said, “but the world is entering a PC-plus world … We just need to redefine and evolve the PC.”
One of those evolutions is Lenovo’s push to create “convertibles”, such as its Yoga device, a touchscreen laptop that can be flipped and twisted in order to create a tablet. Another was its unveiling in January of the Horizon, a large touchscreen computer that doubles up as a table. To its critics, it’s a gimmick, unlikely to catch on with the general public; according to Mr Yang, there is “definitely” demand for a table-top computer in the home.
“We just had a discussion with Dixons and Sebastian [James, the British retail chain’s chief executive],” he said. “He loves this product … You can use it with friends and family. You can play together, be happy together. We definitely are trying our best to innovate to find new market opportunity.”
Lenovo has also begun to sell smartphones. It is following its company mantra by launching first in China, followed by a handful of emerging markets, including India, Indonesia, Vietnam and the Philippines. This year, Lenovo’s smartphone business in China became profitable for the first time, gaining 10 per cent of the market, second only to Samsung.
Lenovo is not ready, however, to launch smartphones in Britain and the United States, Mr Yang said. The company needed more time to create a “flagship” product for less priceobsessed customers than those in China, to develop a device that could entice Western consumers wedded to Apple’s iPhone or Samsung’s Galaxy range of mobiles. He aims to do so in a couple of years’ time.
“Generally speaking, in mature markets you are rich enough and most residents can afford the higher-end products,” he said. “They care about design, they care about quality. We want to produce a first-class product for your country.”
Nevertheless, part of the struggle to break into America and Europe may come from the trust issues that surround Lenovo’s Chinese identity. Last October, a US congressional report warned that telecommunications equipment made by ZTE and Huawei, companies that have some Chinese state backing, could be used for spying. ZTE and Huawei denied the allegations.
Although the government-sponsored Chinese Academy of Sciences owns 36 per cent of Legend Holdings, which in turn has a 34 per cent stake in Lenovo, the company maintains that the authorities have no role in its operations.
Indeed, Mr Yang said that the majority of his board and executive team were from outside the country, including Jerry Yang, the Taiwanese-born American founder of Yahoo!, who joined recently.
“If you want to build trust, you have to be a transparent and open company,” he said. “At Lenovo, we try our best to become a pure international company, not a pure Chinese company.”
Yet he also has advice for technology companies wanting to enter China, such as Google, which has pulled out of the country complaining that it could no longer submit to China’s censorship regime.
“You have to know how to handle the government relationship,” he said. “It’s completely different to how to handle the US Government. Lenovo’s philosophy, wherever you do business … you must comply to the local law … unless you don’t do business in this market.”
He added that few of Silicon Valley’s household names had cracked China because they had failed to adapt their products and methods for local consumers, handing Chinese companies a key advantage.
“[Western companies] definitely must know the difference of the markets,” he said. “Customers require local applications.”