Chinesepod - Lenovo CEO has global ambitions

Opinion / China Watch

Lenovo CEO has global ambitions

By JANE SPENCER (WSJ)
Updated: 2006-11-21 14:53

http://online.wsj.com/public/article/SB116370857929525438-gdYjYdeCw1OMKJvw5
R4LRPuKTkc_20061128.html?mod=regionallinks

Bill Amelio, the American running the biggest computer company operating
in China, has an ambitious agenda. In the next year, the chief executive
of Lenovo Group Ltd. aims to boost the company's brand in the US and
break into key emerging markets -- and beat the company's Chinese
chairman, Yang Yuanqing, at ping pong.

Less than a year ago, Mr. Amelio left his job as head of Dell Inc.'s Asia
operations to take the top job at Lenovo, which following its purchase of
International Business Machines Corp.'s personal-computer division for
$1.25 billion in 2004 had emerged as the world's third-largest computer
company in terms of market share.

Now the 48-year-old CEO, who doesn't know how to say "jet lag" in
Mandarin, spends his days zipping around the globe on a mission to bring
Lenovo out from under IBM's shadow and transform the company into an
industry juggernaut with the same brand clout as its chief competitors,
Hewlett-Packard Co. and Dell, Nos. 1 and 2 respectively in terms of
global market share. Among his first-year accomplishments: launching a
$100 million restructuring effort to push the former IBM computer arm
toward profitability, expanding Lenovo's reach from the business market
to consumers, and enlisting athletes like Brazilian soccer star
Ronaldinho in advertising campaigns aimed at raising Lenovo's profile.

In his first year on the job, Mr. Amelio also has become a major headache
for his former employer. He has poached five senior Dell executives since
August, including Gerry Smith, an expert in supply-chain management,
which has long been one of Lenovo's weak points and one of Dell's
strengths.

Mr. Amelio has had a few headaches of his own at the helm of Lenovo,
ranging from anti-China sentiment to a major battery recall after a
Lenovo laptop caught fire at Los Angeles International airport. Earlier
this year, members of the US Congress voiced security concerns about the
federal government's contracts with Lenovo, saying they were worried
about buying computers from a Chinese company. Mr. Amelio also is
battling a threat from behind, as Taiwan-based Acer Computer Inc., the
world's fourth-largest PC company, experiences explosive growth.

Lenovo's third-quarter results suggest Mr. Amelio has plenty of work
ahead. The company lost market share in the US, and net profit fell 16%
from a year earlier.

During a stop in Hong Kong last week, Mr. Amelio talked about managing
across cultures and competition with Dell. Excerpts follow.

The Wall Street Journal: Do you still consider Lenovo a Chinese company?

Mr. Amelio: We're a global company. We actually rotate the headquarters
between Beijing, Hong Kong, Singapore, Raleigh [North Carolina] and
Paris. Instead of having everyone travel to me, I travel to them. I feel
like a gypsy at times, running around with my bag, unloading it and
loading it.

WSJ: What's your remedy for jet lag?

Mr. Amelio: You hit the ground and you work out. You get energized. Works
like a charm.

WSJ: What kind of cultural issues come up between the American and
Chinese sides of the company?

Mr. Amelio: Every day there's something. On both sides, you need to have
great trust in your colleagues to know that their intentions are good,
even though the words might not come out right.

In the US and Europe, we have highly opinionated executives who like to
make their voices heard. The China team tends to listen more and express
themselves more thoughtfully. The Americans and Europeans need to know
that if a Chinese colleague is nodding silently, it doesn't mean they're
agreeing. We also have a program in place to teach our China team better
confrontational management skills.

The Chinese team also tends to be very, very thorough -- and sometimes
when you want to get something implemented, it's important to have
conciseness.

Sometimes it's great to rally the whole team around something that
everybody is interested in. Last week, we had an event where we brought
in the 1992 Chinese Olympic ping pong champion, and had him play our
executives. Our chairman is the reigning champion [at the company].

WSJ: How's your Mandarin?

Mr. Amelio: I can say "hello" and "thank you." Ni Hao. At some point, I'm
going to do an immersion program.

WSJ: Earlier this year, the US State Department said it wouldn't use
Lenovo computers for classified work, after members of Congress raised
concerns about the fact that the Chinese government owns 27% of the
company. Was the concern legitimate?

Mr. Amelio: There is no risk to the US government in using Lenovo
products. Period. Full stop. There are no backdoor surveillance
activities or spy chips or any of the like associated with any of our
computers. Essentially, and unfortunately, this was wrapped up with
political issues associated with China.

WSJ: There are a lot of rumors out there that Lenovo is working on a $100
PC. What's the story?

Mr. Amelio: We're not there yet, but we've just announced a program in
India and China with Microsoft and Intel that allows people to get access
to a PC for somewhere between $100 and $150. The strategy goes like this:
We take a fully functioning PC, and we drop the cost in half. The bank
picks up one half, and the customer picks up the other half. Then the
customer buys computer cards, just like you buy phone cards. You can buy
a card for, say, 10 hours of computing. Over time, you essentially buy
back the computer from the bank by buying computer cards. This opens up
computing to people who would never be able to afford it otherwise.

WSJ: How do Lenovo's marketing strategies differ around the world?

Mr. Amelio: In India, we work with Bollywood actors and do key product
placements on game shows. Outside of the US, soccer is very popular, so
we hired Ronaldinho to do ads for us. In the US, we're working with the
NBA [the National Basketball Association]. Another way is through the
Olympics, which have broad appeal around the world. We're doing some
interesting stuff with blogs, too -- check out the Design Matters blog on
Lenovoblogs.com.

WSJ: What's in store for the next generation of Lenovo/IBM ThinkPads?

Mr. Amelio: Fingerprint swipe readers. If you have 30 different
passwords, they're all stored on your fingerprint, and you don't have to
remember them all.

We like to take ideas from other industries and apply them to our
computers. Take the roll cage around cars that protects people when they
get in an accident. We've put a roll cage around the LCD screen in a
ThinkPad, so if you drop the computer, you might not break the glass.

WSJ: Last quarter, you lost market share in the US What's your strategy
going forward?

Mr. Amelio: The issue in the American market is that historically we've
played in the large-account space. That market shrank this past quarter,
creating a lot of aggressive pricing. Our problem is that we haven't been
in the transaction space, targeting small and medium businesses and
consumers. As we gear up that part of our business, you'll see us gain
share.

We also need to get our supply chain around the world as efficient as it
is in China. And we need to get our brand as known outside China as it is
inside China.

WSJ: Does the US market still matter, when there are billions of
potential computer users in emerging markets like China and India?

Mr. Amelio: When you look at the size of the US market, it'd be hard to
say it doesn't matter. But the emerging markets are critical for our
success. We've got a great position in China, and we're migrating that
model to India, and we'll do that across many of the emerging markets,
whether it's Brazil or Russia.

WSJ: You've said that American companies typically use a "colonial
approach" when they enter the global market. What's different about
Lenovo's strategy?

Mr. Amelio: [With a colonial approach] you send an effective executive on
an expat assignment to Asia. They hire talent in-country. The downside is
that you tend to hire people through the filter of the language that you
speak, and you don't get the best talent. It's hard to identify talent if
you're conducting the job interview in English.

In all the previous jobs I had before Lenovo, the struggle was finding
midlevel managers in China. What I came to learn at Lenovo is that
there's a lot of talent, but a lot of the best people aren't at a high
level of English proficiency. If you look inside Lenovo, we've been
hiring without a screen for English for years, and that means we really
have depth when it comes to talent in China. Now we're working with our
Chinese midlevel managers on English skills.

WSJ: How has Dell's recent price cutting affected Lenovo?

Mr. Amelio: It's kind of the same old, same old. In this industry, if you
plotted it back for 26 years, you'd see that the average takedown rate is
30% per year. This is the dynamic that we live in, and the people that
relish that do well.

But one thing that's nice is that we have the IBM ThinkPad brand, which
is definitely positioned in the market as an innovative, higher
price-point product. People will pay for innovation.

WSJ: Taiwan's Acer, the world's fourth-largest PC company, is growing
faster than Lenovo, and the president has vowed to overtake Lenovo, to
become the world's third-biggest PC company by the end of next year. How
big a threat are they?

Mr. Amelio: I worry about every competitor. But as we enter into some new
markets, you're going to see our trajectory change. Everywhere in the
world outside of China and India, we haven't been selling to consumers
and small businesses. In some markets, that's over 50% of the
marketplace. The game is about to change as we enter that segment.

WSJ: What do you do when you're not working?

Mr. Amelio: I love to hang out in Singapore, where my family is. I don't
play golf or anything, so when I'm home, I'm home. My wife and I have
four kids, ages 21 months to 18. We also have two sixth-grade Cambodian
girls that are living with us and going to school in Singapore. They're
from the school that my wife and I started in Cambodia.

Hot Talks

� Does the future belong to China?

� Ah all i know is that i know so little..

� How to be ready for a foreign boss

� Koizumi visits Yasukuni shrine for the 5th time

� Leave a space for ur solitude

Most Commented/Read Stories in 48 Hours

Chinesepod