Lenovo's Great Leap

Despite cultural conflicts, the Chinese-IBM computer merger shows signs of success.

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The latest Lenovo notebook model in a Hong Kong computer shop.

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To bridge the gap between eastern and western cultures, the company conducted a "cultural audit" of its employees, discovering that former IBM-ers didn't fully trust the new owners and that original Lenovo workers felt their new American brethren were a bit undisciplined—let off the hook too frequently for blown deadlines or missed targets. Part of the problem, says human resources chief Ken DiPietro, was basic communication. "Westerners tend to speak first, then listen, and easterners tend to listen, then speak," he explains. Now, he counsels the Americans to slow down when they talk and the Asians to be more outspoken.

Global presence. Despite having hubs in China, America, Singapore, France, Japan, and India, Lenovo has no official corporate headquarters. Amelio, the American CEO, lives in Singapore. Chairman Yang Yuanqing, who is Chinese, lives in Raleigh. The company convenes its executives every four to six weeks in cities around the world: San Francisco, Hong Kong, Paris, and perhaps even Phnom Penh, Cambodia, later this year. "At an established company," Amelio says, "there's usually a lot of bureaucracy associated with headquarters. With a roving headquarters there's not as much of that, and you're closer to your customers."

Such multinational innovations have earned plaudits, but Lenovo still faces daunting challenges. "The purchase could have been a case study in disaster, and there were very few glitches," says Fiering. "But they haven't done a very good job with marketing, or with explaining the benefits of the liaison." While Job 1 was protecting the crown jewels—the Think brand sold mostly to corporate customers—Lenovo still has a tiny footprint among ordinary consumers outside China. IBM abandoned the consumer market in 1999, one reason Lenovo's worldwide market share is just 7.3 percent—and even lower in the United States, where it doesn't even offer a line of computers aimed at home users.

Lenovo's next move is to work down the chain from corporate customers to smaller businesses, entrepreneurs, and casual Web surfers. Instead of fighting bottom-feeder price wars with heavyweights Dell and hp, the company hopes to leverage the strength of the Think brand to launch a new lineup of PCs with a Lenovo label that will sell on quality and performance rather than price. The new lineup—the company's most important launch since the 2005 corporate marriage—will include generous tech support and features that make the machines feel more like consumer electronics, and maybe even Think innovations like the "airbags" and "roll bars" designed to protect delicate components. New models are scheduled to debut early next year, with plans to sell them at retailers like Circuit City and Best Buy.

Lenovo has a temporary crutch to help it gain marketplace traction. The terms of the 2005 deal allow the company to use IBM's name and logo to market its products until 2010—a deadline the company hopes to beat. With the agreement of customers, the company has removed the IBM logo from some of its ThinkPad notebooks and other corporate products, replacing it with the Lenovo name. But other customers still find comfort in the IBM endorsement, so Lenovo leaves it on. "We will leverage the IBM brand as long as we need to," says Advani, the marketing chief, "but we expect to take off the logo sooner rather than later."

Olympic gamble. If Lenovo can persuade consumers to pay a premium for its machines, it will be a nifty trick for a company that has far less brand recognition—and marketing money—than Dell or hp. Enter the 2008 Olympics. By spending upwards of $50 million to be a top-tier sponsor of the Beijing games, Lenovo hopes to gain worldwide exposure that will translate into PC sales. While the price is high, Amelio and other execs feel the return is greater than what they'd get from TV commercials or more conventional marketing. Placing such a big bet on the Olympics—and the fortunes of China in general—is risky, especially with human-rights activists targeting the Games as an opportunity to highlight China's association with questionable governments, especially that of Sudan. But Lenovo's American execs are unabashedly bullish on China. Advani raves about innovations that have come from the company's Chinese engineers, like a reset button on computers used in schools that automatically returns the desktop to a predetermined state after a lot of different users have moved icons around or changed settings. Amelio praises the "deep level of talent" he has found in China. And the company's Project Sea Turtle—named after the term for ethnic Chinese who migrate abroad for jobs or education, then return home—is aimed at luring talented Chinese expatriates to a home-grown company. So far, the project has nabbed several dozen hires.


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  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.