The HBR Interview: “I Came Back Because the Company Needed Me”
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Yang assumed the reins at Lenovo (formerly known as Legend) in 2001, when the company’s founder, Liu Chuanzhi, moved on to become chairman. He served as CEO for three years before succeeding Liu as chairman, and he and Liu engineered the stunning 2005 acquisition of IBM’s personal computer business, which suddenly made Lenovo the world’s third-largest computer maker. In 2009, after the company had begun to falter during the global recession, the board asked Yang to return as CEO, a post he’s held ever since.
Pursuing a strategy the company calls “protect and attack”—defending its core market in PCs (Lenovo is now the world’s number one manufacturer) while moving into new growth areas such as mobile and the cloud—Yang has turned things around. Earlier this year Lenovo spent $2.3 billion to acquire IBM’s low-end server business and $2.9 billion for Google’s Motorola Mobility unit.
He talks here with HBR’s editor in chief about Lenovo’s innovations, competitors, acquisitions, and more.
Photography: Lissa Gotwals
Some CEOs come across as philosophers, and some just seem to love selling stuff. Yang Yuanqing, the 49-year-old head of the Chinese computer giant Lenovo, is among the latter. And he’s one of the best in the game.
Yang, who studied computer science in his native China, assumed the reins in 2001, when the company’s founder, Liu Chuanzhi, moved on to become chairman. Yang served as CEO for three years before succeeding Liu as chairman, and he and Liu engineered the stunning 2005 acquisition of IBM’s personal computer business. The deal suddenly made Lenovo (formerly known as Legend) the world’s third-largest computer maker. In 2009, after Lenovo had begun to falter during the global recession, the board asked Yang to return as CEO, a post he’s held ever since.
Yang has turned things around, pursuing a strategy the company calls “protect and attack”—defending its core market in PCs while moving into new growth areas such as mobile and the cloud. Earlier this year the company made two more eye-popping acquisitions, spending $2.3 billion for IBM’s low-end server business and $2.9 billion for Google’s Motorola Mobility unit.
As a leader, Yang is probably best known for his efforts to break down Lenovo’s hierarchies and empower employees at every level—and for his well-publicized generosity. In 2012 he opted to share well more than half of his $5.2 million bonus—and in 2013 more than three-quarters of his $4.23 million bonus—with Lenovo employees. Yang spoke with HBR’s editor in chief, Adi Ignatius, in Morrisville, North Carolina, where Lenovo maintains one of its two headquarters (the other is in Beijing).
HBR: Lenovo recently became number one in worldwide PC sales. That’s obviously a great accomplishment, but is it also a reason for concern, given that the global PC market is shrinking?
Yang: When we bought IBM’s PC business, almost 10 years ago, we never thought such a thing was possible. It’s a dream come true. But we know the world is changing. This is no longer the PC era; it’s the “PC-plus” era. So we want to win in other areas: mobile, tablets, back-end servers.
Who do you think are your biggest competitors in the PC-plus world?
Apple and Samsung, of course. For now, we’re a solid number three. But we won’t stop there. Over time we’ll challenge them.
How do you take on giant, innovative companies like Apple and Samsung?
We are an innovative company as well, and we have a successful formula. We pursue a clear strategy and execution; we have an efficient business model; we innovate on our products and technology; and we have a diverse team and culture. Innovation is in our genes. We’ve developed products such as the ThinkPad, which has become iconic in the commercial-customer segment. And we’ve expanded innovation to the consumer space, with our Yoga PC and tablet.
OK, but people tend to talk about Apple as the ideal example of an innovative company. What does Lenovo do better than Apple?
We know how to balance innovation and efficiency. For some companies, innovation means an expensive product. That’s not Lenovo’s philosophy. We want innovation to be affordable for most of our customers. We have premium products, sure, but we aim most of our products at mainstream or entry-level customers.
Apple has very few products and a relatively limited product range. Lenovo has lots of products for different sectors of the market. Do you plan to change your approach?
No, we don’t. We want to cover more customers with rich product offerings along the full price range.
What do you think your best-selling product will be in five years?
Today PCs account for 84% of our total business. I think they will continue to be our core, with the tablet now part of this market. But I believe that two other markets—smartphones and the enterprise business—will grow faster than PCs. So in five years, I hope to see a more balanced business.
Let’s talk about your decision to buy Motorola from Google. Why do you think Google couldn’t make it successful?
Hardware is not its strength. Google is an ecosystem business—with advertisements, apps, and so on. It bought Motorola mainly for the IP, so it wasn’t focusing on the hardware.
How did the deal come about?
Right after Google bought Motorola, in 2012, I had dinner at my house with [Google’s executive chairman] Eric Schmidt. I said to him, “Do you really think you can handle the hardware business? And if someday you can’t, just call me and I’ll buy Motorola from you.” A year and a half later, he called me, and we quickly reached an agreement.
What is Motorola’s value to Lenovo? The IP? The branding?
Both. The brand is very important in North America and Latin America. In China, too, even though Motorola is hardly present now. We plan to bring the brand back to China. And we need this kind of IP to be a global player, particularly in mature markets. Plus, Motorola has strong relationships with carriers and retail networks.
You also recently bought IBM’s server business. What’s your strategy in choosing acquisition targets?
We use what we call a triangle process. When deciding on developing a business, we consider whether the market is big enough or attractive enough; whether the business fits with our core; and whether we have the resources to make up for any strengths we might lack to make it work.
Lenovo Goes Global
Big acquisitions have helped drive business since the company’s founding (as Legend) in Beijing in 1984.
† Numbers have been restated after taking into account the results of the mobile handset business; net gain on disposal of that business ($58,223M) was excluded from the net profit of 2008 for comparison purposes.
‡ Financials for the mobile handset business (which Lenovo sold on March 31, 2008, and bought back on January 31, 2010) are excluded during this period.
Sources: Lenovo; Yahoo Finance
Lenovo is often cited for sustaining a healthy corporate culture. What’s the secret to that?
We focus on three elements. The first is an ownership culture: We try to empower people to think for themselves, to make decisions for themselves. Everyone is an engine. The second is a commitment culture: If you commit to something, you must deliver. And the third is a pioneer culture: We encourage our people to be more innovative.
How do you actually promote innovative behavior? Is it a matter of creating the right incentives?
There are a lot of ways to do it. For example, I hold monthly brainstorming sessions with our R&D team. At each session we focus on one topic—it might be a product, a service, or a technology. Another approach is through the budget. For our R&D people, we allow 20% of the budget to be flexible, so they can decide which areas they want to focus on and what they want to develop.
Are you a student of management ideas, or more of an instinctive leader?
I tend to learn as I go, from our company’s own experience.
Have you been through an instructive failure at Lenovo?
Yes. During my first stint as CEO, I decided to diversify away from the PC business. We went in a lot of directions: internet service, IT service, contract manufacturing, phones. We tried to do too many things simultaneously and lost sight of our core competence. It was my mistake, and it failed. But we learned how to think about finding the right strategy.
During my first stint as CEO, we went in a lot of directions. We tried to do too many things simultaneously and lost sight of our core competence.
Why did you come back as CEO in 2009?
I came back because the company needed me. During the 2008–2009 financial crisis, Lenovo’s performance dropped significantly. We lost $200 million in one quarter! It was very dangerous. So we had no choice. The board asked me to do the job.
What can U.S. companies learn from how Chinese companies do business, and vice versa?
I think both can learn from us, because we’re not a U.S. or a Chinese company but a global company. Our top 10 executives come from six different countries.
I understand that Lenovo doesn’t employ many expats.
It’s true. We don’t assign people to other countries; we rely on local talent. That helps build a culture of trust and helps us understand different markets and industries. Throughout the company we employ only about 50 expatriates among our 54,000 employees.
How important is your share price? Do you think it’s a good measure of Lenovo’s performance?
We don’t usually comment on our share price. It’s how the market sees us. But our shares dropped to some extent after the two recent acquisitions. Investors worry about whether we can turn around Motorola’s business and whether we can make the IBM server business more profitable. We need to prove that we can make those deals work.
Some analysts look at your “protect and attack” strategy and say you’re doing well with “protect” but not as well with “attack.”
That’s not right. When we bought IBM’s PC business, Lenovo was a $3 billion company. This year our revenue will be close to $40 billion. If we were just trying to “protect,” we couldn’t reach such a level. Originally we bought only IBM’s commercial PC business. But after I returned as CEO, we decided to attack the consumer business, too. In just five years we became number one worldwide. And a few years ago I bought back the phone business that my predecessor had sold. Today we’re the number two smartphone player in China and number four worldwide. These are clear examples of “attack.”
People often say that no Chinese company has become a truly global brand. Do you think you’re there yet—a global brand like Apple or Coca-Cola?
I can’t say we’ve made it. But we’re a pioneer—among the first brands that originated in China and are now global.
You moved your family to North Carolina several years ago. What has surprised you most about the United States?
I’m impressed with the education system. In China kids study mainly for the test, to get high scores. In the United States schools give kids the flexibility to learn what they like. I’ve also discovered the value of work/life balance. In China we don’t go for balance. We just work all the time.
A version of this article appeared in the July–August 2014 issue of Harvard Business Review.