Lenovo CEO Yang Yuanqing and his team are focusing on the company’s vision of intelligent transformation across geographies. The tech giant is fast expanding its portfolio beyond PCs to emerge as a strong ‘end to end datacenter’ player.
According to IDC, Lenovo dominated the global PC market as a leader in Q3 of 2018. “We have embarked on a very different strategy of intelligent transformation, which is about smart IoT, data and computing power across PCs, smart devices and datacenter of a modern organization,” said Ken Wong, President, PCSD, Asia Pacific and Senior Vice President, Lenovo Group in an extensive interaction with ChannelWorld India in Hong Kong.
Ken leads Lenovo’s fast-growing Asia Pacific business across PCSD (PCs and Smart Devices) in diverse markets of ANZ, Central Asia Pacific (ASEAN, Hong Kong, Taiwan and Korea), India and Japan.
First up, how diverse are the trends in the adoption of PCs and smart devices by Asia Pacific companies? Does the maturity curve differ across regions?
LENOVO ADDING IMPETUS TO CHANNEL STRATEGY IN APAC
1. Project Velocity is a 2 year worldwide program that launched 6 months back focusing on reengineering processing on channel operation, making good use of tech to drive experience and empowering channels on AI, deep learning & data analytics.
2. GTN (Gross-to-net) program is a combination of quarterly target incentive programs or monthly tactical promotions for channel partners to support their sell through or sellout sales.
3. ‘GTN tools’ refers to an automated system that has been launched to calculate rebate payment amount for these programs and also, to speed up payouts to partners.
A couple of trends that we are obviously seeing, especially in the past 12 to 18 months is a very strong commercial demand mainly driven by the Windows upgrade. And for obvious reason, because Windows is going end-of-life by the end of 2019.
With the recent news of the biggest airlines in HK, and the other from the biggest hotel chain group; companies are becoming more aware of the importance of security. When more devices are connected it's not an IT question, even lines of business, CEOs, CFOs, the CIO have the same concern. We see strong demand coming out of the security issue for PCs and we introduced a new product suite few weeks ago - ThinkShield. ‘As a service’ model is another rising trend.
Asia-Pacific is the most dynamic geography, for example areas like Japan and ANZ, and then come the more emerging but also extremely dynamic regions such as India and Southeast Asia. The modern CIO has to prioritize work and be answerable to the LOBs on their IT demands, and that is a big driver of as-a-service model.
So, will we live in a world of ‘everything as a service’ like PC as a service, laptop as a service?
Yes, and it depends on the customer type. With PC as a service we had a couple of successful cases, as organizations want more time and capacity for IT leaders to focus on say AI to help their business, or develop deep learning teams or monetize their data.
Microsoft is also driving a lot of software as a service or application as a service demand. At the end of the day, it will be technology as a service as everything can be on that platform. This is not only confined to enterprises as we have seen SMB version of ‘technology as a service’ emerge in the last six months for the smaller companies in APAC.
Cloud as a service is already quite mature. But companies are trying to figure out software as a service, device as a service - PC, tablet, smartphone - and we have introduced such offerings in the market, not only for enterprises but also for SMBs.
Lenovo was the leader in global PC market in Q3 2018 with 24 percent market share followed by HP and then Dell, according to IDC. Was the growth driven by Lenovo’s joint venture with Fujitsu or you see overall momentum continuing in the PC market?
I think it's both. We obviously got some growth from our inorganic model, but if you look at our organic growth it's also very promising. In Asia Pacific, we reclaimed number one in the last quarter too. Lenovo was globally number one, and the highlight was that in the past 22 years it was a record high for any vendor in the market, as per IDC.
More than 95 percent of our business in APAC is driven through channel, and the IDC report tags us as the fastest growing vendor in this space. We are substantially investing in channels to maintain our market leadership by enabling our business partners to do more business and help them lead the intelligent transformation vision of Lenovo.
What are the key tenets evaluated by CIOs when they engage with a PC vendor? Does the conversation start with pricing?
They don't look at hardware as such, though it’s important. They look at how much productivity or capacity they need. As more CIOs manage their complicated infrastructure setup, they look at how the tech provider can help them simplify the same. And lastly, security has come a lot higher in the stack than maybe three years ago when I talk to CIOs in the regions.
Besides PC, how is Lenovo faring with the smart devices business including smartphones, because you were late to the mobility party, than say Apple and Samsung?
We are very candid (that's in our DNA) that our smartphones strategy needs to be fine-tuned. We wanted to be across 169 countries in the past, and that was when I was a strategy officer for the company.
Now, we are very focused in Latin America, North America, Western Europe and India, and this has helped us to go deeper into the market, things you need around 4Ps and help us to right size our organization. It enables us to expand where we can spend the money into the place that we are good at, and that has been a great turnaround for mobile business. We actually made money for the first time in mobility business this year.
IT channel partners have been big proponents of PCs to organizations. What's the report card on Lenovo’s channel strategy and the road ahead? Any major announcements, new GTM for APAC for 2019?
The biggest initiative around channel, not only for Asia-Pacific, but also for the world is Project Velocity. It's basically coming up from our business partners’ feedback in the past two years that ease of doing business with Lenovo from a channel perspective has not been our strength. Project Velocity - the worldwide program launched six months ago with a total duration of 24 months, has three core pillars. The first being reengineering our processing around channel operation, making good use of technology to drive that experience and third one revolves around AI, deep learning and data analytics.
The next focus in GTN (Gross-to-net) programs which can be a combination of quarterly target incentive programs or monthly tactical promotions that Lenovo announces to channel partners to support their sell through or sellout sales. "GTN tools" refers to an automated system that Asia Pacific has launched to calculate the rebate payment amount for these programs and also, to speed up payouts to partners.
Ken’s Priorities for Lenovo PCSD in 2019
1. Growth Momentum: That’s the top priority as Lenovo pushes the pedal to retain its recent no. 1 PC vendor position.
2. Customer Centricity: Customer Experience is core to businesses with employee satisfaction as the big element.
3. Intelligent transformation: It is one of the most important transformations in the past three decades for Lenovo.
In the past, there were some disputes with our partners. I'm happy to share the early successes - this quarter, in some part of Asia Pacific, we have already piloted the digitization of our GTN program, including record and tracking on the portal, and now you don't need paper. After completion of a quarter, it was a lengthy process for channels to submit claims and get back the rebate. With digitization, the claim to pay lead time for our business partners has reduced by 30 percent.
Do you really feel Project Velocity will sway channel partners from competition or it would mean selling more with existing partners in an extremely diverse PC market?
It's definitely a plus for Lenovo. The four objectives of Velocity are speed, consistency, simplicity and profitability. And our ultimate vision is that partners should be able to get all their needs fulfilled through the portal real time, not just from the web portal, but also from a mobile app for a specific industry or vertical.
Project Velocity is about intelligent transformation. If you look at the solutions we provide to our business partners’ customers, we are by far the most differentiated and competitive in the market. It’s not only about GTN or putting a little bit of sales materials digitally, but it’s about revamp of the channel process and delivering an ‘end to end’ channel experience to partners.
If I am a CIO of an end organization, what would Lenovo promise me?
We are really committed to listen to customer feedback, as all the action initiatives and new projects are primarily based on their feedback. Intelligent transformation is important to me, important to our business partners, and also to our customers. The discussion is how we can help them on that journey. And lastly it is about customer centricity, as I have to make sure that my CIO customer is happy - then I will be happy.
As APJ chief for Lenovo’s PCSD division, what would be your three priorities for 2019?
My top priority is growth. I don't think any company can survive without growth. We talked a lot about customer centricity as the core of how we make a decision. Secondly, lot of companies might have missed the big element in CX which is about employee satisfaction using PCs in your company. How can an unhappy employee deliver happiness to the customer? The third one is intelligent transformation which is one of the most important transformations in the past two to three decades of Lenovo.
If you were given a crystal ball to see prime trends in PC and smart devices domain, what they would be and why?
The as-a-service model will become more mainstream in the next five years. Differentiated solutions that fixe business pain points of the customer will become prevalent. That’s something that we have been learning, and it's not easy. Selling hardware is relatively easy, but understanding customers’ pain points and introducing a solution requires a different level of engagement and requirement set.
Another trend I see is in terms of more technology alternatives with respect to supplier. In the past, PC industry has been about one, two or three suppliers – be it Intel, Microsoft, among others. Going forward, my prediction is that there will be more alternatives for silicon, there will be more alternatives for an operating system. The world is moving into choices for the customer, and it will be more defined with a different mix of technologies for specific scenarios.
Pitch Lenovo as it is today in one sentence.
We are transforming well.