Yang Yuanqing wants to use artificial intelligence to reverse the decline. Facing the early deployment of BAT, can Lenovo catch up and catch up?

The growth rate of its main PC business has been slowing down, which is an impending disaster for Lenovo Group, which has been trying to transform in recent years.

All of this started five years ago, in 2012, when Gartner, an authoritative market research organization in the United States, released PC market data in its third quarter report, which showed that Lenovo had surpassed HP to become the world's number one. Although it was slightly different from the data released by IDC later, given Lenovo's growth rate that exceeded the industry's growth rate for 14 consecutive quarters, a gap of less than 1% was no longer an obstacle for Lenovo to firmly sit on the top of the PC market.

But it is worth noting that according to the data in Gartner's third quarter report at the time, the global PC market as a whole was already in a downward trend as early as 2012. The total sales volume in the first three quarters of that year was only 87.5 million units, a year-on-year decline of 8.3%. Not only that, the profit margins of the PC industry are also gradually decreasing.

Some media even analyzed that Lenovo's profit margin was 1.4%, HP's was 7.4%, Dell's was 6.2%, and Acer's was only 0.4%. Now it seems that the practice of reducing profit margins to increase sales was like drinking poison to quench thirst, which was effective but may not last long.

As expected, as the research organization IDC released the global PC shipment ranking data for the first quarter of 2017, Lenovo was completely pushed to the forefront.

On April 12, 2017, IDC released the ranking data of global PC shipments in the first quarter. HP's total PC shipments were 13.143 million units, an increase of 13.1% from 11.621 million units in the same period last year; ranking first in the industry. Lenovo Group ranked second, with a total PC shipment of 12.322 million units, an increase of 1.7% from 12.121 million units in the same period last year; Lenovo Group's market share in the quarter was 20.4%. According to data released by market research firm Gartner, although Lenovo is still the first in the PC industry, its total shipments were 12.377 million units, a year-on-year increase of only 1.2%, and its market share was 19.9%. HP's PC shipments in the quarter were 12.118 million units, but it increased by 6.5% year-on-year.

Regardless of whose data, IDC or Gartner, is more valuable for reference, as of now, Lenovo's PC business is facing a major crisis, and perhaps Lenovo Group's transformation has reached an imminent point.

However, it is only a matter of time before HP regains the top spot in the PC industry. For Lenovo, which has clearly shown signs of lack of innovation, weak products and weak marketing, it is somewhat difficult for it to consolidate its position as the king.

Just like what Yang Yuanqing said at Lenovo's 2017 Global Rally, "Overall, Lenovo's progress is still not fast enough and strong enough." But in fact, the problems Lenovo is currently facing cannot be simply summarized as "not fast enough." I think what Lenovo needs most now is a direction that can solve the problem.

Lenovo's frequent structural adjustments are the cause of its predicament

Lenovo is the brand name of Lenovo. "Le" is taken from the original "Legend", which means "legend", while "novo" is said to be derived from Latin, representing innovation. Lenovo has not only become a symbol of Lenovo's entry into the world market, but also witnessed Lenovo's development from its founding to its current huge IT empire with an operating income of nearly 300 billion yuan.

However, the current PC industry has long been a sunset industry, and the profits of the whole machine are like chicken ribs. Even if Lenovo has won the global sales champion for five consecutive years, it is difficult to bring it huge economic benefits. Lenovo's mobile phone business is even more miserable, and has had little presence in the market in recent years.

Recently, some online media found that a Lenovo phone model S920 was being sold on JD.com for less than RMB 350. Although this is not a new Lenovo phone, but a phone that was first launched in 2013, such a low price gives us every reason to believe that Lenovo seems to be clearing out its inventory from a few years ago.

Prior to this, Yang Yuanqing had said that Lenovo Mobile would make a comeback in China. One year later, Lenovo Mobile has further failed, and 70% of the group's revenue is concentrated in PCs. According to market data, Lenovo's mobile phone sales in the first half of 2016 were 5.85 million, ranking outside the top ten. According to Tencent Technology, compared with the 15 million mobile phones sold in China in 2015, Lenovo Mobile's performance in the Chinese market in 2016 dropped by an order of magnitude, selling only more than 3 million mobile phones, and even failing to catch up with 360 mobile phones.

On the other hand, in 2014, Lenovo acquired Motorola's mobile phone business for US$2.9 billion and IBM's X86 server business for US$2.3 billion. However, not only did it fail to replicate the successful experience of acquiring IBM's PC business in 2004, but it was dragged down and suffered huge losses in 2015.

The failure of this acquisition directly led to a net loss of 128 million US dollars for Lenovo Group, which was the first loss since 2008. Therefore, Yang Yuanqing subsequently made the eighth organizational structure adjustment for the entire group, and the mobile business segment made continuous adjustments in terms of business, structure and personnel.

However, Lenovo still could not resist the decline. On February 16, Lenovo Group released its third quarter results for the 2016/17 fiscal year. The group's revenue and net profit attributable to the parent company both declined. Revenue reached US$12.169 billion, a year-on-year decrease of 6%. Net profit was US$0.98 billion, a decrease of 67%. It is worth noting that, except for a slight increase in PC business revenue, mobile business and data center business revenue decreased by 23% and 20% respectively.

Behind Lenovo Group's financial report, in addition to layoffs and senior management changes, there are also short-term self-help measures such as selling real estate. Lenovo Group recently announced that its wholly-owned subsidiary Lenovo (Beijing) Co., Ltd. has signed an equity transfer agreement with Beijing Sunac Rongke Real Estate Co., Ltd. to sell 49% of the equity of Chengdu Lianchuang Rongjin Investment Co., Ltd. to the latter for approximately RMB 1.617 billion.

Hong Shibin, an industrial economist, told Legal Weekly that Lenovo's frequent organizational structure adjustments in recent years also reflect that Lenovo does not have a clear understanding of its future strategic planning. The reason for this is that Lenovo is too eager to see impressive data and too much pursuit of short-term benefits. On the other hand, it is because the company is too large and it is difficult to find a suitable transformation method.

Can Lenovo's efforts in artificial intelligence and diversified business promote corporate transformation?

Lenovo is striving hard to find a breakthrough. Although they believe that Lenovo's original business still has room for recovery, the company has reached a point where it must undergo transformation, and finding new breakthroughs has become a top priority.

At Lenovo's 2017 Global Rally held in Beijing, Yang Yuanqing appeared again and talked about Lenovo's new transformation. In his opinion, the PC will not die, on the contrary, sales will usher in a new boom, and they must seize this opportunity.

At the conference, Yang Yuanqing emphasized that Lenovo has formulated a new "three-wave" strategy. In short, Lenovo will continue to consolidate its computer and mobile phone businesses while developing new smart devices and cloud services to achieve the effect of transforming from a single business to a diversified business. Lenovo's subsequent strategic shift from product-centric to customer-centric is also recognized by Lenovo as the key to winning customers and the market.

Then on April 19, Lenovo Group CEO Yang Yuanqing announced that Lenovo Group will invest more than US$1.2 billion, equivalent to about RMB 8.2 billion, in artificial intelligence, the Internet of Things and big data in the next four years. It is planned to ensure that Lenovo Group has US$1.5 billion in R&D expenditure each year by March 2021, and the above amount will account for more than 20% of the total R&D budget.

At the same time, Yang Yuanqing said that Lenovo Group will cooperate with Google and Amazon in product development to achieve the goal of achieving 50% of revenue from smartphones and other new businesses in total revenue, although at present, Lenovo's revenue share from this item is only 30%.

In the view of relevant people, Lenovo's cooperation with Google and Amazon this time is a sign that Lenovo's large-scale investment in the artificial intelligence industry is the beginning of its transformation to diversified businesses after its layout in PCs and mobile phones. Ultimately, artificial intelligence will be integrated with the PC and mobile phone industries to help Lenovo occupy the high-end market.

Although it can be seen that Yang Yuanqing intends to deploy artificial intelligence technology on a large scale, will this lead to more intense external competition for Lenovo?

Baidu, Alibaba and Tencent have all made plans in the field of artificial intelligence. Baidu proposed to set up a deep learning institute in 2013 and established the Silicon Valley Artificial Intelligence Laboratory in April of the same year. Today, Baidu's driverless cars, DuerOS, Baidu AR and Baidu Medical Brain have all made their own achievements.

Alibaba launched its artificial intelligence ET last year, which has the capabilities of intelligent voice interaction, image and video recognition, traffic prediction, sentiment analysis, etc. In addition, it also launched e-commerce brain and Ali Xiaomi. Tencent also established an artificial intelligence laboratory in September last year, focusing on basic research and application exploration of artificial intelligence.

However, for Lenovo, whether it wants to use artificial intelligence to reverse its decline or simply considers the complementarity of the company's business itself, artificial intelligence is always a new breakthrough for Lenovo.

Standing at the forefront of artificial intelligence, Lenovo has found its direction of development

As a veteran and established technology company in the industry, Lenovo has been somewhat at a loss about the direction of its future development in recent years. However, there must be a deeper industry background behind its vigorous promotion of artificial intelligence layout this time.

Since AlphaGo dominated the Go world last year, the topic of artificial intelligence has never stopped. And after AlphaGo, a computer Go program named Master suddenly appeared on the Internet, which won 60 consecutive games in the fast game mode. After that, "artificial intelligence" has completely become a hot topic on the streets.

From IBM's "Deep Blue" outstanding performance in the field of chess in 1997 to the emergence of AlphaGo in 2016, artificial intelligence has fully transitioned from early programming language construction logic inference to machine learning and cognitive simulation based on artificial neural networks. At this stage, various manufacturers seem to have seen the development prospects of artificial intelligence and have launched their own intelligent products.

The reason behind the booming market is that artificial intelligence has become a new round of capital hotspot.

According to the tracking survey data of Ventures Scanner, an investment research institution, as of November 2016, a total of 1,485 AI startups received financing, with a total financing amount of more than US$8.9 billion, setting a record. Among these companies that received investment, 44% of them are committed to AI in the field of machine learning. In the entire AI industry, 35% of companies choose the machine learning route, which is the industry's leading direction. It can be seen that investors attach great importance to the AI ​​industry.

At the same time, according to the Financial Times, Microsoft spent $12 billion on research and development in 2015, one-third more than Google and the highest among all companies in the world. Nearly one-third of Microsoft's employees are engaged in research on artificial intelligence-related projects.

It is precisely this industry that seems full of hope that allows Lenovo to see a breakthrough in its transformation.

In the past, although Lenovo became an industry leader in PC business, with the decline of PC business, the company's development began to usher in a change. However, in the era of smart phones, Lenovo's layout was a little slow, and it still did not achieve much results despite its efforts. However, this time, Lenovo chose artificial intelligence as a new breakthrough point. Although it was a little late in the timing, it may be a wise choice for it.

Let’s not discuss whether Lenovo is only focusing on the short-term benefits brought by artificial intelligence this time, but the industry already has precedents for how much economic benefits the combination of artificial intelligence and mobile phone business can bring.

Bixby of Samsung Galaxy S8, Siri of Apple, and Magic Live intelligent system of Honor Magic are already the representatives of artificial intelligence in the mobile phone market. Although the level of these artificial intelligence is not that high, it is enough to show that artificial intelligence has become a "hot topic" in front of mobile phone manufacturers.

In this situation, for Lenovo, which did not have much accumulation in the field of artificial intelligence, how to quickly connect artificial intelligence technology with its own products has become the key to whether Lenovo can quickly reverse its decline.

But before that, we still need to analyze the biggest difficulty Lenovo faces in developing artificial intelligence, which is "corporate culture."

How to overcome the obstacles of corporate culture has become the real challenge of Lenovo's transformation

In the past period of time, whether it is the lack of product quality or the vacillation in strategic layout, on the surface, it is due to a series of complications of Lenovo's unsuccessful transformation. But in fact, the main reason for Lenovo's lack of problem-solving direction is the corporate culture, which can also be seen from Lenovo's sensitivity to the technological "trend" of artificial intelligence and the scale of investment.

"Lenovo is too rigid, and it is difficult for Internet awareness to take root." A Lenovo executive once said this to the media.

This reminds me of the website called FM365, which was founded in October 1999. The full name of this website was "Lenovo FM 365", which was an ISP business jointly developed by Lenovo and China Telecom. It has news, email, search, games, software and other channels, and became a popular portal website. At its peak, it was one of the four major portals with Sina, Sohu and NetEase. In terms of publicity, in addition to relying on Tianxi and Tongxi series brand machines, it also invited Nicholas Tse and Zhou Xun to do TV and outdoor advertising, but in the end it only survived for 4 years.

Fundamentally, the main reason why Lenovo lost to Sina, Sohu and Netease is that Lenovo was just a hardware company at the beginning. It was difficult for the hardware company's traditional corporate culture to adapt to the emerging Internet wave. In the face of new opportunities, it should have a new perspective.

Perhaps it is because Lenovo has achieved so much in the PC industry that it is difficult to promote Internet thinking in the company. From this perspective, some businesses that are too successful will indeed become an obstacle to the popularization of emerging things.

Lenovo's traditional corporate culture as a hardware manufacturer has become the most difficult obstacle for Lenovo to face in recent years, and it has also become one of the important reasons for Lenovo's replacement of senior management with fresh blood in recent years. Even Liu Jun, who was once second only to Yang Yuanqing in Lenovo's status, finally left in 2015 to join 499fang, ending his 22-year career at Lenovo. Before that, Feng Xing, the "second in command" of the mobile phone business, also joined LeTV after being "transferred away", and now he is facing a choice again.

Subsequently, at the end of last year, Chen Xudong, who succeeded Liu Jun as Lenovo Group's executive vice president and president of the Mobile Business Group, was transferred to be responsible for Lenovo's global service business, while Lenovo's MBG business was taken over by Qiao Jian, the senior vice president who was formerly in charge of Lenovo Group's HR business.

For Lenovo, whether it is focusing on short-term economic benefits or constantly adjusting the industrial structure, the root cause behind it is that Lenovo is restricted by its corporate culture. This corporate culture of a traditional hardware manufacturer not only makes it impossible for Lenovo to deeply deploy an industry, but the pursuit of short-term benefits is also not what Lenovo wants.

At the same time, the complications of pursuing short-term economic benefits became more and more obvious. Without a long-term strategic layout, Lenovo could only keep shifting positions, trying to catch up with the next trend in the Internet industry, and for this reason it had to repeatedly adjust its own industrial structure. This behavior was the cause of the decline in the attractiveness of Lenovo's products.

Therefore, the deployment of artificial intelligence has not only become an important solution to break through the current industrial weakness, but also an important position for Lenovo to try to transform. The importance of artificial intelligence to Lenovo is self-evident. On the other hand, although the transfer of senior personnel may affect the development progress of artificial intelligence in a short period of time, for Lenovo today, the top priority is to forget about the performance of the next quarter and find the future strategic direction with greater determination.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.