Debate: Is Yang Yuanqing a qualified Lenovo CEO?

An article in a certain self-media titled "The Truth: Is Yang Yuanqing a Qualified Lenovo CEO?" had an impact no less than that of "gravitational waves" and caused ripples in the industry.

On February 16, Lenovo Group issued a rebuttal, saying that the article contained data distortion, substitution of concepts, quoting out of context, conspiracy theories and other issues. Behind the debate is the unsatisfactory performance of Lenovo Group. Some commentators believe that it is the poor performance of Lenovo Mobile that dragged down the overall performance.

According to news released by Sina, Liu Chuanzhi, chairman of Lenovo Holdings and founder of Lenovo Group, pointed out in his speech at Lenovo's 2016 New Year's Annual Meeting that Lenovo is facing the fourth major hurdle in its development. However, he still did not forget to cheer up Yang Yuanqing, saying that "Yuanqing is a person who never gives up, has aspirations, is resilient, and knows how to build a team, set strategies, and lead a team."

Sun Yongjie, a senior IT commentator, said in an interview with the Daily Economic News that Lenovo's first three successes were due to its emphasis on the PC and Chinese markets, but today's decline is due to its neglect of these two key factors. If Yang Yuanqing wants to lead Lenovo through the fourth hurdle, he needs to re-examine the PC business and market, and the mobile business needs to shift its focus from overseas to the Chinese market in a timely manner, just like Liu Chuanzhi did when he returned, otherwise it will be difficult to overcome the hurdle.

Want to make a comeback in the mobile phone market

Most commentators believe that Lenovo's decline was caused by the poor performance of Lenovo Mobile (mainly smartphones). On the other hand, the PC business, which accounts for 70% of Lenovo's revenue and nearly 100% of its profits, saw a year-on-year decline in shipments last year, which also led to a 9% year-on-year decline in Lenovo's PC revenue in the first half of last year.

Lenovo's mobile business, which is its future focus, missed its high-speed development period three years ago. I don't know how many people remember that in 2013, Lenovo's smartphone business was the second largest smartphone manufacturer in the domestic market after Samsung; in 2014, Lenovo ranked third after Xiaomi and Samsung; by the end of 2015, Lenovo had fallen out of the top five.

Based on such market performance, Lenovo can no longer sit still.

On February 3, 2016, after Lenovo Group released its third quarter financial report for 2015/2016 ending December 31, 2015, Yang Yuanqing changed his tone of criticizing the domestic mobile phone market and said he wanted to make a comeback in the country.

Sun Yongjie believes that according to the market situation at that time, Lenovo's mobile phone and tablet shipments, which were in a rising period, ranked among the top three in the world. Lenovo's acquisition was aimed at obtaining patents and expanding overseas markets. The strategy was very clear, that is, the MOTO brand focused on overseas markets, and its own brand competed in the domestic market.

After acquiring MOTO's mobile business, Lenovo has ventured into the high-end market. However, its planned expectations have not been realized due to the severe internal and external environment.

IDC data shows that after completing the acquisition of MOTO mobile business and merging the Lenovo and Motorola dual-brand smartphone shipments in 2014 (a total of 93.7 million units), Lenovo Group became the world's third largest mobile phone manufacturer in 2014 (with a market share of 7.2%).

However, as of the end of 2015, Lenovo's smartphone shipments were actually only 74 million units, a year-on-year decline of 21%; its global share was 5.2%, and it also lost the third place in the world to Huawei.

Winning by scale may be Lenovo's advantage

In the process of Lenovo's development, one thing that cannot be ignored is the changes in the Chinese market; another is the fluctuations in its internal strategy.

What Lenovo did not expect was that during the nearly one year of waiting for the approval of the acquisition of Motorola, the market situation changed significantly, Lenovo was ranked behind Xiaomi, and the original plan of MOTO focusing on overseas markets was changed to MOTO returning to China and targeting the high-end market. The swaying of MOTO's brand positioning led to Lenovo's smartphone business line operating four brands at the same time in the middle of last year, including Motorola, Lenovo, Magic Factory and Lenovo Vibe series, with three brands positioned in the high-end market, which inevitably put Lenovo's mobile phones in an awkward position.

In Sun Yongjie's view, the vacillation of MOTO's brand positioning stems from Lenovo's overestimation of Motorola's brand influence. "Motorola is similar to IBM in the past, with brand influence, but the PC industry is different from the mobile phone industry. Motorola's influence is no longer a symbol of high-end, which can be seen in its performance in the South American market."

According to the third quarter financial report of the 2015 fiscal year, Lenovo's smartphone sales in markets outside China increased by 15% year-on-year, mainly in emerging markets such as India and Indonesia. Motorola contributed $2 billion in revenue in the quarter, accounting for 62.5% of Lenovo's mobile revenue. However, the price of mobile phones in emerging markets is relatively low, which has a very limited impact on Lenovo's revenue and profit.

In comparison, last year, the shipments of models priced around 2,000 to 3,000 yuan from Huawei, Vivo, OPPO and other companies all increased.

"Whether it is PC or mobile, the importance of the Chinese market to Lenovo is self-evident. In the past two years, PC is still the core of Lenovo. It is not only related to Lenovo's revenue and profit, but also to the success or failure of Lenovo's transformation. With the development of win10, the world will usher in a wave of PC replacement. If Lenovo can win it, it can lay the foundation for the next two to three years." Sun Yongjie believes that winning by scale in the future may be Lenovo's advantage.

Lenovo is facing the fourth hurdle

Liu Chuanzhi said that Lenovo had experienced three hurdles: the first hurdle was in 1994, when foreign brands entered China in large numbers and local brands almost collapsed. Lenovo established a microcomputer division headed by Yang Yuanqing, which broke through this hurdle in one fell swoop; the second hurdle was in the late 1990s, when Dell's direct sales model "landed" in China. Lenovo fought with it for three years and was once predicted to fail. It was not until the end of 2004 that it finally won with dual-mode marketing; the third hurdle was that Lenovo suffered a brief loss after acquiring IBM's PC business, and later achieved a breakthrough.

Today, Liu Chuanzhi believes that the fourth hurdle Lenovo faces is that due to innovations in technology and business models, Lenovo's PC business has been compressed, and new businesses such as mobile phones and servers have not yet taken shape.

At the same time, Liu Chuanzhi encouraged the Lenovo team. He said that no matter what, this industry is still a big industry with enough room for maneuver; in addition, Lenovo is an international enterprise with more than 70% of its business taking place overseas, so there is enough room for development.

In the industry's view, "PC and Chinese market" were the most important factors among the three hurdles Lenovo had previously overcome. Especially during the third hurdle, Liu Chuanzhi returned to the helm of Lenovo and shifted the focus of Lenovo's PC market from overseas to the Chinese market, which not only saved Lenovo's PC, but also laid a solid foundation for its subsequent bid for the global PC market.

Looking back at Lenovo's development history under the leadership of Yang Yuanqing, Sun Yongjie believes that "Yang Yuanqing's radical work style is both a weakness and an advantage." According to rumors, when Lenovo decided to acquire IBM's PC business, only Yang Yuanqing agreed, and all senior executives were opposed. At the last board meeting, Yang Yuanqing convinced all senior executives.

Sun Yongjie believes that this mobile strategy is repeating the mistakes of the acquisition of IBM PC. A similar difficult situation has also occurred. The internationalization strategy was immediately implemented after the acquisition, resulting in the loss of the domestic market. Fortunately, Yang Yuanqing is good at reviewing the situation. Through his efforts, Yang Yuanqing not only successfully integrated this asset into the Lenovo system, but also promoted the development of Lenovo's entire PC business.

Now, Yang Yuanqing has decided to return and shift the focus of the smartphone market from overseas to China. Can Lenovo replicate the miracle of that year?

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.