Depth report

　　

In the past month, the tide of attacks has plunged Lenovo into the most serious public relations crisis in history. The brand image has been severely damaged, and Lenovo has been reminded of the most critical moment.

    The outside world is mixed with doubts and pessimism about Lenovo: On the one hand, many people do not know that Legend Holdings and Lenovo Group are two companies, and think that Lenovo Group’s business is blooming everywhere is speculative; on the other hand, they are very sensitive to the decline in the mobile phone business. He thinks that “there are few Lenovo mobile phone users” around him, and Lenovo is over. He regards the PC business as yesterday’s yellow flower, knows little about Lenovo’s enterprise-level business, and does not understand the growth of other smart devices and investment in the smart field. Many people sigh that Lenovo, which was once proud of it, is drifting away.

    But an interesting phenomenon occurred. From May 11 to May 25 during the outbreak of the crisis, the Hong Kong stock Lenovo Group (00992)'s share price not only did not fall, but also showed obvious signs of bottoming out and rebounding. It soared by 6.91 on May 25. %. Since Lenovo was removed from the Hang Seng Index constituent stocks in early May, it seems that many funds have entered Lenovo stock under the negative conditions.

      The latest update of Lenovo Group’s performance before the deadline for this article verifies the objective and calmness of “capital”: in the fourth quarter of fiscal year 2017/2018, Lenovo’s turnover returned to double-digit growth of 11% after a lapse of 10 quarters, and pre-tax profit For 37 million U.S. dollars, a 143% increase compared to the previous fiscal year. The overall turnover in the fiscal year increased by 5.4% to US$45.4 billion, the second highest level in history (US$46.3 billion in the 2014/2015 fiscal year). This means that if Lenovo’s performance is really turning point and it is sustainable, and the current stock price is greatly underestimated, this crisis may be the last opportunity for big money to buy Lenovo.

Is the "battle nation" still there?

    Our first concern is whether the Lenovo culture has deteriorated. If the culture changes, all changes will be empty talk.

    In this regard, the benevolent see benevolent. In the interview, most of the old Lenovo people think that Lenovo is "able to fight, fight tough and win battles". Although every company has the possibility of decline, they think that Lenovo is capable of "cultural rejuvenation."

    A member of the Legend Club who is now an investment believes that Lenovo's culture originates from suffering, born of challenges, and has never been a brother. He shared a short story: Liu Chuanzhi, who had just stepped onto the podium at a swearing ceremony before Lenovo acquired IBM PC, was crying bitterly in front of more than 1,000 employees, and everyone was silently waiting for him to reveal the reason. Mr. Liu said affectionately: He accidentally saw that the old colleagues sitting in the first row of the venue were very tired. More than half of these old entrepreneurs were in very bad health and had various chronic diseases, which made him feel very emotional. Guilt and self-blame. At that time, Lenovo was on the eve of a brilliant career, and it was also the time when Yang Yuanqing and many current Lenovo executives were fighting from village to township to city with Dell and Hewlett-Packard. While working hard to innovate on the Chinese Academy of Sciences system, the old Lenovo people of that generation had to deal with various challenges and criticisms while facing global market competition. Most of them overspent their families and their bodies. Therefore, Legend Club, Lenovo’s former employee organization, is one of the few large companies to fully interact with the company and miss the years of fighting.

    Take Yang Yuanqing as an example. He has always been regarded as the "sword-holder" who pushed the Lenovo Spartak phalanx to move forward, and has always been the strategic "radical" of Lenovo Group. After Lenovo's successful integration of IBM's personal computer business, many Lenovo foreign executives in the United States advocated cutting off the unprofitable mobile phone business. Most people hope that Lenovo will stably guard the PC and enterprise-level business to reduce the uncertainty of the capital market. This also allowed the mobile phone business to be briefly sold to Hony Capital, a subsidiary of Legend Holdings, in 2008. But Yang Li's main mobile phone was merged into Lenovo Group to show greater dreams. Looking at this decision now, he has been under tremendous pressure, but today he is still willing to start a new adventure with All in AI (Focus on Intelligence). Yang Yuanqing also likened this strategic transformation to the "Normandy landing" that reversed the situation in World War II. He wanted to rekindle the war.

      Although both Liu Chuanzhi and Yang Yuanqing are considered by the outside world to be Lenovo’s stars and bigwigs, they are not universal. In the survey and interviews of ordinary employees, we can still feel that the "combat culture" is still motivating the organization to move forward. Points to Lenovo’s understanding:

    First, Lenovo people are not dogmatic. According to Qiao Jian, senior vice president of Lenovo Group, when the company approached McKinsey and other international consulting companies for strategic consulting around 2000, many people in the industry almost unanimously expressed doubts about the development of Lenovo Group. Many people suggested selling the PC business to IBM or Dell, because they have no hope of defeating these two giants in this business. At that time, Lenovo withstood the huge pressure of public opinion and completed the upgrade of the consumer-grade PC business business model. It creatively created a dual model of T mode (product retail transaction mode) and R mode (relational mode) to compete with Dell and win A great success. In 2004, Lenovo Snake Tunxiang acquired IBM's PC business, and many people in the industry also think it is difficult to succeed, saying that there is a high probability of being "choked to death" and other ridicules. This is exactly the same as the questioning of today's intelligent transformation. She also talked about Lenovo's current mobile phone business culturally breaking the traditional "wearing shoes" and "big pot rice" reforms, and giving out bonuses in the form of incentives to sales staff. "Most of the history of Lenovo's development has been desperately moving forward under pressure, solving problems as they saw each other," she said.

    Secondly, Lenovo people don't go into the camp. The few details of this touched the author. The first one was the story about dealing with customs in the early days of entrepreneurship. At that time, Lenovo had no personal support at a certain customs in the south, and didn't know how to accommodate it, and suffered many difficulties. Later, Lenovo’s long-term investment principle was not to blend with officials. They felt that although the company grew up in the system, many environments were more difficult than private enterprises. Therefore, Lenovo’s internationalization "Being in order" is very eager. "What we haven't changed for more than 30 years is that we respect competition and haven't made any quick money," said a member of the Legend Club. The second story comes from the memory of a Lenovo financial officer and the friction between the tax bureau clerk. At that time, the newly recruited clerk was a little bit reluctant to ask CEO Yang Yuanqing to be there for a trivial matter. As a result, his words were not gentle enough to cause the entire company including Yang Yuanqing From top to bottom, the tax bureau apologized. These vignettes reflect from a certain aspect that Lenovo is not a nobleman, and there have been a lot of unknown bitterness and tossing around. From another perspective, Lenovo people have no room to drill camp or take shortcuts in the cruel living environment.

    The third is that Lenovo people are not war-weary. This point is analyzed in "Lenovo's Strategic Paradox". One of the main points in the article is to criticize Lenovo's globalization for establishing bureaucracy. It is recommended that Lenovo focus on training the team with high growth in the Chinese market. After that, Lenovo opened a lot of information about our domestic and foreign market teams to support in-depth research, which gave us a new understanding of Lenovo's globalization capabilities.

    At the same time, we also witnessed the whole process of Lenovo's counterattack in China. In 2017, under the leadership of Liu Jun in China, the turnover of major customers broke through 60% of the market share. Member and user management, new retail New customer-oriented models and new channels such as the system and SMB business platform are quickly established. Although Lenovo’s "China Rebalance" strategy has fought in many places, it has fought very resolutely.

    The above three points are our observations on the inheritance of the "battle culture" from a human perspective, and they have also led to thinking about Lenovo's long-term development potential: some people think that Lenovo is a rusty iron sword, but the true "battle culture" of Lenovo is still With the alloy's resistance to decay, Lenovo's "proud" energy is straightforward and stubborn. It is neither pampering, wealthy, nor aristocratic. The essence is the soldier's reluctance to admit defeat and the desire for the battlefield.

    Yang Yuanqing did not evade the problem during the interview. First, he believes: Although Lenovo has achieved phased success in its globalization strategy since acquiring IBM's PC business, it has indeed not strengthened its "engine" position in the Chinese market enough; second, Lenovo’s strategy used to be narrow about the hardware itself, and insufficient attention to “service innovation” and “software innovation”, which resulted in the company’s strategy not focusing on world-class shipments to lock in future-oriented ecological competitiveness; third, more During this period, the investment in the innovation of the Internet, mobile Internet, and smart phone basic software and hardware was not determined enough, and it remained at the financial level. Therefore, the "three-wave strategy" he advocated faces innovation directly.

    After Liu Jun returned to Lenovo, he revived the old Lenovo's fighting culture of "no dogma, no camp, no war-weary", and at the same time proposed a 32-character "new entrepreneurial culture". An executive from Lenovo Group China shared a few details: Liu Jun bombarded the "bureaucracy" at many internal meetings and repeatedly emphasized "hands in mud", "hard blood and hard work", "subverting conventions", and "corrupt and trustworthy". "New entrepreneurial culture" and other key points, eradicate the self-righteous inertia of multinational companies. He often holds office meetings at the company around 8 in the morning, and meetings at 10 in the evening to discuss strategic deployment. Some new Lenovo employees began to discuss overtime meals at 8-10 in the evening. The entire Lenovo seems to be returning to the efficiency, methods, and rapid decision-making of Chinese companies from the "high coldness" of the previous internationalization strategy.

    The "battle nation" has begun to return to China. It does not seem to be an imaginary slogan. It has become a self-renewal appeal from the heart. The “local approach” began to replace the red tape-style process control of multinational companies, and the determination of “returning to China” to reshape local competitiveness also made Chinese employees no longer entangled in how to write PPT in English, and R&D talents received great attention. From time to time, Yang Yuanqing and Liu Jun will give senior executives exams on new culture at meetings. “Liu’s Association is very true face-to-face so that many people can recite the'new entrepreneurial culture' verbatim without making a single mistake.” Signs indicate: Prior to the business rebound, Lenovo's "spiritual spirit" has been completely renewed.

Is the "Lenovo Turning Point" sustainable?

    The emergence of morale inflection points and performance inflection points obviously cannot explain all the problems.

    Strategic rivals have changed. Companies such as Xiaomi, which have taken advantage of the rapid rise of the smartphone business, are making profound cross-border innovations; their business models have changed, and Tencent and Alibaba, which use the Internet model to cut into enterprise-level cloud services, are establishing an agility. Efficient enterprise-level service barriers; organizational needs have changed, and whether Lenovo can win the future high-tech competition depends more on whether the organization can be strong and integrate talented fighters. The most fundamental problem facing Yang Yuanqing is not to change public perception, but how to make Lenovo enter the next growth cycle under the leadership of its smart strategy.

    "As a super giant with an annual revenue of 300 billion yuan, Lenovo’s strategic opponents are all global giants, and it conducts business across cultures on a global scale. It is also a listed company. Limited by short-term performance fluctuations, Lenovo’s turnaround is not "Easy thing", Liu Jun's view on the difficulty of Lenovo's transformation is very pertinent.

    However, while most of Lenovo's executives were cautious, Zhou's shopkeeper team found that Lenovo's business model was quietly changing, and the "Lenovo turning point" was changing from expectations to signs. There are several remarkable facts and our analysis and judgment:

    First, the equipment business has bottomed out. Even if the equipment business includes mobile phones, Lenovo Group has no room for downward decline, but there is a lot of upward space. Taking PC as an example, every additional point of penetration will bring in a turnover of 330 million U.S. dollars and a profit of 130 million U.S. dollars. Today, Lenovo's penetration rate is only 2.8%, HP has 4.8%, and DELL is as high as 7.3%. However, business PC cloud services for stock devices still have long-term market potential.

    Dialectically, Lenovo’s PC business is not as "sunset" as criticized by some radical analysts. Instead, it is possible to usher in the bonus period of "the leftover is king", just like the slightest criticism of white goods such as Midea and Gree. Without technical content, Lenovo, as the king of PCs, still has a stable profit return in the main position. "Black and white electricity" is also likely to allow Lenovo to copy a wave of beautiful and Gree share price growth. Moreover, in the enterprise-level market with higher profit margins, Lenovo Group PC surpassed Hewlett-Packard to return to the world's number one throne, achieving the dual global champion of PC turnover and sales in the enterprise-level market.

    This objectively has a huge business opportunity that will detonate cloud services and enterprise-level data center business. From the perspective of Laas, PaaS and SaaS in the industry, Lenovo will add a new strategic engine. This is also a new business opportunity for "device + cloud". . Looking at the data: Lenovo Group's total mobile business turnover in the latest fiscal year reached 7.2 billion US dollars, and sales growth in North America reached 57%. The turnover of all new equipment has achieved a year-on-year increase of about 50%. There should be good reasons to believe that the equipment business has bottomed out and is in the shift phase.

    Second, the capabilities of “cloud services” and “enterprise-level services” are greatly underestimated: Although Lenovo is not as cutting-edge as the momentum of Tencent and Alibaba’s cloud services, the Lenovo Group, which has long-term The demonstrated "cloud service capability" is still outstanding, which includes not only the enterprise-level services of the data center, but also the PC application services of the intelligent IoT platform.

    In terms of technology accumulation, Lenovo's supercomputing capability is the second in the world and the first in China. In terms of application, six of the world's seven largest data centers use Lenovo's solutions. In cooperation with universities at the forefront of technology research and development, Lenovo has obtained comprehensive applications from universities such as Peking University, Oxford University, University of London, University of Chicago, and North Carolina State University.

    "In terms of institutional and enterprise-level services, we are not afraid of any competition. The battle has just begun." said Tong Fuyao, president of Lenovo's data center business group in China. He also believes that Lenovo's B2B and B2C business synergy has unlimited space, which can even start from business. The angle of view provides new opportunities for the re-emergence of the mobile phone business. It should be said that this business is Lenovo's strong anti-risk ability and a stabilizer for long-term sustainable growth.

    Third, the "smart ecology" clearly points to consumer-level business upgrades: After all, Lenovo is a company that has been doing B2C consumer electronics products for more than 30 years and is extremely sensitive to the trend of smart devices. Lenovo's "smart ecology" layout began to accelerate in 2018, and it can be summarized as "new equipment", "new platform", and "new retail" in three levels.

    “New devices” can already see the release of a series of smart devices, including AR helmets, VR headsets, smart conferences, and consumer electronics products promoted with partners; “new platforms” are more reflected in the use of Smart The IoT platform provides users with rich video, audio, games and other content services. Currently, the daily active users have reached 3.4 million. The "new retail" is Lenovo's exploration of new retail terminals from many companies. Among them, the Mirage AR headset is already the global sales champion. A Lenovo product manager is confident that AR helmets will become the next PC-level "big box", and he cares more about Lenovo’s possible breakthrough in the field of smart devices.

The widely criticized "no core technology" and "work hard for the Wintel Alliance". This is the shame in his heart.

    In other words, Lenovo is not only vigorously upgrading its consumer-level business, but its own adjustment and evolution have created a new strategic window of opportunity around "intelligent cloud services." In the words of Yang Yuanqing: "The first wave is to upgrade the terminal and transform the past Lenovo, the second wave is to build infrastructure to consolidate core competitiveness, and the third wave is to reshape new competitiveness in industry solutions.

    This new strategic thinking has many similarities to Microsoft's transformation. The reason why Microsoft was able to rise again was that the performance of Microsoft Azure cloud rebounded and pushed the market value to a record $740 billion in the past four years, not 7.17 billion in 2013. The US dollar's acquisition of Nokia's mobile phone division has recovered, but because of the consolidation of competitiveness in the commercial cloud service sector, it has become the world's largest commercial cloud service company except Amazon.

    Lenovo is consciously or unconsciously embarking on the road of Microsoft's revival. "All in AI" (full betting on AI) essentially swears by a systematic change in strategic thinking and direction. Although the character of the "fighting nation" does not like to admit defeat in the mobile phone business, the real situation is that Lenovo Group’s valuation model has changed. Lenovo’s latest financial report on May 24 shows that Lenovo Group has already learned from a company. Of consumer electronics companies are moving towards the new strategic direction of smart solution providers, which means that the outside world’s perception of Lenovo as a “device-based” company has fallen behind, and it is transforming into a service-oriented technology company.

    On the whole, the "Normandy Landing" is a lasting battle for Lenovo's intelligent innovation. This battle is difficult and systematic, and it also requires a surprise. During the survey, we found that there are still many secret weapons in the "landing war": Lenovo's venture capital business has invested in a total of 85 companies and completed the independent spin-off of 8 innovative businesses. Accurately identify cutting-edge technology companies such as Face++, Cambrian, Sino-Austrian Technology, Waterdrop Technology, and Vision Medical, and have cutting-edge investment layouts in the fields of artificial intelligence, face recognition, gait recognition, smart security and smart medical care, 1.5 billion yuan The US Dollar Innovation Fund is carrying out special operations for the strategic reshaping of the "New Lenovo".

    Perhaps all the pessimism of the outside world has been reflected in the sluggish stock price, and looking forward, more positive factors are accumulating, the dawn of Lenovo has appeared, and this is the time when Lenovo people are most tortured. In this regard, Yang Yuanqing’s sentence at the 2018 Diamond Stadium Association Swearing Conference is very meaningful: Nadal, who ended the season early due to injuries in 2016, was once looked down upon by many people, but he returned to the top in 2017.

      In his opinion: the Normandy landing battle has already begun, and the "battle nation" is still good at fighting. From March to October 2014, the forward-looking guidance was updated, and was updated again in March 2015 to reflect the sensitivity of establishing the time point of the first increase in the federal funds rate in line with inflation results.

    All in all, the Fed carefully adjusted the pace of interest rate hikes to meet changing macroeconomic conditions. The global spillover effect did not become apparent until October last year. But since the Fed began to shrink its balance sheet, the global spillover effect has been realizing. This is because the Fed has not made adjustments to the previous unexpected increase in the issuance of US government bonds, or even explicitly acknowledged this. It must do so now.

      The good news is that the Fed has an option that does not require it to change the overall policy direction. It can simply re-adjust its balance sheet normalization plan to accommodate the impact of the aforementioned deficit. A simple rule of thumb is to reduce the speed of its scale reduction, and the rate of reduction must be sufficient to significantly weaken or even completely offset the shortage of dollar liquidity caused by the expansion of the US government's borrowing scale.

      This move will help alleviate the shocks suffered by emerging markets and limit the impact on global economic growth through supply chains that are distributed in both developed and emerging economies. Otherwise, the possibility of a "sudden halt" in the global economic recovery will increase.

      This may also cause harm to the US economy. Time has changed. The Fed’s policy should also be changed accordingly. It will still reach the same destination, but there will be less turbulence along the way.