Lenovo (formerly, Legend) is China’s largest PC company, with $3 billion in revenues. Excerpts from a Knowledge@Wharton interview with Lenovo chairman, Liu Chuanzhi:
Regarding the domestic market, we have seen that recently Legend’s market share has been declining. The main reason is that our strategy for the past three years was not so well set up. Three years ago, Legend’s market share was about 30%. In order to keep growing, the company decided to diversify into multiple sectors. I don’t think the top management team was well prepared for that. Their attention was distracted from the PC business, which is our core business.
In addition, the domestic market has been changing. Many small- and medium-sized companies have come up in the computer industry. Customers’ behavior has also changed. In the past, most of our orders were large orders that came from government institutions but now there are many orders from small companies and also from private individuals. We also have more foreign competitors that have come into the Chinese market. Their marketing and sales practices were more attuned to this changed customer behavior.
In view of these developments, this year Legend carried out a thorough and careful review of our plans in the past three years. We have decided to retreat from diversification and refocus on the PC business.
For those who are starting their careers and their own business at the startup stage, one word I would say to them is “perseverance.” They should know that everyone faces setbacks and failures — that this is part of everyone’s experience — and that they must stick to their goals and keep trying all the time.
For executives at large companies of Legend’s size, my advice is that they remember that in order to keep the company going over a long time, one success or one setback is not that important. The most important thing is to establish a solid management base. This needs three things. First, you have to find the right people and bring them to your team. Second, you have to decide the right strategy and plan. And third, you have to have strong execution power. With these three points a strong base can be established for the company.