This week, I’m at the coming out party for Lenovo’s server unit, Lenovo Enterprise Product Group, which was recently acquired from IBM. This reminds me of the first meeting I had with the ThinkPad group after Lenovo had gained control of the PC company: The executives acted like they’d died and gone to heaven.
You really don’t get a sense for how difficult it is to get things done in a large complex company until you take a division like this and set it off on its own. Frankly, I think IBM and HP executives should be in the room with me because, as we saw with the IBM PC company, the x86 server group outside of IBM is vastly more powerful and far more effective.
Let’s talk about some of the advantages.
Legal that Works for You, Not Against You
One of the biggest problems in working at a large, old firm is that the legal department seems to work against you, not for you. The folks in that department seem to stay up late at night trying to figure out all the reasons you can’t do something that you need to just get done. In a younger firm, the legal department is on a mission to help you get things accomplished legally; they don’t throw stones, they take what you want to do as a direction and then they stay up late at night coming up with legal ways to do what you want done.
One example that was given was that in IBM, this group couldn’t provide a global contract. The legal teams at IBM couldn’t agree on the language that would work equally well in all geographies, so a global account had to sign a number of regional or country-specific contracts. But at Lenovo, the legal department created a contract that global accounts could use.
Large companies tend to be at war with everyone, which makes it nearly impossible to establish a partnership. Microsoft and IBM have always had a very iffy relationship, Intel and IBM have been at cross purposes as well due to the Power Platform at IBM, and Oracle and IBM are in a long-term war. Microsoft has always loved Lenovo in the PC space, in fact, it and Dell are considered Lenovo’s closest partners and this transfers to the server group. Lenovo has no competing platform with Intel and the two firms have historically been close. Not only do they have access to IBM storage, but EMC doesn’t consider them competitors. The two firms appear to be fighting to see which one can be the best Lenovo partner. Even though Oracle is in the hardware business now, Lenovo has no database software and Oracle is working with the Lenovo server group strategically.
Partnerships provide scale beyond the firm. It is these partnerships that give Lenovo a sense of scale that the x86 server group couldn’t get at IBM.
Cost is something that will bite HP in the butt when it spins off its PC unit. The company now has PC-level volumes and a truly global supply chain. It is reporting a cost reduction approaching 70 percent for many of the system components. In addition, it no longer has to pay the IBM Corporate overhead costs. Both of these points speak to the fact that the company can now price more aggressively and increase margins while typically, those two movements would be mutually exclusive. But I think part of this cost reduction is that there are simply fewer layers between the folks who create the hardware and those who buy it, which results in a huge drop in costs that couldn’t be avoided in IBM. Once a process is in place in a large company, it is almost impossible to get rid of it, but since Lenovo is a younger company, it is vastly leaner and, as a result, less wasteful and more agile.
Strategic Over Tactical
In large companies, there is massive pressure to deal with quarterly numbers. This forces the company to have weekly meetings where management pounds on sales to move more product. This is driven from the top, because this same pressure is put on the CEO from the large institutional investors. This type of pressure doesn’t seem to exist at the same level in Lenovo. This is partially because it is more of a global company than a U.S. company, and partly because it is younger and this behavior hasn’t yet spread through the organization. As a result, the meetings are less frequent and the focus is more on strategic issues that underlie the trends. In short, while large firms like IBM and HP tend to overly focus on what is going on, Lenovo focuses more on the “why” underneath the issues.
Focusing on what is going on is like playing Whack-A-Mole. It becomes nearly impossible to make headway. But if you can figure out the cause of the problem and fix that, rather than constantly dealing with the outcome of the problem, the problem will go away.
Global Drives Simplicity
IBM, as most companies in its class, is driven from headquarters. This tends to hamper agility because it creates a lot of red tape. Lenovo was built globally. It tends to be run from its geographies, which means decisions are more effectively delegated and executives are less concerned with covering their butts and more concerned with getting things done. This is a critical difference.
One executive in the room at this party shared an event where a customer located outside of the U.S. had a major outage, and with Lenovo, it was back up and running in a few hours. This same event in the U.S. would have required up to two weeks time just to get the approvals for the work to be done.
Because Lenovo is a global company that uses English as its common language, there is a massive effort to keep things very simple, because complex things get lost in translation. Communications tend to be very precise and direct, which forces a level of rigor to keep things simple that typically doesn’t exist in larger firms that are being led from one country.
Wrapping Up: Lenovo's Refreshing Change
You should get a refreshing surprise when you do business with the new Enterprise Product Group in Lenovo. You’ll find the products less expensive, the teams more responsive, and that the services (still supplied largely by IBM) haven’t changed. I actually think IBM should send a team in to do a post-mortem study and then take the findings back to IBM to transform that company and make it more agile and strategic, as well. Any very large company could learn a lot by talking to the Lenovo executives who, when inside IBM, struggled to get important things done and now are free to explore the potential they always had but were blocked from achieving.
This speaks to why over 95 percent of the folks who were offered a job at Lenovo from IBM accepted, when typically pulling folks out of IBM is very difficult. The grass wasn’t only greener on the other side, it was made of emeralds. In short, often the biggest problem with large companies isn’t competitors; it is that the companies are their own biggest obstacle. Lenovo has found a way to avoid that problem and the old IBM x86 group couldn’t be happier. The word “ecstatic” comes to mind.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+