VUCA is an acronym used to describe volatility, uncertainty, complexity and ambiguity – elements that increasingly reflect the current and future state of the world in which organisations operate.

Currently one of the top two PC makers globally, it’s hard to imagine that Lenovo's formation and evolution as a company encapsulates the essence of VUCA in many ways.

Barely seven years ago, Lenovo Group acquired IBM's personal computer (PC) business. The merger of two very large organisations with roots in both the East and West saw the company work through numerous complexities during its formative years.

For example, the structure of the two companies was diverse: IBM had a 100-year heritage with over 250,000 employees, while Lenovo was a relatively new five-year old company with a tenth of the former’s staff strength.

In terms of operations, IBM and its executives were headquartered in New York while Lenovo’s Executive Committee members were based in different parts of the world. Language and culture were also factors to overcome, as Lenovo executives could not speak fluent English and had far less multinational experience that their counterparts at IBM.

Since the acquisition in 2005, Lenovo has grown to become a US$30 billion company with over 27,000 employees globally. Most notably, Lenovo achieved this growth in what had become an increasingly VUCA period that saw its fair share of natural disasters, political turmoil, the global financial crisis and hyper-competition.

Today, where its competitors have faltered, Lenovo has outpaced the growth of the overall PC industry for 14 consecutive quarters and is just whisker away from being the number one PC company globally. Fundamental to Lenovo's success has been the notion of balancing the opposites in three areas:

• Striking a balance in the Protect and Attack strategy;

• Getting the right balance between innovation efficiency and control;

• Grooming Lenovo’s next-generation of leaders by balancing the needs for job rotation and accountability.  

Protect and Attack

Lenovo's Protect and Attack strategy has been a core philosophy that has helped the company grow market share and improve profitability despite the increasing VUCA environment. Just like how a boxer uses one arm to shield his vital areas while using his other arm to strike the ‘kill zones’ of his opponent; Lenovo protects areas where it maintains a strong lead, and adopts the attack strategy where it sees growth potential.

While the Protect and Attack strategy is applied across the world, every region is empowered to decide on what or how they adopt the strategy. For instance, in China Lenovo is already the dominant PC market leader with 34% market share, hence the strategy is to protect and extend the leadership position in the PC segment. At the same time, Lenovo is attacking new segments such as smartphones where it has overtaken Apple to reach the second position in China with 14.2% market share.

In ASEAN countries on the other hand, Lenovo is still building up its leadership, so the strategy is to protect the commercial PC market where its Think branded PCs dominate, and attack the hyper growth small-medium business (SMB) and consumer PC markets which are growing rapidly. Lenovo is also selectively attacking the smartphone markets in Indonesia, Philippines, and Vietnam.  

Globally connected and fully localised

Guided by its Protect and Attack strategy, Lenovo has a clear focus of building a company that is both globally connected and fully localised.

The company moved away from a single headquarter approach to adopting a polycentric model. Lenovo's global leadership team is distributed across different hubs located in Beijing, Paris, Raleigh and Singapore. Lenovo's top 10 leaders represent seven nationalities while the top 100 executives are of 17 different nationalities.

At the same time, Lenovo is establishing deeper roots in each major market around the world. In addition to hiring talents, Lenovo is also establishing stronger manufacturing footprints in major markets like Brazil (through the acquisition of CCE), Japan (through a joint venture with NEC) and US (through the opening of a manufacturing facility in Whitsett, North Carolina).

This global-local model enables Lenovo to deeply implement its Protect and Attack strategy. As the company’s most valuable business operations are placed strategically around the world, top local talent are hired to operate the businesses in these key markets. This is fundamentally different from a traditional multinational company which has a single headquarters in one country, with only sales and distribution spread around the world.

As validation, Lenovo has been the fastest growing among major PC vendors for 12 consecutive quarters. It is also number one in five of the seven largest PC markets, achieving 27.2% market share in Japan and 16.9% in India.  

Striking the right balance in organisational structure

Speed, flexibility and adaptability have always characterised Lenovo's approach in organising its business. The organisational structure draws on the learnings and synergies across countries at similar stages of development.

In 2009, Lenovo moved away from the traditional geographical segmentation and organised its business into the Mature Markets and Emerging Markets Group. The notion was that consumers and businesses in Jakarta, Moscow and Dubai shared more in common in terms of technology usage and buying behaviour, than their geographical neighbours.

Adapting to changing business environments and needs in early 2012, Lenovo re-organised again into four regions – China, North America, Asia Pacific and Latin America (APLA), and Europe, the Middle East and Africa (EMEA).

These four new geographic regions were balanced in size, focused on growth, and took advantage of the company's larger structures to consolidate growth momentum. This helped Lenovo to become a faster and more-focused organisation, to accelerate their end-to-end operational speed, and protected areas where they have a strong lead and attack areas of greatest potential. Lenovo's most recent quarterly earnings (FY2012-13 Q2, for the period July-September 2012) provide solid validation that this evolved structure is paying dividends. Even as the economy slowed down, Lenovo's China PC business maintained growth of 8% year-on-year and its market share continued to reach new heights.

In EMEA, Lenovo recorded double-digit market share of 10.8% and an all-time record of 11.5% in APLA. In North America, Lenovo reached an all-time high of 8.3% market share in the United States, and rejoined the top four, just behind the three strong domestic brands (HP, Dell and Apple).

Balancing innovation efficiency and control

Developing the right mix of innovation efficiency and control has been another factor that has helped Lenovo to successfully navigate the VUCA landscape. Innovation creates stronger differentiation and better margins for Lenovo in a hyper-competitive and commoditised PC market. Efficiency enables Lenovo to balance the pace of innovation in a market that moves at light speed. It also provides better control and management of variables amidst an increasingly volatile external environment.

Lenovo's innovation efficiency is based on a two-tiered approach to solving real-world customer problems. First, the company prioritises the majority of development towards innovations and secondly, this is coupled with longer-term research targeting ‘game-changing’ big plays that redefine the product category.

For instance Lenovo’s LePhone A60, which has been retailing in China, was developed in six months, half the usual development time. In addition, Lenovo controls inventory tightly, with as little as five weeks of storage so that stores can quickly turnaround sales.

Unlike major PC makers which typically fully outsource their manufacturing process, Lenovo adopts an ‘end-to-end’ business model which involves vertical integration and a hybrid manufacturing model. Such an approach leverages Lenovo’s manufacturing capabilities as well as its innovation partners for greater control over both product development and supply chain operations. As a result, Lenovo is able to efficiently drive innovation, and build the most resilient, speedy and efficient global supply chain in the industry.

Lenovo has recently announced the Wuhan Industrial Base, an investment of around RMB 5 billion over the next few years, and the joint venture with NEC in Japan and Compal in China. These illustrate Lenovo's approach to vertical integration. In addition, Lenovo has invested in a manufacturing and distribution centre in Itu, Sao Paulo - an example of its hybrid manufacturing model which will enable the company to expand its product portfolio in Brazil, strengthen price competitiveness, and shorten order delivery times to customers.

As proof points of innovation, Lenovo now has 6,500 globally recognized patents, nearly 5,000 of which are patents for invention. In 2011 alone, the company registered 500 new patents. In addition, Lenovo is perhaps one of the few Chinese companies that makes money from its patents. Last year, patents contributed significantly to Lenovo’s revenue.  

Grooming leaders of tomorrow

Identifying and grooming next-generation leaders is critical to Lenovo's continued success. To navigate in a VUCA world, Lenovo grooms leaders on three different aspects that the company coins as the ABC of Leadership:

Attitude:having a winning attitude, respect for others, being adaptable and entrepreneurial;

Behaviour: being a role model to employees, inspiring and motivating them;

Competency: to have self-awareness and reflection, communication skills, people management, business acumen, and the ability to embrace and initiate change.  

Lenovo’s goal is to groom leaders with a global mind-set, who possess the aptitude to work across borders and cultures, and have the resilience to deal with unpredictability. The company actively rotates the jobs of key leaders approximately every three years to give them greater exposure across different roles, functions and environments.

The three-year tenure strikes a good balance in terms of giving the leader enough time to initiate changes and for the outcomes to manifest to ensure ownership and accountability. In addition, leaders and employees abide by a shared set of values called the Lenovo Way that is designed to cultivate a company-first approach that promotes delivery and accountability. Every employee is trained in the fundamentals of the Lenovo Way, which consist of five ‘P’s:

1. Planning

2. Performance

3. Prioritisation

4. Practice

5. Pioneering.

This goes towards grooming leaders that exemplify the ABCs of leadership.  

Living la Vida VUCA - the Lenovo Way

The adage, change is the only constant, aptly describes the mindset that organisations need to embrace if they want to successfully thrive in a VUCA world.

Lenovo has taken this a step further by not only embracing change, but also engineering change. Lenovo has a saying in Mandarin: 每年一小变，每三年一大变, which means “A small change every year, and a big change every three years”.

Lenovo is a company formed in VUCA times, and built to thrive in VUCA times.

This article was first published in HQ Asia (Print) Issue 04 (2012).