Reviewing the road to success over the past 15 years, Liu Chuanzhi frankly told "why"
December 3, 1999, Lenovo's 15th anniversary special report at the Great Hall of the People. Reporters initially thought this was just an ordinary 15-year celebration, just on a larger scale. Unexpectedly, Liu Chuanzhi, who has great ambitions, reviewed the reasons for Lenovo's success from the history of China's economic development. Liu Chuanzhi said that after five years, he will not host Lenovo's report, so this report is his best effort. At this celebration, Liu Chuanzhi did not accept a "birthday gift", but instead gave a real gift - the revelation of Lenovo's success.
“These 35% should be remembered as legendary”
Liu Chuanzhi believes that Lenovo is the lucky one.
Liu Chuanzhi said that there are many types of state-owned enterprises. Lenovo is a state-owned and private enterprise with a system of foreign ownership. The state does not invest and relies entirely on the hard work of enterprises. Liu Chuanzhi said that unclear property rights will eventually hinder the enterprise. Fortunately, Lenovo has a good mother-in-law.
It was impossible to clear the property rights in 1984, but the Institute of Computer Science, Chinese Academy of Sciences made the most enlightened move it could at the time: handing over the company’s personnel, financial, and decision-making rights to the company. This move creates the best environment for Lenovo to release energy. With these rights, Lenovo started from the communication room. After the success of Lenovo's Chinese character system in 1985, Lenovo wanted to produce PCs, but Lenovo had no backers and couldn't get a production license - there were dozens of them across the country, and they couldn't get enough. It is precisely because of these three rights that Lenovo decided to set up a production base in Hong Kong to engage in large-scale production from PC assembly to motherboard production. This opened up a new world, otherwise it would be trapped.
In 1994, the decision-making team with Zhou Guangzhao, President of the Academy of Sciences as the core, announced that 35% of the dividend rights would be given to the Lenovo Employee Stock Ownership Association. Variable capital was a politically risky thing at the time, so the Academy of Sciences did it. Jing Shuping, chairman of the All-China Federation of Industry and Commerce, said: If we were labeled as a "loss of national capital" at that time, we could wear it firmly. Liu Chuanzhi said: This 35% is worthy of establishing a monument. It not only mobilizes the enthusiasm of Lenovo's entire employees, but also solves the problem of seniors. Lenovo failed miserably in 1993. Without this 35%, Liu Chuanzhi would not have allowed the veterans to retreat to the holding company after receiving generous equity returns, and let Yang Yuanqing come to power. As soon as the young managers came to power, they established cost control procedures and used new management methods to reduce costs, which enabled Lenovo's management to jump to a higher platform and Lenovo was able to take off again. Liu Chuanzhi said: After the 35% became equity, the shareholder representatives dispatched by the Academy of Sciences never had to do administrative management, but made decisions through the board of directors. Liu Chuanzhi called for: In companies like Lenovo, superior supervisors should fully delegate power. He believes that whether superiors can delegate power depends 40% on the general policy environment and 60% on the leadership of the supervisor. His observation was that many corporate policies at the time allowed it, but the key was that the superiors would not let him go because of their own interests. He called on these enterprises to be unable to survive in the next century unless the issue of property rights is resolved.
Zhou Guangzhao, president of the Academy of Sciences, believes that the Academy of Sciences has also given this policy to many subordinate companies, but only Lenovo has become bigger. He believes that only by delegating power to enterprises can enterprises like Lenovo bring huge returns, and leaders should have a far-sighted vision.
The unforgettable year 1993
Lenovo people will never forget the year 1993. The popular IT industry in the West has given Chinese companies a head-on blow. At that time, Western IT companies entered China in a big way, and Chinese companies failed miserably, with their market share falling from 80% to 20%. Lenovo only completed 20,000 units of its 30,000-unit sales plan that year. Liu Chuanzhi fell ill on the bedside. Chinese enterprises are inferior in technology, culture, management, and marketing, and Lenovo is enveloped in a feeling of failure. After recovering from his illness, Liu Chuanzhi reorganized the PC business. First, I learned marketing skills by acting as an agent for the products of large Western companies, strengthened management, and worked hard to practice internal skills. Lenovo understands that the management capabilities of Western companies are much higher than those of local companies, and Lenovo can only reduce costs in all aspects. This move enabled Lenovo to cut prices four times in a row in 1996.
In 1998, Lenovo designed products that met the needs of the Chinese market. This was the result of learning from Western market segments and developing for customers. For small and medium-sized enterprises, business doctors, electronic classrooms for education, as well as tax-specific machines and Tianxi network computers, Lenovo applied for 42 patents alone.
Some people criticize Lenovo for not paying attention to technology. Liu Chuanzhi replied: Only by possessing core technologies can we bring considerable profits. At present, Lenovo, like most Chinese companies, does not have the financial strength and scale to master these core technologies. But Lenovo believes that in addition to core computer technology, there is also product technology. In this regard, Chinese companies have local advantages, that is, they develop products based on the needs of the Chinese people. Product technology is the biggest advantage of Chinese companies.
Liu Chuanzhi believes that the most important thing for Chinese computer companies is not technology. Lenovo also developed dozens of patents in 1992, but due to weak management and market capabilities, it was unable to invest in PC development, and there was a backlog of motherboards. It also greatly increased the cost, so Lenovo made up its mind to solve the management and cost issues first and then talk about the technical issues.
Lenovo has recovered from its failure in 1993 and currently ranks first in the Asia-Pacific market in PC sales, with sales revenue of 17.6 billion in 1998. Liu Chuanzhi believes that there is indeed a big gap between Chinese companies and Western companies, but Lenovo has built confidence in Chinese IT companies. After joining the WTO, Chinese companies will still develop normally. They will have both comprehensive competition and cooperation with Western companies, and more cooperation. Lenovo is It’s about learning from others through collaboration.
Future
Liu Chuanzhi believes: “In the West, not every company focuses on technology. Some large companies with marketing capabilities can purchase or merge small companies with technological advantages. " He believes that compared with Silicon Valley, Zhongguancun lacks not only venture funds but also such large companies, and Lenovo wants to be such a company. Liu Chuanzhi said: "Lenovo first focuses on the domestic market and becomes the main brand in the Chinese market; secondly, it produces for well-known foreign brands through OEM; thirdly, it gathers strength to become an international brand enterprise." Liu Chuanzhi believes that Lenovo's path is a path of gradual improvement. After that, Lenovo will still be a century-old enterprise. (Ming Lei)