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Lenovo, Not Disruptive? Think Again!

by Richard Guppy | 6月 17, 2014

An industry watcher living in China told me: Lenovo will never be disruptive.  I replied: but they have been disruptive already!

My contact knows Lenovo from within China, and believes that Lenovo’s products and their quality do not stand out among other Chinese smartphone vendors, and certainly not among Apple, Samsung and Sony.  I know Lenovo from a global, strategic perspective, and I can see at least two important things.  One: how Lenovo has risen to be world number one in selling PCs.  Two: how Lenovo has bought Motorola Mobility, and what that means, since I used to work at Motorola.

Let’s take the PC subject first.  PCs are now a commodity product; if you like, the opposite of what they were when Apple and IBM brought them to market in the 1980s.  Lenovo has built its number one ranking on the ability to make good PC devices at large scale and low margins, causing its revenues and operating margins to grow steadily over the last several years.  Oh, and it acquired IBM’s PC business in 2005, gaining technology and brand (‘Think’) in the process.  It has brought a certain amount of innovation to the game, such as its Yoga folding two-in-one PCs/tablets, and its DOit apps, like SHAREit which has had over a million downloads.

But it’s not about innovation, and this is perhaps where my contact and I see things differently.  It’s about having the right skills and assets at the right time of market development.  Motorola used to have 40% global market share in phones, when phones were analog and needed different, almost magical properties in each different market where they were sold.  As phones became digital and commoditized, then Nokia took over, with its skills in consumer electronics such as cost control, portfolio management and user interface.  Apple came along and hit the reset button, making phones special again.  Now, Android enables phones to be a commodity once more.  In each phase, successful companies have different strengths.  It seems to me that in Android, there is now space for a high volume, low margin devices specialist to grow significantly.

Let’s take the Motorola subject second.  For Lenovo to move beyond second rank in smartphones in China and onto the global stage, it needs several things, including IPR, technology, brand, channels, and more appealing products.  Motorola brings all of those things.  The two companies share certain cultures also, such as an engineering and product centric approach.  The two companies tend not to have duplication either, such as the markets where they are strong.  In other words, it’s a great match.

So let’s say that Lenovo is a candidate for being in the right place at the right time.  Then let’s say that Motorola, if the acquisition is confirmed, will find a great new home to make the most of its amazing history and surviving assets.  Will the two companies work well together?  For me, this is the final piece of the puzzle.  Lenovo has shown that it can successfully integrate its acquisitions: look at the IBM PC business, and the NEC Japan PC business, which have helped propel Lenovo to its #1 global status.  (Consider also how main PC rival HP did not do well in integrating its Palm acquisition.)  Therefore I am optimistic that Lenovo and Motorola will work well as an integrated business.

Finally, so what, if Lenovo confirms its instant global #3 smartphone rank, with the Motorola acquisition approved?  It will mean that a high volume low margin specialist will take a #3 position in the commoditizing world of Android smartphones and tablets with almost all the ingredients it needs, and may bring down margins by doing what it does best.  That will impact those companies that are hanging in there, hoping to make a margin one day out of smartphones, especially in the low and mid tiers.  It may mean that other companies try and boost their scale, by making acquisitions also (think: HTC bought by another Chinese vendor such as ZTE).  The missing ingredient? Quality, which needs to improve for Lenovo to compete in the premier league of international vendors.  Motorola could enable that improvement, but it remains the single biggest risk factor, in my opinion.

These options are explored more in the new SCI-m Lenovo Dossier and new Lenovo Disruptive Alert http://sa-link.cc/LNVO .

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