"Experts told us not to bring out this new product now, since the marketplace was worried that ThinkPad might not be ThinkPad after the merger, that the titanium notebook was just too different. Not only would that hurt the IBM brand equity, it could create a negative brand image for Lenovo," says Mr. Advani, Lenovo's senior VP-CMO. "We thought hard about it." Heads: Offer consumers a better ThinkPad, delivering on their expectations of continued innovation. Tails: Go with the familiar black, assuaging consumer fears that the new ownership may have cheapened the brand's identity.
Ultimately, the company decided that ThinkPad users cared more about a better product than tradition, says Mr. Advani, who spent 13 years at IBM before signing on at the merged company, "so we decided to take the risk and offer the titanium option."
All business gambles should pay off so nicely: Not only is it selling well, but a Fortune reviewer last fall concluded that it might be "the best ThinkPad yet." In hindsight, Mr. Advani says, he's not surprised. "If we had compromised on quality or innovation or service, then it would have backfired. But because we stayed true to the essence of the brand, it's been very successful."
To some, looking for those essential marketing truths in Lenovo's Big Red-meets-Big Blue culture might feel like solving Rubik's Cube in a blender. Lenovo is the third-largest PC company, according to IDC's Worldwide Quarterly PC Tracker, owning a full third of the burgeoning Chinese market, and a market leader in many of the 60 countries in which it operates. But in the U.S., the world's biggest PC market, the company is ranked No. 4, after Dell, Hewlett-Packard and Gateway. And while few brands are as well known as IBM, the combined Lenovo IBM ThinkPad brand is still a nonentity to most consumers. Mr. Advani's charge is to create marketing programs that can make the Lenovo name known around the world and infuse it with IBM's cachet-all without missing a beat on ThinkPad.
GLOBAL VIEW, SINGULAR GOAL
Few CMOs can bring as much global perspective to the job as Mr. Advani. Born in India, Mr. Advani and his family moved to East Lansing, Mich., when he was 16, and he eventually earned degrees from Michigan State University, Wright State University and the Wharton School of the University of Pennsylvania. His business acumen translates in both Eastern and Western cultures-he's as fond of golf and his Carrera as he is of his constant traveling to emerging markets. China and India may be his favorite business destinations, but he still considers Michigan, where his parents live, home.
While Mr. Advani may be multicultural, his mandate is singular. "Our branding strategy, first and foremost, is to establish the Lenovo master brand around the world, while we continue to strengthen the ThinkPad sub-brand. But brands don't get built through marketing or advertising alone," he says. "They get built by first communicating the value of your product to people, and then making sure that what you're promising is real. It all starts on having clarity on the brand's essence."
The ThinkPad essence, he says, is that it's "the ultimate business tool." And he maintains that what worked for ThinkPad will work for Lenovo: "ThinkPad has become a strong brand over a decade of disciplined execution, because it delivers on its brand essence." Innovations, he claims, didn't just surprise customers; they genuinely addressed customer pain points, like software that managed multiple passwords.
Industry experts believe Mr. Advani's job is a massive one. When it comes to brand building, "technology is a hugely challenging category," says Allen Adamson, managing director of Landor New York, a design and branding company. "Maintaining meaningful product differentiation is tough. There are technological overlays that unify the category-lots of products have Intel or Microsoft technology inside. And it's hard to deliver on service." And calculating risks in the PC world, known for fast-paced innovations and instant obsolescence, requires a gambler's grasp of market timing. "If you come out with a bell that no one wants yet, you're in trouble," Mr. Adamson says. "And if you don't have the bell that everyone wants, you're in deeper trouble."
The new Lenovo hopes it's in a better position to time these risks than other companies. Lenovo started in China as Legend Computers, and grew to be a powerhouse in Asia. Then, in December 2004, it announced plans to acquire IBM's Personal Computing Division, which included the global desktop and notebook computer business.
New launches refine brand essence
Thus far, early market reactions to the $1.25 billion merger have been positive. "I can't think of any more daunting task than merging a division of a U.S. company with a Chinese company, partially owned by the Chinese government," says analyst Rob Enderle, of the Enderle Group in San Jose, Calif. "And not only have they not bled market share-and most people thought they'd bleed a lot-they're actually up."
IDC's Worldwide Quarterly PC Tracker reports that in the fourth quarter of last year, Lenovo's total shipments were up over 13%. "Lenovo continues to gain momentum as it tunes its operations following the acquisition of IBM's PC business," according to IDC's Worldwide Quarterly PC Tracker. "Asia/Pacific (excluding Japan), which accounts for roughly 55 percent of its shipments, is especially hot, with 30 percent growth in the quarter."
The integration has gone "extremely well," Mr. Advani says. "If I could see back then where we are today, I would be very pleased." But he's not surprised by consumer response, either. In those December 2004 customer surveys, respondents indicated that the merger, though complex, "`makes a lot of sense,"' Mr. Advani says. "But they had three concerns. They worried that our level of innovation would go down or that the quality of our products would suffer. They worried, too, that the level of service and support we provide might go down. We told them that would not be the case, and they said, `If you do what you say, then we'll be with you.' What's been so gratifying is that over the last 12 months, we have delivered on our commitments. With products like the Z60, our level of innovation has actually accelerated."
Brand clarity in focus
Continually delivering on the promise of ThinkPad is no small challenge. First introduced by IBM in 1992, it became a best-seller with features that only frequent-flying, bleary-eyed execs could love. It was the first notebook to market with a DVD drive, the first with an imbedded security chip and built-in restore-and-recovery software, and a pioneer in long-life batteries. Its design protected clumsy people: "Airbag" technology shielded the laptops from the bumps, bangs and falls that come from working late in taxis, and this year's "roll cage" technology, which shock-mounts the hard drive, makes the notebook even sturdier. Business users worry about security, and ThinkPad again was out front in 2004 with an integrated fingerprint reader. So far, it's already sold one million units, making it the largest provider of biometrics-enabled machines.
To Mr. Adamson, Lenovo's strength is that it understands that ThinkPad lays claim to the idea of security, not just the smaller specific of biometrics. "You can't build a brand on a product feature, because the half-life of any advantage is so small," he says. "If they own the notion of a more secure machine, even if the fingerprint only lasts six months before everyone knocks it off, then they can just move on to retina scans, or whatever."
Mr. Advani says the company is very focused on getting that brand clarity. "We love it when our competitors zero in on one of the ThinkPad features and say, `We've got that too.' That's what I call setting the industry's agenda. We are not standing still-we want to keep innovating. In 2004, it was the airbag and the fingerprint reader, in 2005, the roll cage. And it will be something different in 2006. The fact that we've got those innovations, and then that others copy them, validates that the PC space is not a commodity space," he says. "And with our R&D, we're well positioned to serve [customers'] needs in the future."
Mr. Adamson agrees. "It's not for everybody, but ThinkPad has held on to its quality image very well. Now Lenovo has to drive more innovation into the product in order to deliver on the brand's promise."
Reassessing the risk culture
Up next is what Mr. Advani calls "a one-two punch to build the Lenovo master brand." Within the first half of this year, it will introduce its first Lenovo-branded product, followed by the launch of a new campaign for ThinkPad. (Internally, he says, it's called "ThinkPad Unleashed;" Ogilvy & Mather, New York, handles the $100 million advertising budget.) "What you'll see is us strengthening the ThinkPad brand, with the message that Lenovo is making ThinkPad better."
New launches will likely target the consumer market, which IBM turned its back on six years ago; former brass grumbled that price wars in a commodity business are just "really dumb." "One of the big mistakes IBM made was exiting the [brick-and-mortar retail] consumer market, and they're trying to undo that now," says Mr. Enderle. In November, the company announced it would return to the U.S. retail market after a six-year absence, and has begun selling ThinkPads at Office Depot.
"There is a lot of excitement about Lenovo's sponsorship of the Winter Olympics," Mr. Advani adds. "You'll see a lot more focus on the role in the Olympics." As a worldwide sponsor with the International Olympic Committee, the company will be a major supplier of computing equipment-such as desktop and notebook computers and servers-and funding in support of Turin in 2006 and the 2008 summer games in Beijing, China.
Accomplishing all this, Mr. Advani says, has required adjusting to a new culture of risk. "Judicious risk-taking is essential for growth, and that's true for people, companies and countries. But people like to look at the way people take risks in Western cultures, compared to Asian cultures. It's more relevant to look at it in terms of corporate cultures. We've been No. 1 in the Chinese market for eight years, and No. 1 in Asia/Pacific, including Japan. That hasn't happened by accident. That's because of an entrepreneurial nature, and we're very clear on our strengths and weaknesses. Where we see market opportunities and market needs, we take prudent risks and then serve customers very quickly. When you look at the culture of entrepreneurship here at Lenovo, it's not that different from Silicon Valley."
Even though the new company is evolving-there's a brand-new CEO, William J. Amelio, who comes to Lenovo from Dell-there's also a familiarity. "Bill was also at IBM for 18 years," says Mr. Advani. "And he's got great skills to lead us into the next phase. After the merger, we developed a three-phase strategy. First, focus on stability and deliver on your commitments. Second, [invest] for competitiveness, by focusing on branding and innovation. And third, focus on growth. We've done well on the first two, and with Bill, we're in a great position to go after growth." Yuanqing Yang, Lenovo's chairman, has been quoted as saying that he expects the new Lenovo to become the most successful PC company and the most recognized brand in the computer world within five years.
Has the IBM pinstriped-suit approach quite caught up to that global challenge? Not quite, says Mr. Enderle. "The big challenge, moving forward, has to do with the company's culture, and realizing that they are no longer under the IBM umbrella, with its rigorous rules. Stepping out from that takes time, and in my mind, they haven't really crossed that threshold. Lenovo is still, to a large extent, acting in that very conservative IBM fashion. And being conservative was one of the things that hurt them long term."
But the biggest measure of Lenovo's success will not be calculated from Mr. Advani's Raleigh, N.C., headquarters. "The real challenge, ultimately, is not how many ThinkPads Lenovo can sell in Cleveland, but how many they can sell in Calcutta, Beijing and Pakistan," says Mr. Adamson.
Mr. Advani doesn't disagree. "When you're a $10 billion-plus business, you become very global in your nature," he says. "And yes, we know that succeeding in the U.S., the U.K., and Canada is critical. But we're well aware there are lots of growth opportunities in emerging markets like Brazil, Russia, and India-Lenovo operates in more than 60 countries, and we are focused on capturing growth in all those countries. We've got to win in all of them."
And that, too, he says, fits neatly into Lenovo's mission.
"Our goal is to put more innovation in the hands of more people so they can do more amazing things," he says. "Some players are just focusing on designing high-end products and charging a premium, others vendors are just focusing on getting every cent of cost out of the system. What we bring to the marketplace is a combination of innovation and operational efficiencies. Over time, that will be more and more compelling for our customers."