SPEAKER: This is a production of Cornell University.
GARY: On behalf of Dean Harry Katz and the ILR School, I'm delighted to welcome all of you at this very early hour in the morning to come and attend what, for us, is a first, which is the first time that we've had a corporate CEO and his senior vice president for human resources here.
I'm very pleased to welcome Bill Amelio, who is the CEO of Lenovo, and Ken DiPietro, who is the senior vice president of human resources at Lenovo, and also an ILR graduate to be here today. Dean Katz has a meeting right now of deans and provost, and it will end at 10 o'clock and he will be here for the latter part of the session. He sends his regrets that he's not able to be here right now.
Now, I know a lot of you have classes at 10:10, so what we're going to do is follow a format where there will be a presentation for the first half of the hour, then there will be a question and answer period until 10 o'clock. There will then, at 10 o'clock, be a one-minute break, where those of you who need to leave can just simply get up and leave to go to your classes, and then the question and answer session will continue until 10:15. So without further ado, let me welcome Bill and Ken, and ask Bill to make a few remarks.
BILL AMELIO: Well, it's an absolute thrill to have the opportunity to speak to you. I can see this is just like any other class, that everyone avoids these seats in the front.
Little did you know that we put $20 bills underneath those seats, so those of you who missed that opportunity. I had graduated from Lehigh University, just down the road from here, so it's great to have an opportunity to be here. I actually worked several years in Endicott, New York so I'm very familiar with upstate New York and the conditions that you have to endure sometimes in the wintertime. And this is a great part of the year because it's still wonderfully warm and you have an opportunity to be able to enjoy the outside.
I think you're getting the chance to at least get an idea of a different kind of company that we have. We have a theme that we call New World, New Thinking, and here New World, New Winners. And I actually like to say New World, More winners. Because if we view the world as not a zero sum game, that there's winners and losers, I think it's a better way for all of us to think about things. I mean, with some of the latest current events, it's hard sometimes to think that way because it looks like there's always somebody that's going to win and somebody that's going to lose.
But what we've noticed over the course of the last 20 years is more and more people are literally coming out of poverty. Sometimes the news doesn't tell you that. I mean, if you look over the last 20 years, essentially 70 million people per year have been coming out of poverty. It's creating an immense middle class across the world with more money to spend and the economic order of the world is adjusting rapidly.
And it's actually quite interesting to think about where the next new companies will come from, because it's not clear what roots they're going to have. I mean, our company, 1, it's a unique company with the fact that we have roots in China and we have roots in the United States, which makes it a very interesting combination.
Can you imagine putting together two companies, as well as trying to put together two cultures? That's why they had somebody like myself and Ken run it, because that gives us an opportunity to really be able to get emotion going, to get people excited about how we can move the company forward. Because I think that in order to build a company, you've got to get people passionate about what they do.
At the end of the day, it's all about doing great work. And when you leave here and you go to do your assignments and your jobs anywhere else, make sure you find something that you truly love, because if you don't love what you're doing, it's really difficult to really make an impact and make a mark. Then you're kind of just trudging through life each and every day.
I will tell you, every day I wake up in the morning, I am excited about getting started and being able to do what we need to do. Because this isn't for the faint of heart. We're an industry called PCs, and for those of you who have watched the margins in the PC business will know they're very tight. Therefore, making a mistake is very difficult on us because we don't have that much room. We don't have a long tether, so to speak, with a number of mistakes that we can make and still be profitable.
And in an economic situation that we are today, it's interesting, I think, that a few things you've got to think about to be successful, especially in an economic situation today. You got to be fast to act. You got to be decisive. And you've got to be able to confront reality very quickly and not be confused with the signals that are out there, and have false hopes that things are going to go a certain direction and they may not. That's difficult for a lot of leaders to do when they've been rooted in a company for a long, long time. One of the great reasons why the more experiences you have, the more opportunities you have to be able to see things a bit differently.
We'll have a chance today to talk about lots of different things, anything that's really on your mind. But one of these I want to let you know, and what's unique about our company that we think and we hold dear to our heart is this idea of diversity. Diversity we want to use as literally a competitive weapon for the company.
And how do we use that diversity as a competitive weapon? Now, we have the East and the West. We have several different cultures. We essentially do business in 160 countries around the world, 60 of which we have presence in. So we have lots of people that give us influence across the world.
There is a lot of data that would suggest that the more diverse a city is, the more productive it is. The more diverse the board of directors, the better decisions they make. And the more diverse a company is, the more innovative it becomes. We believe in this as a core value of our company, that we need to figure out, how do we make sure that we value this idea diversity?
I have an argument that goes as follows, that if, in fact, the world is improving and innovating faster today than ever before, one of the reasons is because best practice sharing happens a lot quicker. Well, we all seem to be connected to the web. It's quite amazing how many people, even in the rural areas around the world, you can find connected, and they get the latest level of information.
Today, you can innovate not starting from ground zero. You actually innovate from where the last person had the best practice, if you're open to the best practice. Now, translate that to a company for a moment. The biggest difficulty in a company is to not have the antibodies inside the companies attack new ideas. Savage them, kill them. That happens all the time. And the idea that we have is to be able to make sure we can cherish these ideas and make sure we respect each other's ideas.
Now, when you have a group of Easterners and Westerners get in the room together, sometimes that doesn't work well, because the learning patterns are so much different from the people that have been born in the West and the people have been born in the East. One of things that Ken will talk about is some of our East/West training to try to get us all on the same page with respect to, how do we behave appropriately with each other?
Let me give you a fine example. If there's silence in the room, westerners are very, very uncomfortable, and within seconds, less than seconds, they will fill the airwaves up very rapidly. Our Eastern colleagues like to think. They use that time to think. And when they want to respond, they think. They think deep. They think even deeper before they respond and give an answer, because they want to make sure they've really thought it through.
No answer is right or wrong, but it's different, and then when you get two different people in the room, sometimes what ends up occurring is the room gets overwhelmed by Westerners talking because they think, talk, think, talk, think, talk. And that becomes unnerving sometimes for others in the room.
By having this East/West training gets people better attuned to each other's behaviors. It's very interesting how, all of a sudden, we now get better ideas on the table that stick. We also tried to put a reward system in place inside the company, where we want to align objectives, measures, and rewards. And reward not only the person who comes up with the idea, but also the person who takes that idea and implements it elsewhere in the company.
If we're able to get best practice sharing and implement it elsewhere, and not have somebody say, you think that's a good idea? Let me show you five other ideas. If we're able to do that, we can effectively raise our game pretty effectively across the world. So that's been one of our critical objectives for us to be successful, as far as a company goes.
I also touch upon an idea that we have inside the company we think that's important, is corporate social responsibility. You hear a lot of companies talking about it. We take it to heart. It's something pretty important and pretty deep in the values of both sides of the company. The IBM heritage comes rich with that, as well as the heritage in Lenovo.
As an example, when an unfortunate earthquake hit China, literally our team jumped to the front field very rapidly. We had volunteers on the ground almost instantly. We had thousands of people lined up giving blood and sending it down to the stricken areas, and millions of dollars flowed into the province from Lenovo, because we think it's important to make a stand and the importance of when something happens of that magnitude.
And we do that elsewhere in the world for hurricane issues that have occurred in other geographies, and some of the tsunamis that occurred, et cetera. We think that's important because it's a value inside the company that people feel good about. Not only they feel good about it, they feel like this is the kind of company that we want to work for. And then we want to transcend that from corporate social responsibility to ISR, Individual Social Responsibility. Because each one of us have a responsibility to be able to do for somebody else.
I like to think about this idea that says to whom much is given, much is expected. And everyone in this room, a lot has been given. And the fact is as you move forward, there's a lot of things you want to do that says that you want to make a difference in the world, as far as your career goes, but make sure that you try to pull somebody else along the way as well. It's the most rewarding thing that you'll do in your life.
When I look at great leaders, what I see in great leaders is people that have the ability to have what I'll call a gene for coaching and the ability to be able to see something in others that they may not see in themselves, and be able to then get them excited about the fact that there is a different way to lead, to get people motivated and enthusiastic about making tomorrow better than today.
Especially in the news that you hear today. I mean, if you listen to some of the people on TV today and read the papers, you would suspect that if today's bad, wait till tomorrow. It's even going to get worse That's not what leadership's about. Leadership is about trying to figure out how to find the optimism and to try to pull us out of the ditch, not put us deeper into the ditch. That's the whole idea of what you look for in great leaders.
So before I keep going on, because I have many topics to talk about, what I wanted to do is run a quick video about Lenovo, and then come back up and talk a little bit more about how the company is put together and then we can get into some Q&As.
SPEAKER: For those of you who just came in, there's chairs over there. There are also some empty seats here in the front. So please don't sit on the floor, but make yourselves more comfortable.
- Welcome to Lenovo.
- Lenovo's DNA is equal parts ingenuity and imagination. It is the combination of the number one PC company in China and the icon that gave birth to the PC industry.
- There is an openness that we have at Lenovo.
- We are unique because we integrate the Western and the Eastern together.
- In a way, Lenovo started in 1981 when IBM launched its PC division, and with it the PC industry. But we also began in 1984, when a small group of Chinese engineers started Legend Computers with a whopping $25,000 of startup capital. Legend changed its name in 2003, taking the first syllable of Legend and combining it with the Latin word novo, for "new."
- The fact that it's an American company, a European company, a Chinese company, if you like to be in this kind of international environment, then it's really a good place to be.
- In 2005, Lenovo bought the PC division of IBM, forming a $13 billion dollar startup. Today, we're a member of the 14 global 500.
- Even though we have different cultures and different views, we all agree on one thing, that we're trying to build a great product. And that excites me, and that excites everybody.
- As exciting as the work and products are, testing them on live TV is positively thrilling.
- Bill Amelio, chief executive officer of Lenovo. With us on set is a couple of computers.
- What I think is unique about ThinkPads is I can take a glass of water, spill it on here, and the system will still work.
- I got water right here, you know.
- Let's try it.
- Let's do it.
- Come on, why not? He said it'll do it.
All right, hang on.
- Look at that, it's firing up.
- It is.
- It's that mindset of risk-taking that embodies Lenovo. We don't want to merely lead the industry, we want to define it. We introduce new ways of doing business, such as world sourcing that meet the demands of an ever-evolving global market. The world map is changing, and tremendous economic power, innovative thinking, and great talent exist all over the planet. It's not enough to have the best people and the best products.
You have to demonstrate who you are and what you stand for. You have to build your brand. Lenovo made a big bet on the Olympics. We launched a global advertising campaign with some pretty unusual ideas, a troll in an airport, a jogger vaporized with lasers, and Sumos flying over Sydney. We provided 30,000 pieces of equipment and 600 engineers to power the largest sporting event in history. There were 302 competitive events spread over 17 days, and only one chance to get it right.
When it was all over, Lenovo was ranked by media watchers and major business publications as the top sponsor of the games. We got a big bang for our buck. But sponsorships aren't all we do to build a name for ourselves. Through joint marketing ventures with partners like Microsoft, Intel, and Dolby, Lenovo extends its reach and its product appeal even further.
- (SINGING) Hush little baby, don't you cry. Mama's going to sing you a lullaby.
- Dolby surround sound on the new Lenovo IdeaPad. Lenovo.
- 10 years ago, who would have anticipated the impact that blogs, forums, and video sharing sites would have? Lenovo's web and viral ad campaigns are now a vital part of our strategy. One viral video lit up the blogosphere for days and currently has over a million hits on YouTube.
In the end, of course, the best strategy for any company anywhere is a no-brainer. Never lose sight of who makes it all happen, the customer. Whether our client is sending astronauts into space or athletes into history, our goal is to surpass the mark we set before. Because here, we don't just strive for perfection. We engineer it.
BILL AMELIO: OK, let me take it just a couple of minutes now and I'll give you a little bit of an outline and framework of where we've been as a company since the acquisition. Talk a few minutes about world sourcing, and then talk a little bit about the Olympics. And then from there, hopefully we'll get into some questions, that these comments I'll make will spur some ideas in your mind.
First about the company. So back in 2005, Lenovo was looking diligently to be able to go across the world and be a global player, but we had difficulty being able to do it organically. Going into several different markets, we attempted to do it, but we just couldn't get the traction that we needed in markets like Australia, like Western Europe, like United States.
So the best strategy for us was to do an acquisition, and what better company to do it with was a company like IBM and the IBM PC group? In August of 1981, essentially the world changed when IBM put the first business PC out in the marketplace. In fact, I was part of the IBM company at that time.
It was quite amazing when the early projections came out of the PC. There was actually a whitepaper report-- I wish I could find it-- that suggested that number of PCs that would be sold for the life of all of us was 5,000 PCs. Just to give you a sense, there's over a billion installed around the world today, and the next billion will be installed in the next six or seven years, just to give you a sense of where the industry has gone from that particular point in time.
A few years later, Legend was formed, 1984, just on the slide, with 11 entrepreneurs and $25,000 of seed money. When we did this acquisition, it was a big deal, from the standpoint of the Legend company. Was about $2.9 billion and the IBM revenues were $10 billion at the time. Today, we're roughly a $16 plus billion company, on our way to probably $17, $18 billion this year. So lots of growth in this industry.
But it was viewed in China as the story of a snake swallowing an elephant, and then with all the ramifications associated with, how do you do an integration of this magnitude across different companies, as well as across different cultures? We set a three-phase plan up. Phase 1 was for us to make sure we demonstrated to all who were IBM loyal customers that we were a good steward of the ThinkPad brand.
And that, essentially, meant for us to be able to get out in front of all of our customers and demonstrate we were going to make the brand right. We were going to continue on the path of great reliability, great quality products, heavy on features, light on price. That was the game plan that we had to demonstrate.
In the first year, we lost a little bit of revenue in the site outside of China. Let's say about a 6% revenue dropped. We got it all back and more the second year, simply because we were able to demonstrate with a lot of new products that we were able to be good stewards of the ThinkPad brand.
In fact, we took the IBM logo off. This device here, you'll see the first one is the one with the IBM logo not only off, but Lenovo on the cover. So it's the first one that we ended up doing that with. A lot of our analyst, media, and board of directors would have suggested that wasn't such a hot idea, taking the IBM brand off two years early.
But a few of us got in the room and said, from a cultural point of view-- Ken and I had lots of discussion about this-- from a cultural point of view, it's very difficult for the people that were part of the IBM team to really feel part of a new company if every day you go into work and you look at the IBM logo, as opposed to looking at your logo.
You then get a sense that the ships are still there and you can go retreat anytime back to the old mothership. And the fact is we're trying to create a new company and we want to burn those ships so you can't go back. That's the idea, is that you're part of the new thing, and the best way to do that is to rally around your own logo.
Equally important is the fact that we had to have customers feeling good about the fact that they were OK with us changing the logo. So we went on a campaign. Some of us traveled to many different customers and asked them an important question, what would you feel like if we took the IBM logo off the machine and put a ThinkPad Lenovo logo on?
And literally 95% of them said, I don't know why you haven't done it already. Because a Lenovo person comes and sells me this, and then a few weeks later the machine arrives and we get confused on, is it IBM or is it Lenovo, or what is this? This is a very confusing situation.
That still wasn't good enough for a lot of our stakeholders to feel comfortable to make that decision work. So then in our special bids desk, we went out and asked customers to make a choice. Do you want to have the IBM logo or do you want to have the Lenovo ThinkPad logo on it? And for a period of about three months, we did that work. And literally, almost 100% of them chose the Lenovo ThinkPad logo. So we made the change. Not a hitch whatsoever.
And we had a major symbolic event in the company, where we actually had everybody tied in by satellite, and a few of us went to some of the major sites and we did logo changing, with all the senior managers walking around changing logos on everybody's desks so you could feel comfortable that now you're part of a new company and we have arrived and we made the move. So that was phase one of stabilizing the brand.
Phase 2 was for us to be able to build a culture, come together as one and become unified. And when Yuanqing Yang first brought the company together, even before I joined, he used three words to describe what we think is important for us to be successful. And those three words were trust, respect, and compromise.
And the team did a good job, the first year, of being able to use those three as guideposts to help us move forward. But after the first year, I kind of talk about it like a honeymoon. Think about those of you who are married or have boyfriends or girlfriends, and think about the initial year. The first year, it's always wonderful. Everything's great.
Then all of a sudden one day you wake up and you say, hm, there's some things here I didn't know about before. And that's no different in a company. The same thing happens inside of a company, where all of a sudden, expectations might not have been quite met the way you thought they should be met.
You have questions about some of the colleagues' capability in the company. You have questions about others' accountability. And there's a skepticism that can breed inside the company. If you don't do something about it, it can essentially erode the value you have inside the company.
Well, Ken and I realized-- in fact, Ken did a lot of work on surveys inside the company to find out right under the surface, we had a brewing trust issue, mainly the skepticism issue. What we did was we gathered the top team together and said we have to fix this problem. Because unfortunately, in a lot of our meetings, people weren't talking about the real problems.
The white elephant was in the room and nobody wanted to talk about it. We call undiscussables, and people would essentially have those discussions outside the room instead of inside the room. So we had a trust workshop that essentially helped us bind together and learn the fundamentals of what it means to trust somebody. Essentially, how important your integrity is, how important your intentions are, the capabilities you bring to the job, and delivering results. Making and keeping commitments are so important. In fact, it's not only important in work, it's also important at home.
We also learned how we can better effectively run a meeting to get more people participating and feeling comfortable with what we're doing. I think that was one of the watershed events that we had in the company that helped pull us together, and we've now worked hard to try to cascade that throughout the entire organization. We're trying to build a company that's high in trust.
Difficult to do because there's always the skepticism of people reading the tea leaves, wondering what direction management's really thinking about. Do they really want to tell you the truth or tell you what's convenient to tell you? And what we're trying to work hard on is to make sure people tell us the facts, tell us the unadulterated truth. Tell us about the white elephant that's sitting in the room that, unfortunately, sometimes management can't see, but others do.
The third element of our strategy was to then put a growth strategy in place, figure out the seams in the market where we can grow effectively. If you looked at the business that we had, the IBM business that we procured was primarily in large accounts, higher education, and we had a wide open space in small, medium, and business and consumer across the world. And consumer represents 30% to 40% of the market, depending upon what country that you're in. So great opportunities for us to grow, provided we could get some rich products in those areas.
Other couple of categories we thought we could win in would be the emerging markets. We had a great presence, as you would be aware in China. One in three computers that are sold in China are Lenovo computers. Lenovo is essentially everywhere. In India, we made a great move in India. We got roughly 10% market share in India.
And the other what I'll call major emerging markets, like Brazil, Russia, Turkey, just to name a few, we also are moving very rapidly. So that's a good other space for us to grow, utilizing the business models that are tried and true in China, replicating them elsewhere in the world.
Another key area is getting into other categories, like workstations and like servers, because that gives us an opportunity to be able to increase our margins and be able to get higher value IT applications that become more of a full service supplier to our customers. So that gives you a little thumbnail sketch of the strategy that we have, just a piece of it, anyways. I mean, as you can imagine, there's a lot more depth and arguments that go into that.
Early on, we put four major elements in place to get the company really rolling on the stabilization and growth strategy. First and foremost, we looked at our supply chain and saw that our supply chain was very weak outside of China. Almost best in class in China, if not best in class in China. Outside of China, woefully short, and was an Achilles heel of the IBM business for a long time.
We hired some outside talent. We'd done some extremely deep thinking work on Six Sigma and lean expertise in all of our operations. Leaned out our facilities, value mapped all of our processes, and essentially took out cycle time, took out defects. And today, we're bouncing up against best in class on the supply chain. That was like the number one thing we had to fix.
In fact, our sales team had a real skepticism about whether we could ever fix it, because they heard for years and years and years of some of the sales teams sitting there nodding, will tell you that we couldn't deliver on time. Now, our time from an order to delivery is the best it's ever been in the company history.
Second thing we wanted to do is to get our desktop business that was very profitable inside of China, profitable outside of China. And over the course of the three years, we've been able to do that. The third thing we had to do was to take a model that was tried and true in China, that was very successful in China, helped the China market actually grow.
It's called the transaction business model that, essentially, serviced small customers and medium-sized customers. We distilled it down, understood exactly the key elements of that, and then started to roll it out across the world, starting in India, then Hong Kong, then Europe, Middle East, and Africa, then the United States. And it's helped us grow our [INAUDIBLE] in business.
And then finally, building the brand, which leads me to the next topic on the Olympics. Let me tell you about the Olympics for a moment. It's literally almost a life-changing event, at least for me. I mean, the feelings I had with being a part of the Olympics was something that was very, very unique.
If you think about 1964 for a moment, Japan came out with the Olympics and Sony's brand was born. 1988 was South Korea's coming out party and Samsung was born. And 2008, it was the Beijing Olympics. It was our opportunity as Lenovo for our coming out party.
Let me give you a sense of the complexity of doing the Olympics. We essentially were the IT backbone behind the Olympics, where 30,000 pieces of equipment, as you heard on the video, 600 plus people behind the scenes, engineers and technicians, making sure everything worked. We had seven iLounges, where athletes and coaches could go in, do emails, do Skype, do whatever they needed to do in order to stay connected. We had 100 athletes that were blogging with YouTube videos, as well as text about their experience and feeling about being part of the Olympics.
The Olympic torch was an important part of what happened to us, as well, and it bodes well for this idea that we called world sourcing, because we actually used 10 different countries to come up with a winning design to get the torch. The torch had to go against 300 other design shops for Lenovo to win out. We were the first top sponsor ever to win the torch.
And the winning design was because of the diversity of the thinking that we had behind putting that idea together. And the idea is called the Cloud of Promise, which was a connection of China's past, present, and future. It's rolled up like a scroll that represents paper and celebrates the invention of paper by China 1,000 years ago.
If you feel the torch, it actually feels almost uncannily like a human hand. And the idea was that when we would pass it from one hand to another, it would be like you'd never let go. So constantly one person touching it across the world.
And if anyone's had the opportunity ever hold the torch-- has anyone in this room ever hold the torch? Well, I guess I could be the one to tell you I held the torch. I had the opportunity to run the torch in San Francisco. And I can't begin to tell you the emotional feeling it has, to have that in your hand and be captured, that moment in history, and to be part of something that's so special in the world.
I mean, to bring together 17,000 elite athletes in one spot and the celebration of unity, of peaceful, as well as a celebration of the human spirit, is something that literally is an uplifting experience. And to be a part of that is something really, really unique.
From our point of view, we had to activate this Olympics. And the way we activated it was when you first stepped foot off the airplane in Beijing-- and the new Beijing airport now is a sight to see. Those of you who might have traveled to Hong Kong, it's essentially architected exactly like the Hong Kong airport, but it's about four times the size.
To put together this operation that we had to put together, it was almost like putting together a Fortune 100 company in essentially two weeks. That's the kind of complexity it has. And the message that we gave customers is if we can do this for the Olympics, imagine what we can do for you.
Now, you can imagine on day 1 how nervous I was, knowing the responsibility of walking into the Olympics and the opening ceremonies and seeing all this happen, and thinking to myself, if something goes wrong, guess what? That's the end of this.
There's no upside at that point in time. So I was kind of wound tight. My wife was asking me, geez, you don't seem like you're too relaxed doing opening ceremonies. But by closing ceremonies, when almost the full 17 days had gone and we were flawless performance at that time, I was so happy with the amount of preparation we did for literally the last two years to get this to work.
But as I mentioned, you stepped off the airplane. The first thing you saw was signage across the airport that welcomed you from Lenovo. Then when you went into the city, you saw 600 buses that were wrapped with Lenovo signage and talking about our value proposition. Each of the bus stops, there were Lenovo advertise. You couldn't miss Lenovo anywhere you went inside the Olympics.
And in fact, you saw One of the commercials there. We had to actually take some of those down because the IOC wasn't happy that we had the sportscasters with a big Lenovo logo as they were talking, so you couldn't help see Lenovo on it. And some of our competitors, of course, complained, so we had to, unfortunately, take that off. I also want to apologize to those of you who are Mac users in here and saw that little parody that we did there. I apologize for that, but it's true.
I think before I conclude my remarks, one of the things that's important about a company is what's at the heart of the company. And the heart of our company is innovation and this idea of getting people to become product evangelists. Whether you're the CEO of the company or whether you're the frontline salesperson, you have to be excited about the products you have.
You have to be excited about the values of the company you're in and you have to be excited about the products that are in the company. Otherwise, why are you in this company? That's one of the most important things. I am personally delighted to always be a product evangelist and tell people about why I love the products that we have and what's unique about our products versus somebody else's.
And I think that has to run deep in any company because you've got to feel like you're connected to whatever organization you're in. Because if you want to do great work, as I opened up my remarks, you have to really feel like you're connected to the business you're in. Well with that, hopefully I stimulated some thoughts and some questions. If not, I know Gary has a few. He'll ask us and we can start the panel discussion.
GARY: Thank you.
OK, the way we're going to proceed, for those of you who weren't here at the beginning, is we have a question and answer period that will run until 10:15. At 10 o'clock, there will be a one-minute break so that people who need to leave for classes can do so, and we'll resume then.
And there's this microphone which people need to come up to? No? OK. The proceedings are being recorded, so if you have questions, just ask your questions and our guests will be happy to answer them. So who would like to go first? Yes, please.
AUDIENCE: So first, thanks for taking the time to come today. My question is, what were some of the techniques for helping people feel comfortable in meetings when speaking, as you put it, the unadulterated truth about those white elephants in the room?
KEN DIPIETRO: Yeah. Yeah, I mean, we recognized that we were having some failures when we'd sit in meetings. And to some extent, it still goes on. I mean, I think we are on a path of getting better, and I think there's much greater awareness of some of the complexities of managing a company like ours, where there's so much diversity.
But we'd see symptoms. You'd be sitting in meetings and literally, the Western colleagues would be yapping and talking and controlling the meeting. And all of our colleagues who weren't from the US or from Western Europe, as it was, from UK or France, would be literally watching this go on.
And you'd first conclude, well, they don't have a point of view or maybe they didn't understand because we're speaking so fast, but it's a combination of things. And I think the catalytic was we learned a lot, we talked a lot, and we listened about what some of the some of the issues had been with how to effectively work in this environment.
And certainly, our East/West training-- and in fact, we modified it because we even see that some of these issues exist within region. And so this training is really an opportunity to bring teams together, and in it, we explore deeply, well, at one level, cultural diversity.
What is it to be Chinese? What is it to be an American? You can't have a six-credit study on anthropology in a day, but we cover enough that give people a context to understand communication challenges, style challenges, and how hierarchy works, and the way culture and religion informs even how we behave. And we spend time and a lot of discussion on that.
And then we get into tactics to be more effective. Speak slowly, check for understanding, send out an agenda ahead of time, state your intent up front, record the meeting, someone keep track of time, have a coach, a buddy so that we assign people in meetings, so that if a colleague is struggling we can on behalf-- are you catching at all? What do we need to do?
Because Bill said it, and it is in our DNA. We win when we get everyone's participation. And our advantage is that we are so different. And the idea is that each of us have, together, an incredible asset for the corporation, but until we learn to listen better and communicate better and are able to pull ideas and synthesize and distill them into actions, we don't realize that potential. And so it's a competitive issue for us.
And these sessions, these East/West workshops that we're actually rolling out, and we just had one last week, our services team did one. The guy who runs services for us, he's an English person, but his team is incredibly diverse. I wasn't there. I was told that the session was emotional. I mean, people were actually crying at the end, and it was a sense of community and spirit about how we can win that wasn't there before.
Our global head of supply chain and our president of our China business, they had a joint session with their teams, because they were having some real issues with getting things done. And they came up with like a 10-point checklist of how they're going to comport themselves when they're in meetings together. And they start their meetings with a flip chart and review what it is they're going to do.
Now, if you are from Ithaca, New York and you've never left Ithaca and your team is from Ithaca, this is like a yawn. It's a no-brainer for you. It's so simple. But for a company like ours, where we're fusing lots of diversity real fast and compressing it, these are really vital, important, and actually somewhat breakthrough things for us.
I mean, look at. I'm an American. I'm quite Western. I speak fast. I use a lot of jargon. I can be prone to hyperbole. And when I'm talking to an Easterner, sometimes their eyes roll back and I have to be aware and conscious, and I have to encourage my Chinese colleague or my Singaporean colleague to challenge me. And even that is a different-- it requires different skills and different learning. Because how we approach conflict and conflict resolution is much different.
So we use the term "world sourcing" and we decide we think we're on the sharp end of an exciting time in the history of commerce, but in many ways, we're a laboratory, a laboratory for human behavior and human performance in this new world. And I'm not trying to romanticize that, but I believe that in my soul. That's what makes my job so exciting.
BILL AMELIO: I would just add a couple things to summarize. Ken touched on the things that we do inside the meetings to make them more effective, but this idea of stating your intentions upfront was a very powerful idea. And we also said that we put the five-minute or 10-minute rule in place.
If you are a native speaker of English, we gave you five minutes before we attacked you. If English was a second language, you got 10 minutes to get your point across before you got savaged with a lot of ideas and opinions from the team.
KEN DIPIETRO: When you're standing up and presenting, typically the person presenting or sharing an idea in a PowerPoint presentation usually got one minute before the first slide came up and people are asking 35 questions. So the guy couldn't get through the presentation. So the rule is five minutes before you ask a question and 10 minutes for a non-native language.
BILL AMELIO: To make sure that you could articulate what the idea is. We also train people to change the way we do presentations, because a lot of us are ADHD, and therefore, we don't wait that long and we're kind of a little impatient.
So the way to fix that is to do answer first. So I suggest that you're thinking about when you want to be clear with somebody, it's always good to tell somebody, here is the answer first. I'd like to tell you the recommendation, what my findings were. And then you can get your supporting evidence behind that, as opposed to the wind up, which is you build this slow story that takes maybe a half an hour to finally get to the end conclusion. And a lot of us are crazy by the time you get to the end conclusion. So that helped all of us be able to resort the way we do our meetings a lot more effectively.
The other thing that Ken mentioned is the summary. We spend time now, after a particular presentation, to summarize what the conclusions were and what the findings were and to write them down on a wall, and to say, go around the room. Does everybody agree with what we just said? It's a simple thing, simple technique, but the fact is a lot of times, we found, was we all thought we were agreeing and nobody was agreeing. And that's not a good thing, so we then switched our style of operation to be able to do that.
Another one, which is another simple thing to do, is those of you who've gone into some business meetings now with the latest level of technology will see that people have their BlackBerries and their computers open. So we forbid people to have BlackBerries and computers in there, and I become the person who goes around taking them all.
And the reason is because it's very difficult to multitask. I mean, I know all of you in the room think that you're probably great multitaskers, but I'm going to give you a little story on multitasking for a minute. I thought I was really good at this, and I learned this important lesson at home.
I had the BlackBerry out, the TV is going, and I was pretending like I was playing with my seven-year-old kid, my son Bronson. It's a great name. He's a powerful little guy. So Bronson's looking at me. He says, Dad, you're not paying attention. See, I'm paying attention to you. I'm watching TV. I'm doing a couple of notes on the BlackBerry. I got this to do, I got that.
All of a sudden, he reaches up, grabs my BlackBerry, throws it against the wall, looks me in the eyes and said, now pay attention to me. And all of a sudden, it hit me like a ton of bricks, this whole point about if you try to do too many things, you might be able to do a lot of things, but you're never went to any one of them really well.
So those of you who like exercising as an example-- it's a passion of my life and helps me be able to travel around the world better-- if you're on the treadmill and you're reading, I suggest you probably don't have it intense enough. So I think you ought to just crank up the speed a little bit. You won't be able to read anymore, but you'll be able to do more effective exercise. I think it works in a lot of places in our lives.
So as far as meetings go, though, to keep people focused on what we're trying to do is what's important. And I think the only way you do that is to keep people on the one task, versus getting off to several other tasks. So thanks for that question.
AUDIENCE: OK. Hi, my name is Paul. I'm a first-year [INAUDIBLE]. I have a question about brand. I know that everyone at Lenovo sees Lenovo as an international brand, but you mentioned that during the Olympics in Japan, that's what propelled Sony to the global forefront, and we see Sony as a Japanese brand. And so do you think that people seeing Lenovo as a Chinese brand is a handicap, or do you want to capitalize on that?
BILL AMELIO: If I think I got your question right is, are we going to be viewed as a Chinese brand or an international brand? What's people going to view us? Is that a negative? OK. If you take a look at the company, we're working hard to position ourselves as a new world, new thinking company, meaning that we have roots in both the East and the West.
And if you look at the makeup of our top leadership team, it comes from 10 different nationalities, as an example. If you take a look at our board of directors, it's highly diverse as well. We have essentially seven US passport holders and one Brit and four Chinese citizens. So it's a pretty diverse team, or at least made up of the East and West components that we have.
With respect to what others view, with respect to our brand, clearly some countries actually view us as an international brand already. Some view us as clearly a Chinese brand. And some countries, that's very positive. In other countries, it's neutral. And in some countries, it's tending towards negative, especially when there's discussions that are happening with respect to trade imbalances and some of the issues of jobs leaving a certain country, and then this whole concept of zero sum game.
I mean, if the mentality of the entire country is that all the jobs are moving to the East, then there is a clear cut disadvantage then to a brand that's sitting in a country where people think the jobs are going. That's a problem that we have to face with respect to, every day, how we do our branding campaigns.
I think the way to get around that is I think it's important-- I think this is an important point-- is that if you think about between now and the year 2020, the Brookings Institute, or the World Bank, suggests that there will be a billion more people that are going to enter the middle class, and most of them will be coming from the emerging markets. It's going to change the economic order of the world pretty dramatically.
And the way we view the world and the world map should change a bit because it's not going to be Western-centric anymore. And I think that's good for every one of us because that means the pie is getting bigger, not smaller. And in fact, the thing that allows us the ability to be able to not allow near-term supply constraints to cause a problem, because a lot of us heard-- the doomsayers would say, oh my goodness, with the rise of China and India, they're going to use up all the commodities around the world.
The world's going to come to an end, and look what happens. I mean, you know things are a little nutty when oil prices go up and the doomsayers come out and say the world's coming to an end because inflation is going to rise. And then when oil drops down below 100, the doomsayers come out, because all of a sudden the demand is collapsing around us. That's just noise in the system right now.
The fact of the matter is over the long term, innovation is what trumps everything. I mean, I look at the price performance improvements of PCs, as just one example, over the course from 1981, where IBM had that 5150-- what a wonderful name-- that was first announced to the products that we have today. I mean, we literally have a supercomputer on your desk today.
What's built into this little system today was essentially a supercomputer in the 1960s. And that's unbelievable, the innovations that's been packed into something like this. Who would have thought in the '60s, those of you who were around in the '60s, there was this big issue with respect to putting pollution control on cars. And nobody thought you could ever get performance and tailpipe reductions that have happened today.
I mean, there's literally 99% reduction in tailpipe emissions today. Still not good enough. We've got to do better, but the amount of innovation that had occurred to make that happen over the years is literally remarkable. And if pressure comes on the system and we keep innovating, it's not a zero sum game across the world.
And I think that's one of the most important parts about building a brand, is to build the idea that the fact it's going to be good for all of us to have an expanding middle class, good for all of us to have countries across the world rise out of poverty and be more effective. So I think that's the major message. Yes, sir?
AUDIENCE: Springboarding off of that, would you say that your sweet spot is really that emerging market space? Because obviously, you have ferocious competition in the US and Western Europe, with Dell and HP, et cetera. Is that the strategy, is that as emerging markets grow, Lenovo will be right there?
BILL AMELIO: One of our key game plans is to protect and leverage our bases, and our base is China, obviously, and a base is large enterprise in global accounts. So there's two prongs of this. If any global account, higher education included, decides to go do a bid for computers, there's street players they think about. They think about Lenovo, HP, and Dell. So that's clearly a strong spot for us, and we have excelled in that spot over the last three years.
Small, medium business is another area where we've now been expanding to. The toughest spot in the markets will be for us is in consumer. Now, why would that be in consumer? If you look at our direct web capability, we're actually doing extremely well there, but it's hard to get top of mind with a lot of people on the web. So you've got to get into retail.
And the problem with retail is you get a value gap instantly. So it's a chicken and egg problem. And the value gap means that even if you have the same features and functions as your buddy does, or your enemy does, they want a discount. The retailer likes this guy, and they can demand a discount because they're so large and powerful in mature markets.
That's not necessarily the way you go to market in every emerging market, which gives us a bigger opportunity to be able to grow in emerging market consumer first, and to be able to do it a bit later in the more mature markets. As our brand gets more recognized, that value grab shrinks and investment makes a big play and consumer becomes easier. So that is definitely a consideration for us.
AUDIENCE: What's the role or presence of the younger generations in your strategy, as market, as competitors, as potential talent?
BILL AMELIO: Start with that and I'll finish.
KEN DIPIETRO: Well, I mean, certainly from a product set, I guess I'd let Bill answer that. But from a talent standpoint, from a leadership standpoint, it's fundamentally vital for us. I'll answer it from a staffing and recruiting standpoint. I think last year in China alone, we hired probably 3,000-- we had 3,000 kids join us from colleges and universities across China.
So in both what was Legend, Lenovo, and IBM have a legacy of growing our own talent, and that's been core to the model, and it will still remain core to the model. Bill mentioned in some of his opening remarks that we needed to go out in the marketplace and hire some skills that we did not have, particularly if we were going to compete successfully and fix some of the impaired parts of the business that existed in the time of the merger.
But I think ideas come from everywhere, and I think some of the bold ideas come from people who are less skeptical, or more skeptical, perhaps, and less worried about taking risks. And typically, that comes from a lot of our new hires that come off campus.
BILL AMELIO: I'd add to that, with the advent of social networking, it's a good way for us to tap into what's happening in the town across the company, give people a way to have an equal voice over just the management that's in the company. One of things that Ken didn't touch on some of our talent review is we actually go deep in the organization, and we're abstracting out where the most talented people are everywhere in the company and making sure we're watching them carefully and giving them the right experiences so they can be successful and be able to have great judgments on what our future products look like.
There are also ideas out there that say, how do we get the entire company to vote on what we're doing? Just to say, is there a way for us to get in touch with the consumer base, even inside of our own company, to say that the ideas that we have, is going to make it in the marketplace? So we're thinking through, how do we do that a bit more effectively? Not only to do our customer focus groups that we do, but to use the power of our own company, some of the young people in our company, to make sure that our ideas are on track and moving in the right direction.
AUDIENCE: How does the concept of cloud computing change things at your company, or has it? Is your computer going to contain the applications 10 years from now, or is it just going to be the gateway to them through the internet?
BILL AMELIO: This is a fascinating discussion, because even 10 years ago, that was on the radar screen, cloud computing. They changed the name a bit, but it was something that was even talked about 10 years ago. I would tell you that there is going to be a place for both. There really will be. It's going to take a while to be able to say you're going to get it all off your desktop, but clearly, there's going to be cloud computing in some of our products right now, tap into that.
As an example, we had a roll PC application that's out in the middle of China right now that essentially takes applications from the cloud, pulls them down for the farmer to look at, crop tip planting ideas, animal disease control, distribution, pricing. And by the way, when I use that word pricing, pricing is a very interesting thing. If you get transparency of pricing, it's a very powerful tool.
I was shocked myself by how impactful that is for a rural farmer to really know when's the right time to sell their goods, and to understand what market is the best for them to sell. They will travel even farther if they know they can get a better deal somewhere else. So they do their own little calculation on a distance versus where they are. But having transparent prices is really important, and computing allows you to do that pretty effectively. Yes, sir.
AUDIENCE: Sort of following up on that, in the tight margin PC business that you're in, maybe you could comment on how you balance that against longer term research and how you plan to address longer term trends, like iPhone-like devices that subsume more and more of the Notebook capability?
BILL AMELIO: Let me start with the idea. First of all, when you're in a tight margin business, what's very interesting is this, is that at the best, what you can do is really grow great leaders that are both execution-oriented and are able to look around corners and have strategy.
That's the success model. If you really do that, then those kind of people can really lead almost any company in the world. Because you get that in your muscle fiber, the ability to be able to react quickly, but you have to be able to be strategic in your thinking. And that's what we're trying to get in place in everybody's thought process.
So let me start with the execution-oriented, because I think that's important. I think in order to be effective executive or leader, at least in our company, and I've seen a lot of companies, an ability to execute. And everyone uses the word execute, but what does that mean? That means having the right KPIs that work on the critical few things that really matter and don't get sidetracked on the trivial many, which so many people figure out how to do.
They get off track and they lose track of what's really important and what they need to look at each and every day, each and every week, each and every month. When we break a quarter down into 13 weeks, every day matters in our business. We don't have a big annuity stream. If I don't sell a computer, we missed revenue targets for that day. It's that simple. So we have to be able to make sure you break things down into simple ideas and don't let complexity overwhelm you as well. So that's what execution is all about.
Now what we do to make sure we don't get totally sidetracked and just work on execution and think about these bigger ideas is we have a research and development team, where we focus on what are we spending our money on? What are the big bets that we want to make? And as a collective leadership team, we regularly get together and talk about the big bets we make.
There's a few of them that we're very proud about that we made. There's a few of them that I can personally say that I wish I hadn't made. They were bad bets. We drilled a hole and there wasn't any oil that came up. But there's a few that we've done that we're pretty proud about that made a big difference.
I'll give you an example of one. It was tinkering around in the research group for a while, and one of the things that we worked hard on is to get the research team to think more about commercializing something. Because the research team would love to tell me this, well, Bill, you can't track me for five years. Come back in five years and you can tell me if I did well or not.
I said, well, I'm sorry. That's not going to happen. That's not the way it's going to work. We need to look at your portfolio, things that you're working on, and we're to figure out how we can quickly grab a few of them, even if they're not quite baked yet, the idea, and see if we can get them in a product. Because the most fulfilling thing for any developer or any research person is to see what they work on and actually makes it into a product that customers like. That's great. You should feel terrific about that.
So example of that is virtualization is one idea, is that we use virtualization on a lot of servers but not on client-- virtualization essentially allows you to run two different operating systems on a computer. And some of what you're seeing now with instant on capability is essentially using a version of-- I'll say virtualization lite is what would be instant on.
But you can take that to a lot bigger degree, where you're able to have a whole set of products that come out because you have this virtualization technology. We have some great patents that are written, some really great technology associated with it, that will be coming out in some of our future products that will give us really a leg up in the next six to 12 months as we announce a lineup of that. Primarily because we went into the research lab and we looked at some of the things that we're working on. But it's this idea of still looking out in the future and saying, what's the next big idea that we need to go work on?
The other thing that's been difficult for us to think through, and no one seems to have cracked this yet, is what's the product that's between this and this? Because those of you have BlackBerries, iPhones, whatever, you can do so much on a small screen, but you still like a bigger screen and you still like to type like this. We're not getting away from that. And in fact, there's ideas that say, well, you flash a screen on your table and you use a table as typing. Well, that doesn't work so well, either, because you don't got that feedback that you like to have on a keyboard.
So all this is being thought about and worked on, but it still hasn't translated into a real product that really does what you want it to do. Too many people making too many multi-functional things and all of a sudden nothing works really well. It's not a great phone. It's not a great email device. Nothing works. It hangs all the time. The worst thing you have is a thing to hang.
My biggest bugaboo, I'll tell you as a technology leader, is this. I think the car guys really get this and we don't yet, which is almost every car that's getting made today has an onboard computer inside it. In fact, it runs most of the things inside the car. Now think about how frustrated you would be if you pushed the start button and you had a wait for the boot up to happen.
I mean, they get it. You push the button or you turn the key and something actually happens, because it's bypassing the boot up sequence. And that's essentially what we've got to work on with computing. We got to get it to the point where we take a lot more of the bugs out of the system that create hangs, that create the memory leakage so your system doesn't behave.
When you first bought the system, it's fresh, it's quick, and all of a sudden, as you load some things on it, all of a sudden it starts behaving a little differently than the day you bought it. And we'll work on it. That's what building long-term customer satisfaction and unequaled ownership experience is all about.
GARY: Before we take the next question, we've reached 10 o'clock. Take a one-minute break so those that have to go to class may do so, and then we'll resume momentarily.
AUDIENCE: It's great to have you here. I've been watching your analysis since the day 1 you've come on board with Lenovo. I think it's a great achievement that you have changed Lenovo as a typical notebook, a Chinese company, to become an international brand.
So my question to you is in the past few years, what's your biggest challenge you have when you base your senior Chinese team? I know the funder was Chinese, and the CEO and the CFO were also Chinese. But now it's become a more diversified international team. So what's your secret?
BILL AMELIO: That's a heavy-duty question. We've done a lot of past with that, because as you said the question to me, my mind was filling with lots of memories of some of the transitional issues that we had and how we bonded as a team. And I will tell you that what it took was the two of us, Yuanqing Yang and myself, to figure out how we're going to really trust each other, more than anything else. And there were some tension in the air on several occasions, on several key decisions, that needed to get made.
And what you hope for as a CEO is that you're batting average on making the decisions is better than 50%. It'd be good if you can do that, because you're not going to get 100 on every one of them. You're not going to eat every one of them right. And what has to happen is a lot of dialogue in between, on being able to understand each other's positions, and being as patient as you can to listen to the other person's viewpoint. That is probably the best advice.
But there were clearly some times where there was lots of tension in the air on what we were going to do as a business. Let me give you one I think is powerful. If you take a look at the top senior team right now, you'll see that we're made up of about 30% Chinese colleagues in the top leadership team. Some would have expectations, when the merger first happened, it should be more like 100%.
But Mr. Liu was very wise, and Yuanqing as well. Realized that Chinese colleagues, from day one, didn't have every skill necessary to become instant global executives. They did a fantastic job in China, but in order to be a global executive, it takes four different things to be successful.
One is you have to have command of the English language because that's the language of business, unfortunately. That's one thing that all of us have to do. Second thing is you've got to have a business management system that transcends your own country. And if you only grew up with one, that may not be able to transport somewhere else. And if that's the way you think, you have to be able to have a business management system that works in other places.
Third thing you have to do is you have to be able to be culturally sensitive to other cultures around the world. And the fourth, which is probably the most important, is the ability to influence others. If you grew up in one company and in one country, people around you kind of forgive you for a while.
We all have blind spots. There's some things that we have as towering strengths and there are some things that could take us off our path. And people, when you work with them for a while, If you're a solid leader, they'll forgive you for some of that. Now, if I transplant you instantly and put you in another country, those people don't know necessarily who you are, and all of a sudden, it can become a problem.
Another case in point is this, is that in Eastern companies, hierarchy is a lot more important. Like for example, I was surprised when I first became the CEO of Lenovo. I walked in to Beijing and instantly I was recognized as a position authority, as the boss, and I got granted instantly that feeling. When I went into a meeting in Raleigh, North Carolina, I'll never forget this. I walked into the meeting, sat in the meeting. It was almost like people would say, well, who are you?
KEN DIPIETRO: Even going through the security.
BILL AMELIO: Yeah.
KEN DIPIETRO: The security wouldn't let us in. She just refused to let us in because we don't have a badge. Didn't matter who we were. You're not coming in. Yeah, but he runs the company. I don't care, he's not coming in. Remember?
BILL AMELIO: The point of view about that is that that's totally different. So if your mindset is you're in charge, and all of a sudden you go somewhere else and you don't get instantly recognized as you're in charge, that plays with your mind a bit. It's a little bit difficult, if you never had that experience before, to make that leap.
So one of the things that we're working diligently on in the company is taking some of the best talent we have in China and putting them through intensive training on being able to say, how can you work effectively in other cultures around the world so you can be a global executive?
And we've been successful now at moving some people and taking risk on them a little early because we've given them right training. We've also had some high profile flame-outs, where we've put some people in jobs that weren't quite ready and they weren't able to rise to the occasion, and that's something that we'd like not to do. Thanks for that question. Very difficult.
AUDIENCE: Yes. I understand that Lenovo has lost government contracts, US government contracts, due to national security concerns. What are you guys doing to address those concerns?
BILL AMELIO: That was more like a few years ago. You saw there was a big press article that came out with the State Department literally about 2 and 1/2 years ago now. Since then, we have won government contracts. We've done a lot of work to actually have third parties come in, look at our manufacturing processes, our procurement processes, and demonstrated that we, in fact, have the highest level of security and nothing has really changed since the IBM days.
That gave the government a lot of confidence. In fact, we're one of the few companies that got the Seacat approval, which means we're able to import to the United States without a lot of inspection. We have been identified as having the best practices in the industry for what we've been able to do. So we've taking this thing extremely seriously, and we've gone the exact opposite way, to be able demonstrate to everybody we have tight processes in place and we're highly secure and you can bank on, when you get a Lenovo computer, that there is no special software in there, spy chips, or anything else you've got to worry about.
AUDIENCE: Sure. Hi, I'm AJ [INAUDIBLE]. I'm an MBA student. And I wanted to ask, in integrating, you had two different cultures, East and West, but also you had more of a startup culture at Lenovo and a more staid culture at IBM. How did you go about merging those two cultures?
KEN DIPIETRO: That was a definitely a key observation. I mean, you'd go to China, the sense of excitement and that tomorrow is going to be better and the future is now, and people walking fast, smiling. The energy was palpable. And then when you'd go to some of the acquired facilities, in Raleigh or in Paris, there was this almost forlorn atmosphere.
And it's interesting. It was an interesting time because the product is just superb. It's a high quality product, and there's great pride in the cultures. But nothing works like conveying a sense of hope about the future, and then creating a set of plans that are executable and winnable, and conveying through your actions, you get hope in the environment.
But I don't think there was one single thing that helped bridge the cultures, because, in fact, while that was one set of conflict, IBM and Lenovo China, when we started to bring in talent from the outside, from HP or from Dell and other places, it introduced another set of conflict.
I describe that tension that existed. In one sense it was healthy, because we were really consciously saying, look, there's a departure. We're moving forward as one company. Bill talked about the trust workshop we've done and a lot of the culture work we've done, the East/West workshop, the Culture Compass, which was this forum for dialogue, getting clarity around our strategy, getting clarity around what the leadership framework was going to be here.
What did we want leaders and managers to do? And how were we going to hold you accountable? You create a set of frameworks and belief systems and you start measuring against that, and you are able to start to gap, or close the gap, if you will, between what was and where we are today. And so it's not one event. It's a set of strategic initiatives that you do that I think has helped us.
I guess we feel good that people say, I was at IBM but I'm a Lenovo person. I used to say, look, paycheck doesn't say Dell Inc. or HP. It says Lenovo. And so at some point in time, we have to leave the past behind. And Bill calls it burning the boats. This is it. You're not going back. And we literally have a process in place to control the flow of who gets to go back to IBM.
And in some regards, we had some executives that were quick early on to tell us that they had a return ticket. And we said, take it now because we're going this way. And obviously, you have one leg in the past and one leg in the future, imagine the picture, what that looks like. And that's not fair to the rest of us who are here, sailing the good ship Lenovo. Why don't you get off? I mean, it was that blunt.
BILL AMELIO: I will add a couple of things. Ken painted this picture. It was a great picture, is that we used to go into some of the buildings. We were in the oldest buildings at IBM. We were still part of the lease buildings in IBM. So one of the key strategies that we had is where we had concentrated populations in the new buildings, new Lenovo had a totally different feel. Like our campus down in Mooresville now, it's spectacular. I mean, it's contemporary. It was jointly designed by the China team and the US team. It's got feng shui all built into it, so everything is like--
KEN DIPIETRO: Feels like a product.
BILL AMELIO: The water runs in the right spot, so the money doesn't out in the front door and out the back door. We figured all this out. It's great. But that, I think, is an important, symbolic thing, is to get people to move into a work environment they feel comfortable.
The other one was a big one, which was the commitment culture. In the China group, they had a fantastic commitment culture, edgy. When they would put a target in place, rest assured they're going to make a target. There was never a doubt in your mind that if the China team put a number on the board-- they would beat you down to try to get a lower number at the beginning, but when time came to make the commitment, they made the commitment and they would make it happen.
The other culture was a bit different. Their targets would come from finance, which were usually 120% of what was humanly possible. It sounds like a reasonable approach. I think this is an interesting thing to discuss. It sounds like a reasonable approach, but it's deadly for a company. Because what happens is it breeds a company where you don't make commitments.
Instead what you do is the person that could put the best excuse chart together at the end of the quarter, and says, here's the 15 reasons why I didn't make this, and I did 90%. It's good enough. So you build a culture where 90% is good enough for everybody, or 80% is good enough for everybody. And that's not the kind of place you want to live in. That's not an edgy culture that's pushing the limit.
You have more people explaining away the problem versus figuring out what the root cause issues are and figuring out a solution to get things fixed. So that was a major change over what we had to do, is to adjust targets in the right spot, but to make sure that we made people make commitments and keep commitments and hold people accountable to that. Otherwise, you don't build an accountability culture and it's deadly in a company.
GARY: Can I ask you a question? It's 10:15 now. We're going to have a coffee break. Would you like to continue with this for another 15 minutes?
BILL AMELIO: Whatever-- I don't know what time I'm supposed to go.
GARY: At 10:30.
BILL AMELIO: Yeah, at 10:30. OK, we'll keep going then.
GARY: All right. So anybody who would like coffee or soft drinks, they're available in the room right next door. So feel free to help yourself and come right back.
BILL AMELIO: Yes, sir?
AUDIENCE: I want to talk a little bit about commitment to service, because some organizations forget about that commitment to service. Case in point Dell.
I bought my first PC from Dell two years ago, four years ago. I updated a few years ago. I bought a new computer from that. I had horrendous problems with Dell, and I was not alone, as I find out by looking at the newswires today, Michael Dell coming back as the CEO.
One of the chief reasons he's coming back is because the hit that Dell took for not making the commitment to service to customers that have bought their products. How important is that commitment to service, and how do you ensure that your original customer is going to come back to you another time when he wants more?
BILL AMELIO: Best way to describe that is to say what our strategy is. So let me just give you our strategy and I'll give you some proof points that backs our strategy up. We put a strategy together in three years and said the following. Most companies have this first part of the strategy, which is to try to grow faster and more profitably than the industry.
Our game plan to do that is with exceptionally designed products, exceptionally engineered products, with unequaled ownership experience. That's our service motto, unequaled ownership experience. Behind that we've put a lot of muscle in our entire service arm across the company.
Case in point, if you look back three years ago, we were about number 2 in the TBR survey that goes out. It's a third party survey in the United States. It looks at all customers and asks them, who do you like? Who don't you like? What's the good, bad, and ugly of every customer? In desktops, we're like number 4 or 5. Today we're number 1 in both.
We made dramatic improvement. We have a team that spends all sorts of time on the blogs. And if anything pops up because it gets around our customer sat group-- because we have a customer sat group, that if there's anytime an escalation, that's the first place that the escalation goes, and we go fix the customer's problem. We want to save the sale, save the customer experience so they will become repeat customers.
All of us know the following, the world has changed. In the old days, it used to be if you irritated a customer, they'd tell eight people. Today if you irritate a customer, they tell thousands of people because they get online and they start to blog. So it's so important. This idea of customer sat is critical.
If you can't stand behind the customer, I submit to you that what's going to end up happening is it's going to destroy your value over time. So it's an extremely important part of what I do, and I spent a lot of energy on customer sat, and not only in large accounts, but also individual consumers that have issues as well.
And we're not perfect. I wish I could say. We have made mistakes. Rest assured, I've had some glaring things come to my office and describe some of the problems that we had that we continually keep working on. But I will tell you this, each and every one of them, we go to root cause, we put a corrective action in place, and we get better at our ability to be able to make sure that we live up to this idea of an unequal ownership experience.
KEN DIPIETRO: And we put pay against it.
BILL AMELIO: And that helps. [LAUGHS]
KEN DIPIETRO: Variable pay.
AUDIENCE: Can you elaborate on that?
KEN DIPIETRO: Yeah. I mean, our dimension to our bonus scheme is tied to customer sat results. So to the extent we perform or don't perform, it affects all of us.
AUDIENCE: Did you hear about the little white machine?
AUDIENCE: Oh, the little white machine.
BILL AMELIO: This is a brand new category, in fact. It's called a netbook. Let me first describe the difference between this and this, the full-fledged laptop and netbook. This is for simple gaming, light graphics. You're not going to do high intensive computations on here. You can do, of course, social networking and Skyping on here. You can attach to the internet pretty rapidly, do email on here. It's a nice--
KEN DIPIETRO: It's got a camera built in.
BILL AMELIO: Yeah, it's got a camera built in. And it's got the latest processor, and it's a beautiful form factor, and it comes in all the various different colors that you'd like to have. And it's a great machine on the road, as a matter of fact. But if you're going to do lots of typing, lots of spreadsheets, lots of computations, this is the guy that you want.
So that's the difference between the two of them. This is more of a consumer boss. We've got the foreign one inputs that you can put in here, as far as your various different media of SD, compact cards. This one also is WAN-capable as well. So you can put a WAN card in here and you're able to connect literally anywhere around the world.
And the price points on here are really a lot lower. This attracts a totally different set of customers. It's great for the education markets. It's great for second and third computers in some households. And then for emerging markets, it's great for their first computer.
AUDIENCE: And that's available on the market? Because I haven't seen it.
BILL AMELIO: Right now, yes.
AUDIENCE: Is that Linux space?
BILL AMELIO: We have them both. We have both XP and Linux space. And this is one where we'll work on more of the cloud computing. We were asked a question earlier. This is one that you can. Yeah. This one's a mock-up. Unfortunately, you can't turn that one on. I don't know why we didn't have-- for some reason we didn't get the actual in here. But that's why--
KEN DIPIETRO: Might as well pass this around, too. Just don't leave with this one.
BILL AMELIO: Yeah. This is the CEO's one, so do not take that one.
KEN DIPIETRO: Hey, lock the doors.
AUDIENCE: They were saying that this one will sell for $399, $499, depending on what those are. So it's really two.
AUDIENCE: Is this the new one?
KEN DIPIETRO: This is the 110. This is the U110. this really was our first consumer box, right? I mean, you could describe it. This is a full-on, fully loaded all apps laptop, mini laptop. It's kind of feminine in design, but this one--
KEN DIPIETRO: Well, I wouldn't walk around with it, but it actually won Best in Show at CES this year in January. Best computer, best new laptop at the Computer Science Exhibition, international show in Vegas this past year. Its got some real clever design on it. It almost borrow some of the Chinese characters in the back and the cooling vents. And comes in what, red?
BILL AMELIO: Red and black.
KEN DIPIETRO: Red and black now. And it's got the piano keyboard, and it's a cool product.
AUDIENCE: So people come to pick up the [INAUDIBLE]?
KEN DIPIETRO: Excuse me? Yeah, we're giving one of those to all of you who are left here.
BILL AMELIO: Well, we'll give your friends and family a discount.
KEN DIPIETRO: Yeah.
GARY: So I'd like to ask, I've seen what you've written and said about global 2.0. Can you elaborate on that for just a bit?
BILL AMELIO: Yeah. We got around this idea of the world map needs to be viewed differently. Not from a Western-centric view of the world anymore because of this massive switch in how the middle class is growing elsewhere in the world. And it's important for companies to be able to tap into talent anywhere and everywhere.
If you think about just a few years ago, and unfortunately some people are laggards here in the thinking, I would say, in the United States on outsourcing and offshoring, is that that was the bad word of globalization. Everyone thought that everything's leaving the West, going to the East. And our viewpoint is a little different than that.
What we're viewing is the fact that there's global hubs of excellence that you can build everywhere in the world to tap into the innovation and the budding middle class and the budding talent pools that are developing all over the world. And one of the ways that we structure our company is exactly to do that.
We have global hubs of excellence in several different spots. From an innovation point of view, we have one in Beijing, Yamato, Japan, and Raleigh, North Carolina. Manufacturing we essentially have all over the world. Supply chain, we actually have a global hub of excellence in Scotland, because there was great supply chain skills there, as well as business transformation skills in Scotland, to give you just an example.
And this idea is that because you got talent, you can tap into it, and also, those markets are becoming big markets under their own. I mean, let's talk about China for just a moment. China's the number one market in the world for televisions, number two market in the world for automobiles, number two market in the world for PCs, number one market the world for washing machines and refrigerators. It's a pretty big domestic economy, and some people don't really realize that today. So it's a great market to sell in. It's a great area for us to be able to sell our goods.
So companies that are thinking with just a Western-centric viewpoint, they sometimes don't think about the nuances that may happen and how they got to design products a little differently for a market like China, or a market like India, because India is another burgeoning consumer-based economy. There's all sorts of ideas that can happen there that are unique.
Also, there used to be a viewpoint that in emerging markets, they would look for a secondhand equipment, the refurbished equipment, et cetera. It's an anything but that. In fact, some of the latest technologies are first adopted in some of the emerging markets, even before they're adopted in a mature market, because of the inertia to move to the new model.
Cell phones is the perfect example. You go into rural India, you'll find people that are living on $2 a day and they got a cell phone. You say, how does this all work? But they've got a cell phone. And that's kind of unique because they leapfrogged putting landlines in because they were so expensive, so they went to the cell phone.
And it's similar what we're seeing with respect to even higher end technologies. I mean, it was quite fascinating. I had a discussion with somebody from Fortune yesterday, who just got back from India, and she was traveling around. And she said, I went to this one village and they were trying to sell me an iPhone for $700.
And she said, a guy, all he has to do is sell one of those a week and he's in. And the fact is because there's not a market for them. They figured out how to get some of them over there and they're just selling them. So it's interesting how, all of a sudden, you'll see something, because status drives people and brands drive people, even in areas that you wouldn't expect it.
AUDIENCE: I'm wondering what you did differently, if you had to, to motivate former IBM employees to make them more like Lenovo employees now.
BILL AMELIO: What would we do differently or what did we do?
AUDIENCE: What you did do. What would you do if you had to do it, to motivate, to be encouraged?
BILL AMELIO: You want to take a shot at that guess.
KEN DIPIETRO: Yeah. I mean, I don't think we ever set out to target the IBM employee. But Bill talked about establishing a culture of commitment. We've talked about the trust work and working on our culture.
I mean, one key intervention that I think we've done to operationalize what we mean by leadership and management and create a standard definition, if you will-- I'm not literally meaning definition, but to be clear about what we expected-- we put in place a talent evaluation management process.
And a lot of companies do this, but I think what was different for us was the rigor-- it is different for us-- is the rigor and sense of ownership that really comes from Bill on this. You can chime in anytime you want on this. And we're in the middle of this work right now, in fact. This window of our business calendar, this period of time is where we actually are conducting these reviews.
And what happens in that meeting is we sit with business unit leaders and we spend a day going very, very deep in their organization. And we want to understand what your business objectives are. Do you understand them? And then how is your talent in organization paced, matched to achieve that outcome?
And so we spend a lot of time looking at people, and we ask lots of questions about, who are the best? Who are not performing well? What are your plans? What's your bench look like? What are your staffing plans look like?
And those discussions have multiple effects. One, you get deep understanding of the organization. Second, you get a good understanding of whether or not the leader or manager knows his or her people. Third, you get an opportunity to communicate very clearly what your expectations are of managers and leaders in the company.
And then when you build into it a follow-up review six months later, and other things to operationalize those plans, what happens is you're creating an intensity around what we mean by commitment, leadership, and management. So it may have worked one way before when you were with IBM, or if you were at Dell, you may have experienced it differently, but this is what it means to be here.
And what happens is you're also making decisions about the person in the room discussing, and they know it, because later, that person's boss is doing another discussion with Bill and I, and then we roll this up to the board. So that is one example, I think, of how we, I think, operationalize the idea of a culture of commitment and created the Lenovo leadership way.
BILL AMELIO: That's a tough question to ask, what would you do differently? And I would just give you some of my experience on this one. I had 18 years at IBM. I would have definitely handled this job much different if I hadn't changed jobs several times. I'll give you an example of that.
The training I had at IBM was fantastic, the management and leadership development early on. But one of the things that was drummed into me early on was it was your responsibility as a manager to make sure you bring all people along. You shouldn't leave anyone behind.
What I learned as I went to other companies and I learned some different approaches, I changed that thought a bit. When you do a major transformation, like we've just done in Lenovo, what's going to end up happening is about 30% of people get it instantly. They're a part of it. They want to go, and they're going to move with you.
Another 30% are sitting on the fence and wondering if you've got a strategy that works. Can you execute it? Do these guys, the leadership, know what's going on? They're going to vote, depending upon what happens over the course of the next several quarters.
Then you've got the rest that might say, this is not for me. I got to move. And if you spend a lot of time working on that population, you're missing the boat, because what ends up happening is you're focusing on an area of weakness, not an area of strength.
And one of the things that we tried to develop in our entire people talent process is this idea of the following, is get people in jobs where they're maximizing their strengths-- and they need to understand what their towering strengths are. And also, give them feedback on where their areas of development are, what things that could derail them off their career.
Because those of you in the room here, if you haven't got great feedback somewhere along the way, it's going to be difficult to get in great leadership jobs. Because if you've got a blind spot, it only comes out in crisis, unfortunately. I mean, when things are smooth sailing, anybody can run the operation. It's when a crisis develops, can you really dig down deep and not let your dark side or your derailers push you off target?
And one of things that we built inside the company is this whole culture of giving feedback and how important feedback is. I'd like to say that feedback is a gift. Sometimes it's unwanted and unwelcomed, but it's a gift, no matter how you look at it, because it makes you better. Because if you're able to listen to it and be able to say, I can make a change, you will be better in the long run.
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William J. Amelio, president and CEO of Lenovo—China's largest and the world's fourth largest personal computer manufacturer—visited Cornell, September 16, 2008, with Lenovo's senior vice president of human resources Kenneth DiPietro '81 to inspire students and discuss the company's global strategies and the dynamic world of international business
Lenovo Group recently sponsored computing equipment for the 2008 Beijing Olympic Games and made headlines around the world in 2004 when it acquired the much-larger IBM Personal Computer Division for $1.25 billion.
The event was sponsored by the ILR School's Program on Globalization and the Workplace.