September, 2005, Volume
9, Number 12
CONTENTS
China Leads in the U.S.: How Lenovo Is Leveraging
the Brand from East to West
Leadership at the Very Top: Governance Makes a Difference
Management Wisdom: Learning from the New York Yankees’ Dynasty
Leadership
Development Programs: Best of the Year
China Leads in the U.S.:
How Lenovo Is Leveraging the Brand from East to West
In
May 2005, when Lenovo Group completed a $1.75 billion purchase of IBM’s
personal computing division, the China-based manufacturer leapfrogged
its way to become the No. 3 computer maker in the world, second only to
Dell and Hewlett-Packard. Along with rights to the venerable IBM name
and logo, Lenovo got Deepak Advani. Michael Useem, director of
Wharton’s Center for Leadership and Change Management, and Wharton
marketing professor John Zhang spoke with Advani – who is now Lenovo’s
senior vice president and chief marketing officer – about what it takes
to merge an Eastern business with a Western one. From
Knowledge@Wharton, September 7-20, 2005.
Useem:
Following
Lenovo’s acquisition of the IBM PC line, could you talk about the kind
of leadership you need to exercise under the new Chinese ownership?
Advani:
When you look at the IBM PC division, remember that the “I” stands for
international. The last three jobs I had were all worldwide in scope, so
the ability to work with individuals from different cultural backgrounds
was really a requirement of IBM. In the leadership positions I held
there, my teams were located around the world – in Latin
America, Asia, Europe and in the United States.
One of the key
leadership attributes necessary to do well at IBM was to find ways to
turn diversity into a competitive advantage. That happens when you are
very respectful of different individuals and the way they think, because
at the end of the day everyone has developed a point of view that has
been influenced by the various experiences they have had and the
cultures within which they operate.... Very often there isn’t a
black-or-white, right-or-wrong answer. If you can put aside your biases
and look at others ... from an objective perspective, then all of a
sudden you start to realize that what they are saying makes so much
sense to them.
Also, there are
cultural differences. Some cultures are much more vocal, aggressive and
outgoing, and others are more reserved. Keeping that at the forefront of
your consciousness often helps, since very often you have to draw ideas
out of certain people. So at the end of the day at IBM, one of the
things I [learned] was to be respectful and to understand different
people’s points of view.
[With respect to the
Lenovo transaction], one of the most fulfilling experiences with the
team that I have worked with over the course of the last six months has
involved getting to know some of my colleagues. They are very smart,
very young, very driven and very good team players. The working
relationships have been outstanding on both sides. There’s a burning
desire to make this succeed.
I remember in your
[Useem’s] leadership class that you would say, in the context of Apollo
13: “Failure is not an option.” We are in the sort of situation where we
are energized to make this thing work. As [Lenovo] chairman Yuanqing
Yang told us six months ago, in order to be a cohesive team we had to
remember three key things: trust, respect and compromise. We would need
to trust one another, to be respectful of the different points of view,
and to compromise - not in the sense of the lowest common denominator,
but in the sense of realizing that not everything we do will be done the
way we want, or the way we always did it. We are going to look at the
best of all worlds and try not to do what we have always done in the
past. That is the meaning of compromise, and it has worked very well for
us.
Useem:
A reporter once asked Dale Berra, son of [baseball great] Yogi Berra, if
he was similar to his father. And he replied, “No, our similarities are
different.” Given that you have worked on both sides of the Pacific,
what are some significant leadership styles or approaches that are
similar or different from those of the U.S., and how do you use them to
bridge an international gap?
Advani:
We are similar in that both sides are very much meritocracies, so the
best ideas rise to the top. I have also seen a very strong focus on the
marketplace and what the customer really needs. Both the old Lenovo and
the old IBM PC division differentiated themselves in the marketplace
through innovation, but the mantra that we both have is a focus on
innovation that matters. We don’t want to innovate for the sake of
innovation, but we want to innovate in areas that address customer pain
points.
So being very focused
on the marketplace and on customers are key attributes. And we are both
focused on honesty and integrity in all our dealings. Maybe it’s unique
to this company, but Lenovo modeled itself, 20 years ago, after some of
the multinationals like HP and IBM. When two companies come together,
there tend to be unique cultural differences to be resolved. A lot of
people focus on the differences in China and the United States and the
rest of the world, but I think that is less important, because IBM
operates in so many countries that we are used to dealing with global
differences.
What’s more important
are the company cultures and how they are different. As we have seen,
some mergers and acquisitions never realized their full potential
because the company cultures were so different. But in this case we
actually studied the key values both companies had, and they mapped
almost one-on-one. Innovation is the way we both differentiate, and
customer service is very important, [as are] integrity and honesty in
all dealings. I would say from a leadership perspective, having those
attributes in common - meritocracy, focus on the customer, and integrity
in all our dealings - is important.
You also asked about
the differences between the way we did things in IBM and the way I see
Lenovo. When I was in the PC division of IBM, during the last four years
we were not investing in the business for growth. We got out of the
consumer [business] in the late 1990s. We decided that profitability was
very important and instead focused on the enterprise market. So there
wasn’t as much focus on growing the business. Whereas in Lenovo, I sense
an incredible optimism and appetite for growth. The mindset is that “the
future’s so bright I’ve gotta wear shades.” As we bring two teams
together, creating a culture of profitable growth is one of the
important issues. So we were a little different there.
The other difference
is that in IBM we were a business unit within a very large, complex
organization. If there was a problem that needed to be solved, we needed
to make sure that we were consistent with Armonk (N.Y.) corporate
headquarters’ policies, systems and other issues. But what’s incredible
about Lenovo is because it’s a PC-focused company - in a very dynamic,
fast-moving industry - if it thinks that something needs to get done it
can do it. As we come together, that’s very liberating, at least for me
personally. If you see an issue, you just take action, you take it
quickly and you learn as you go.
Zhang:
Do you have a free hand?
Advani:
Absolutely. One of the first questions I asked chairman Yuanqing was:
When it comes to decisions that I need to make – especially in marketing
– do I need to go to him for approval? He said: “You are the head of
marketing. You make the decisions and I will support them.” He was very
clear on that. So one of the things that I have noticed, and I don’t
know if you can generalize this as “East vs. West,” is that in very
large companies you tend to be a little more risk-averse. You tend to be
more conservative because you don’t want to make a lot of mistakes. That
damages your career to some degree. Lenovo is much more entrepreneurial.
If something needs to get done we say, “Look, let’s do it and let’s go.”
There’s a sense of urgency. That’s a different leadership style and I
think it’s really great for the PC industry.
Zhang:
My mom used to tell me that any marriage is difficult, but a cross
cultural marriage will be even harder. Right now you are in a honeymoon
period. I wonder if you have encountered any sort of surprises.
Advani:
Yes, there have been some little surprises. But they are more silly than
serious. Here’s an example: I’ve gone to China maybe half a dozen times
this year. My colleagues there are just incredibly gracious hosts.
Someone picks you up at the airport; the calendar is planned out; it’s
terrific. Well, we sort of made a mistake early on, when an executive
[from China] visited the United States. We didn’t realize that maybe
someone should go pick him up at the airport and have things laid out.
It was a courtesy kind of call that we were not conscious of, and we had
to fix it. But it was a very minor thing.
As you get to know
some of your colleagues, you find that companies have very similar
cultures. We have been able to work through most issues very well
because it comes down to people. It comes down to one-on-one
relationships, and once you start building those relationships, then you
can overcome many things. That’s what has been happening. Whenever we
get together we go out and have dinner, show pictures of the family and
all of a sudden there is a real bonding taking place. In February, for
instance, we had a meeting of about 30 executives in Las Vegas. We were
still getting to know one another, and the chairman of the board put his
arm around my shoulder and said, “Hey, Deepak, I hear you’re a pretty
good blackjack player. Let’s try our luck at blackjack.” About eight of
us took over a table and we were there for a couple of hours. We had a
great time. We built very strong relationships.
Now, as we go
forward, without a doubt there will be challenges. When you look at the
way Lenovo operated in China, it was a very successful business model.
On the China side we understand the business model; on the China side we
understand the needs of the marketplace very, very well. A lot of it
applies to other markets, particularly to other emerging markets. But
not everything. So we’re having a dialog about what makes sense to
replicate, and what doesn’t make sense to replicate. We will have those
challenges, but the personal relationships that have been cemented will
help us.
Zhang:
Many Chinese companies seem to want to go international. Based on your
interactions with the management there, do you think that those
companies are ready to go international?
Advani:
There’s no question that it’s going to happen. It’s just a matter of how
quickly. I was with IBM for 13 years and my career was on the fast
track, so I wasn’t looking to leave. But then this opportunity came
along, and now, having had the pleasure of working with my colleagues in
China for the last year or so, I have been incredibly impressed. The
mindset here is very smart; they are great team players. And they really
understand the basic business fundamentals. Many of them have been
educated at business schools in the United States. The mindset is: What
does it take to win, and how can we deliver value to customers? The
management team is very hungry to learn what it takes to build a truly
global business.
Useem:
In light of your experience so far, do you have any advice or warnings
for other Chinese companies looking to invest in the U.S.?
Advani:
I think that if it makes business sense for the customer, then there’s a
lot that can be gained from such partnerships. I did Linux strategy for
IBM, and one of the comments that was made by a senior executive at IBM
- back when Linux was very new - was that as companies we place bets on
trends in the industry. Some pan out and some don’t. But if a trend is
going to deliver economic benefits for customers, it’s going to happen
with or without you. So you better find a way to make your business
model work and get aligned with the market forces that will deliver
economic benefits.
The advice I would
have is that whether it’s a Chinese company working with an American
company - or any two companies that are coming together - there have to
be synergies and economic benefits to customers. Part of the reason that
our integration has gone so incredibly well over the last couple of
months is that there is hardly any overlap between the Lenovo business
and the old IBM PC division. With the IBM PC division, more than 60% of
our business was with notebooks. And when you look at Lenovo in China,
85% of it was in desktops. We [IBM] had revenue coming from every corner
of the world, while [Lenovo] was focused primarily on China. We were
focused a lot on the large-enterprise mid-market and they were focused
on consumers and small business. As long as the business reason is
sound, then coming together would make a lot of sense.
Zhang:
What are the challenges that you face today, as the person in charge of
marketing?
Advani:
We are in the process of establishing the Lenovo brand and trying to
introduce Lenovo to the world. There are competitors out there saying
that every dollar spent on a ThinkPad goes directly to the Chinese
government. So the challenge is establishing Lenovo as a worldwide brand
that focuses on innovation in ways that matter to our customers and our
stakeholders. You may know that Lenovo is an Olympic sponsor - of the
winter Olympics in Italy and then the summer in Beijing in 2008. So we
are leveraging the Olympics, the strong partnership we have with IBM,
and the great products we will be introducing over the next couple of
quarters. We are leveraging the strong relationships we have with our
partners like Intel and Microsoft. We are going to use all these
elements to introduce Lenovo in a holistic way to the world. It’s a huge
challenge but it’s exciting.
It wasn’t too long
ago that people thought Korean companies could not produce innovative,
high-quality products, but Samsung and other companies changed that. And
20 years ago the same thing was thought about Japan. We’re at the
beginning of a wave with China. When you look at Lenovo, a lot of people
are completely underestimating the assets that we are going to bring to
the market. We have won a number of awards [for our products] and I
think the world is in for a surprise.
Leadership at the Very Top:
Governance Makes a Difference
Company governance
can make a difference, but precisely how remains a source of policy and
academic debate. The Sarbanes-Oxley Act of 2002 and the revised New
York Stock Exchange listing requirements of 2003 mandated greater board
independence, and in the wake of Enron’s failure in 2001 and other
company scandals, many companies have instituted a host of improvements
in their governance policies and practices.
Drawing on data on 2,327 companies as of February 2003, Researchers
Lawrence D. Brown and Marcus L. Caylor examined company governance in
several areas, including audit,
board composition, charter and bylaws, director education, executive and
director compensation, ownership, and state of incorporation.
Institutional Shareholder Services, an independent appraiser of proxy
voting and company governance, compiled data on 51 measures of
governance, and the researchers found that some by not all of the
measures were associated with greater company profitability, value, and
cash to shareholders.
The better governance predictors
of company performance included whether 1) all directors attended at
least three-quarters of the board’s meetings; 2) more than half of board
is comprised by independent non-executive directors; 3) the nominations
committee is entirely composed of independent non-executive directors;
4) the governance committee meets at least annually; 5) board policies
are published in the proxy statement, 6) option re-pricing is
prohibited, 7) directors and executives are required to own stock, and
8) board performance is annually reviewed. However, contrary to
expectations, several measures normally considered indicative of good
governance actually correlated with adverse performance, including
whether the 1) consulting fees paid to the auditor exceeded the auditing
fees paid to the auditor, and 2) directors are elected annually, 3)
company the has no poison pill or one that was shareholder approved.
Overall, better governed
companies are found to have better performance. Firms with relatively
poor governance are less profitable, less valuable, and pay out less to
stockholders than those with relatively good governance. The average
rate of return on equity for companies ranked in the top decile, for
instance, stood at 9.2 percent, while the rate in the bottom decile was
-6.8 percent. Governance does make a difference.
Source:
Lawrence D. Brown and Marcus L. Caylor, “Corporate Governance and Firm
Performance,” Georgia State University, 2004. The paper is available
here.
Management Wisdom:
Learning from the New York Yankees’ Dynasty
By Lance A. Berger and
Dorothy R. Berger 
Sustaining
a dominant competitive position for eight decades is a feat achieved by
few organizations. Yet since 1921, the Yankees have been in the World
Series 39 times and have won the championship 26 times. No other
baseball team comes close. Whether a baseball fan or a disinterested
observer, it is clear to any manager who looks at the history of the
Yankees from a business perspective that there are aspects unique to the
Yankees that enables them to win decade after decade.
The
Yankees’ 14 success principles are divided into three factors that
represent the overriding themes for building a dynasty – leadership,
processes, and culture. Together
they constitute a
roadmap for building a dynasty.
Leadership Establishes the Foundation
Principle 1: Cultivate
Ownership Values from the Top Down. Winning owners have
characteristics and behaviors that set them apart. Each
Yankee owner transmits their passion to win and an opportunistic
spirit to their managers and players.
Principle 2: Hire the Best
Frontline Managers You Can Find. The field manager, or first-level
manager, is the face of the organization that players see every day. The
team’s performance is heavily determined by the operational and
strategic decisions made by the manager. The field manager is the bridge
from ownership and management to the players. That bridge is composed
of professional, citizenship, and leadership competencies that help
create and sustain excellence.
Principle 3: Formally
Recognize Your Informal Leaders. Leaders excel at their job,
inspire others to excel, and who display behaviors that bring credit to
the team. They are recognized and respected as leaders by their
teammates. Leaders are anointed not appointed. Organizations must
formally acknowledge and support these leaders.
Processes for Developing and Maintaining a Dynasty
Principle 4: Set the Bar
Higher Than Your People Have Ever Seen It. Every organization must
have clear and established winning standards for the organization as a
whole and for each player. Everyone must be clear as to what
constitutes winning. For the organization and the players the measures
must be unequivocal.
Principle 5: Make
Organizational Competencies the Heart of Your Appraisal Process.
Competencies are the observable and measurable skills, values, and
behaviors that contribute to enhanced performance and organizational
success. Competencies must be clearly defined, articulated, and
embedded throughout the organization. The standard for player
competencies must exceed those of competitor teams’ peer players.
Principle 6 – Make Everyone
on the Team a Talent Scout. Your organization can expand its
scouting field beyond the formal conduits by instilling talent
assessment and scouting as an organizational value. Players must
understand their role in bringing fresh talent into their organization.
Principle 7 – Create a Balance of Superstars, Stars, and Solid
Performers.
There are not enough superstars in the baseball player pool for the
Yankees “to buy” and field a team of only
superstars. Yankee teams have been developed around a blend of players
at varying performance levels - superstars, stars, and solid
performers.
Principle 8 – Establish Your
Talent Strategy and Fill in the Gaps. The Yankees have a three-part
human resources strategy that can be adapted for success in your
organization:
1. Identify and retain superstars, and/or acquire them from your
competitor’s organizations.
2. Make sure your “battery” (key positions) has at least star and
potential star backups.
3. Assure that everyone on the team is rated at least as a “solid
player.”
Principle 9 – Create a Solid
Farm System: Train and Develop Your People. Since 1929, the farm
system has played a crucial role in maintaining the Yankee dynasty. In
the farm system, minor league teams feed talent through the organization
up to the parent club. During this process, players are developed,
their skills honed, and they learn Yankee values. Continual talent
development protects an organization against competitor raids and makes
it less susceptible to being held hostage to excessive salary demands.
Principle 10 – Pay Your
People Based on Their Actual and Potential Contribution.
Most organizations cannot afford to spend
payroll dollars haphazardly. Missteps can lead to inability to attract
star talent or even worse loss of top people to competitors. Therefore
the first principle in compensation management is not spending more than
you can afford. The second principle is spending compensation dollars
wisely based on an accurate assessment of player current and future
contribution.
Principle 11 – Make the
Superstar the Focal Point of Your Organization. Superstars are a
commodity in short supply. Optimally you should cultivate your own
superstars but strategically hiring your competitor’s superstars can
weaken their competitive strength, demoralize other competitors, greatly
improve your team, and create media focus that heightens fan (customer)
interest.
Design Your Culture for Success
Principle 12 – Scout for a
Diverse Talent Pool in Unconventional Places. For a time the Yankee
dynasty was diminished by its failure to consider quality talent from
all sources when their competitors were doing so. Today the Yankees are
a blend of people from all over the globe. There are no limitations on
where the team will look for talent. Diversity translates into on-field
and box-office success.
Principle 13 – Celebrate Your
History, Heroes, and Legends: Creating Traditions of Excellence
Perhaps no other organization is so filled with myth and legend as the
Yankees. The Yankee organization goes to great lengths to promote their
history and tradition of excellence. On and off the field, the Yankees
have been successful at selling their legendary accomplishments.
Principle14 – Boldly Promote
Your Tradition of Excellence. The Yankees’ two promotional goals
are associating the Yankee brand with winning and becoming an employer
of choice. They accomplish these goals using a four- step strategy:
focus on team accomplishments; focus on the superstar; pick colorful and
committed “hucksters” to spread the message; and package the Yankee
image in an epic-evoking environment.
Note: Lance A. Berger is
CEO of Lance A. Berger & Associates (LBA Consulting Group). Dorothy R.
Berger is Managing Director and a consultant in talent management. This
article is based on their book, Management Wisdom from the New York
Yankees’ Dynasty: What Every Manager Can Learn from a Legendary Team’s
80-Year Winning Streak (John Wiley & Sons, 2005;
www.lanceberger.com; 610-525-5332.
Leadership Development Programs:
Best of the Year
Executive Excellence,
a leadership development firm, identified top leadership development
programs in North America according to the programs’ 1) vision and
mission; 2) involvement and participation; 3) measurement and
accountability; 4) design, content, and curriculum; 5) presenters,
presentations, and delivery; 6) take-home value for participants; and 7)
outreach and outcomes of the programs and products. The 2005 winners in
seven categories are:
Small to midsize
organization: Analytical Graphics
Large corporation:
Caterpillar University
Education, university, or school of
management: University of Michigan
Non-profit organization: The Human
Capital Institute
Government and military: Defense
Acquisition University
Independent consultant, trainer, or
coach: Jim Collins
Large consulting group: Results Based
Leadership
Copyright 1996-2005, Wharton Center for
Leadership and Change Management
University of Pennsylvania.
