Why is the success of the operator channel actually hurting Lenovo?

Every April is the beginning of Lenovo's new fiscal year. It is a tradition of Lenovo to hold a full-time swearing-in meeting to establish a new fiscal year goal and inspire employee morale. On April 21, 2016, Lenovo’s People’s Swearing Conference was held in Beijing. After the meeting, all the staff left, and thousands of people together helped ZUK's new Z2 Pro flagship machine to help out, creating the largest new product launch conference in Lenovo history. ZUK is an Internet mobile phone brand founded by Lenovo at the end of 2014 and operates independently outside the Lenovo system. After more than a year of exploration, ZUK returned to Lenovo and vowed to launch a "mobile phone counterattack" in the Chinese market.

Lenovo is in the transition period to the mobile Internet and the Internet of Everything, and is still in the digestive period after the two major acquisitions of IBM servers and MOTO phones. As a traditional PC giant, Lenovo has resources, channels, brands and other resources, but the transformation is not fast enough. This time, ZUK mobile phone returns, Lenovo Mobile has also launched the “Creation Partner Program” while “reversing” the Chinese mobile phone market, with a new mechanism to revitalize Lenovo and break the “big business disease”. At present, it is another important key in the history of Lenovo's development. How to break the game? "China Business News" reporter interviewed Lenovo Chairman and CEO Yang Yuanqing.

Repeated, the success of the operator channel has hurt Lenovo

"China Business News": Lenovo culture emphasizes the resumption. The Lenovo mobile phone has fallen so badly in the past two years. What is the conclusion of your resumption?

Yang Yuanqing: We don't have a good product that can impress users. In the past, China's mobile phone industry was dominated by operators. Last year, about 80% to 90% of Lenovo's mobile phone business relied on this channel, and we could not do fine products. Three operators of three systems, each requiring customization, are low-end products. The success of this channel is harmful to us, because our customers are not end users, but operators, we are considering to meet the operator's customized requirements and make them satisfied. At that time, it was very good to sell through the operator channel. We also felt at ease. We didn't feel that we need to spend our time on users and products. This is completely wrong. Looking back now, I feel that I have to use my ingenuity to make the product work.

"China Business News": When I founded ZUK, I wanted to make a completely Internet-enabled mobile phone, because it is difficult to break through the internal system of Lenovo. What do you think is the effect?

Yang Yuanqing: Last year, we actually made a great deal of determination to abandon this (operator) model. You may have seen Lenovo's sales decline more seriously. In fact, this is only in the Chinese market. Lenovo's overseas sales have been relatively high-speed growth, and there has been a cliff-like decline in China. At the moment, we should be in the end, throwing away what we should not want, and the low-end products. What you keep now should be said to be boutique. Of course, the operator channel has not given up, but the operator channel must also emphasize good products and good quality. In the future, we will sell more through retail channels and online channels.

ZUK was released last year because we realized that it is the key to doing a good job with the ingenuity. It's not so easy to make any good product, and even making a function that users can satisfy is not easy. Therefore, we set up ZUK to let it operate independently and to make products available. I feel that through their independent fight over the past year, they have achieved product development and product promotion in the form of the Internet. This model has been established. This is more difficult to achieve in the past Lenovo system, I think this is our very big gain.

"China Business News": ZUK has made a lot of Internet attempts in product design, sales and channels. I can see that ZUK has always wanted to get rid of the shadow of Lenovo and become a thorough Internet brand. Why are you going to take it back now?

Yang Yuanqing: The establishment of ZUK was the most correct decision last year, but the more correct decision is to let it return to Lenovo's platform. Lenovo's big platform gives ZUK a unique advantage.

On the one hand, ZUK can reverse the impact, bringing Lenovo's overall mobile business in China more Internet-oriented, and building our business model more user-oriented. ZUK will bring a lot of new things to Lenovo, such as new ways to reach customers, run fans, and new product promotion models.

On the other hand, Lenovo's international platform can also bring great value to ZUK, and push ZUK good products and good models to the world. Lenovo Mobile China team is even more powerful after grafting ZUK. The combination of Lenovo and ZUK's superior resources will enable Lenovo to grow. After returning to Lenovo, ZUK can take advantage of Lenovo's large platform in production and large-scale procurement, including borrowing all the resources and strengths of Lenovo to help promote it.

Don't underestimate the achievements of Lenovo in the past ten years. Its biggest achievement is the global operation and international platform. There are few in China. After ZUK returns to Lenovo, the light and heat that can be emitted on this larger stage will double. Because the current China is only a market of 1.3 billion people, and the world is 7 billion, there is no doubt that it should be aimed at the global market. Through so many years of hard work, Lenovo has established sales channels around the world and established a good operating model. In fact, this is what ZUK can borrow. It is really time to push China's good products and good business models to the world.

In fact, the development of ZUK's independent entrepreneurship during the year was also constrained. For example, they handed the manufacturing to a third party, and the third party had to give money to produce it. This is a big constraint for start-ups. If you are producing on Lenovo's big platform, you can produce it first, then pay it after you sell it, and you can also enjoy the advantages of Lenovo's large-scale procurement. This is the advantage of the big platform.

Counterattack, mobile business is not impossible

China Business News: The mobile business is Lenovo's most turbulent business in the past two years. Last year, Chen Xudong took over Liu Jun to take charge of the global mobile business. This year, Chen Xudong was transferred back to specialize in China Mobile. It can be seen that Lenovo is going to focus on firepower in the Chinese mobile phone market this year?

Yang Yuanqing: Lenovo PC has achieved global NO.1, and as the global PC market becomes saturated and the trend of decline begins to appear, Lenovo will inevitably develop its own new strategy and develop new business. Lenovo has always been based on its existing core competitiveness to develop new business, with an extension of development. Our vision is to be a provider of smart devices. The future is the IoT (Everything Internet) intelligent era, but the development stage of smart phones cannot be crossed. If you don't make smart phones, it is difficult to enter the IoT era. Smartphones can be a great tool for controlling other devices and a great tool for getting into the cloud. Secondly, smart phones are also the basis for the development of other smart devices. With the development capabilities of mobile phones, it is possible to develop more smart devices. This is why we are not doing it.

Now that we have a stronger confidence in China than in the past year, we should look at sales and market share. It should be a historical low. I think this is the time we are going back. Now we have to use all our energy to fight in China. battle. The return of ZUK provides a good opportunity for the mobile business to fully counterattack in China, so that Lenovo products will rise to the next level, and the business model will also rise to the next level.

China Business News: The decline in the market share of Lenovo mobile phones in China is very serious. In addition to the high-profile release of the new Z2 Pro machine, what are the specific measures?

Yang Yuanqing: If you want to win this battle, focus on three aspects of investment: products, channels, brands. This year we did not have too high a profit requirement in the mobile phone market, and basically still in the investment period.

In fact, channel management is Lenovo's strength, both in China and overseas. Today, mobile phones must be multi-channel parallel, including carrier channels, open channels, and online channels. The ability to manage the channel will be a key to testing the vendor's operational capabilities. In these respects, Lenovo is still very confident, because in the past Lenovo has been managing multiple channels in the PC era.

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