Lenovo Group - or Legend Group, as the company used to be called - has long been regarded as one of China's best-known business success stories. Having begun life in 1984 as a distributor of foreign PCs, the company has become China's (and Asia's) largest computer maker. As strong economic growth during the past decades spurred demand for PCs in China, Legend grew into an IT giant with more than $3 billion in annual revenues, and its chairman, Liu Chuanzhi, was hailed as one of China's top business leaders.
Recently, though, Lenovo Group has stumbled a little. Aggressive forays to diversify into areas such as IT services and contract manufacturing of motherboards failed to pay off, hurting Lenovo's profitability. At the same time, intense competition from international rivals caused Lenovo's market share in China to fall. In an effort to correct course, Lenovo Group has returned to its core PC business - and the initial results have been encouraging. On August 11, the company announced that revenues in the first quarter of fiscal 2005 went up 10% to HK$5.8 billion ($743 million).
Liu Chuanzhi recently spoke with Knowledge@Wharton about Lenovo's business challenges, lessons from past experiences, and plans for the future. Among the interviewers were Wharton management professor Michael Useem, director of the school's Center for Leadership and Change Management; Liang Neng, a professor of management and director of the Executive MBA program at China Europe International Business School (CEIBS); and Joseph Wan, a Hong Kong-based manager in the Boston Consulting Group's technology and communications practice.
Useem: You wanted to become a fighter pilot, but instead you became an entrepreneur and the builder of a great company.
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