Technology is characterized by companies that take huge risks and execute against almost impossible odds. Dell’s acquisition and subsequent privatization of EMC were considered near-impossible, but Dell was successful.
IBM bets on Watson years before generative AI was a thing. Now, Lenovo is combining elements of an Asian PC company and failing IBM units into what has become arguably the most powerful technology company globally and the only company that successfully blends Eastern technology concepts with Western technology concepts.
AMD’s Threadripper is another recent success story. Threadripper began as a consumer-oriented product and was incredibly risky due to its high development costs. On paper, Threadripper was the best workstation processor. Workstations are usually built for professionals, not consumers, which makes creating a professional computer from this technology a risky proposition.
Lenovo understood that engineers are more interested in performance than price.
Lenovo’s then-larger competitors refused to accept Threadripper as an option. Lenovo introduced Threadripper to the market and took over the high-end segment almost overnight. Threadripper Pro was launched last week, and now Lenovo’s competitors are chasing the technology. Intel, on the other hand, is chasing AMD, not Lenovo, in this highly visible category. Both firms have done a great job.
This week, let’s discuss how Lenovo is taking risks and grabbing market share. We’ll then close by talking about a head-mounted display that I have been using on my travels, and that could be the foundation for a whole new class of smartphone or mobile PC experiences.
Risk Tolerance
I have worked for and with companies that grow and are doing well and many more that struggle and are lost in their direction. The former is much more enjoyable than the latter.
A successful business tolerates failure while also being willing to accept risks others might have considered unreasonable.
I met Ford’s former CEO and a few analysts who were more automotive-focused than I was. I told him about a conversation that I had with the executives of many technology companies facing new, powerful competitors. I said that if he did not grasp and embrace Tesla’s efforts, he would likely lose his position. Every time I have done this, I have been shouted down. A year later, the man was fired.
I don’t enjoy being the one who correctly predicts someone getting fired. It is not my goal to predict outcomes like these but rather to prevent them. Ford is the story I’m bringing up because Ford said that his main goal was to encourage risk-taking while at the same time saying that if anyone screwed up an important product, they would be fired. This is the opposite of taking risks. Tesla probably takes too many unnecessary risks, but any auto CEO would sell their soul for Tesla’s valuation.
The Magic of Lenovo
I spent my last week at Lenovo. In the past two decades, Lenovo has evolved from a tiny PC company in the West that no one knew about to a major company that dominates nearly every market segment.
Lenovo’s AMD Threadripper story was just one example of how it took huge risks and looked crazy.
Lenovo now has the largest share of PCs. For example, IBM PC struggled before Lenovo purchased it. Who would have thought that a small Asian company could beat giants such as HP and Dell with a tool IBM considered unfixable but was not?
Lenovo acquired IBM Think as well. IBM used to be the dominant player in the global technology market. So how did Lenovo succeed while IBM failed? IBM did not take the same risks as Lenovo. Threadripper, the latest flagship from AMD, is an example of this risk-taking.
IBM’s x86 server division underperformed in the server market. It wasn’t a complete unit, and this kind of merger will fail even if the unit is successful. Lenovo realized, and correctly so, that it was not the technology that was bad. It was arguably the leader in the market. The IBM Power unit, which competed with x86 for resources, took those that x86 required to be successful.
Turning Risks Into Leadership Opportunities
Lenovo is a leader in the PC market and has a strong presence in the server market.
Motorola was a greater risk. Lenovo’s purchase of that unit seemed nuts to me because the unit was already broken when Google purchased it, and Google then literally destroyed it.
The brand was still valuable. Motorola was once the leader in cell phones before Apple. Lenovo has fixed the problem and is now able to challenge Apple. While it is not yet at Apple’s level, it is much closer.
Almost any other company would have found it impossible to achieve even one of these feats. Lenovo managed to accomplish all three feats.
Lenovo could be the next global powerhouse.
Lenovo, like most tech companies, does not invest enough in marketing. AMD, for example, is generally better than Intel. Even though Intel has clearly had difficulties, the perception of the market is not the same as that of reality because AMD’s marketing is under-resourced.
Apple and Lenovo could not compete if Lenovo took another concept from IBM. Lou Gerstner is the man behind this concept. Gerstner was the only non-IBM CEO the company had ever had, and he didn’t understand technology at all. Gerstner, coming from a Nabisco-like marketing powerhouse, was a master of marketing. And, like Steve Jobs, who also had similar skills, Gerstner knew that perception always beats reality.
Steve Jobs saved Apple by convincing people that even the worst products were worth buying. This allowed Apple to survive while he fixed the product line. Gerstner saved IBM, a company in arguably worse shape than Apple. He did this by convincing people that the company had value before it could deliver it.
After studying both men, I found that Gerstner had better marketing skills than Jobs and a greater personal influence. You can replicate what Gerstner accomplished, but it takes a dangerous skill set to duplicate what Jobs achieved. Elon Musk has a similar skill set to Jobs, and I believe he shows the downside of his influence even more than Jobs.
Wrapping up
Lenovo’s execution and willingness to take risks, as well as properly fund and resource their efforts, is market-leading. Lenovo could be a market leader if it took one more lesson from IBM’s only non-IBM chief executive officer. It would combine the strength of its products and solutions with outstanding marketing.
Unfortunately, marketing and great products rarely go hand in hand, preventing us from experiencing the perfect storm we could have had if perceptions matched reality. Strong marketing was used to sell weak products, such as Windows 95, IBM’s Recovery, and the initial iPhone. As the products improved, however, strong marketing almost disappeared.
AMD and Lenovo are the exact opposite, with excellent products but poor marketing. Apple under Jobs and Intel under Grove are the closest to my ideal. However, I am still waiting for the perfect storm of great products AND incredible marketing.