Growth in the consumer market is a critical part of the Lenovo strategy Zielinski laid out, but channel reinvigoration, particularly in the SMB space, is also vital.
The stars were out Monday at Lenovo’s Canadian head offices in Toronto. Both Matt Zielinski, Lenovo’s North American president since February, and North American channel chief Rob Cato were in town Along with Canadian Managing Director Colin McIsaac, they sat down with ChannelBuzz to talk about changes in strategy that Lenovo has put in place with the ambitious goal of attaining market leadership in North America. That includes becoming the market leader in Canada in three years – a pace that is ahead of their ambitions in the U.S.
Before taking the Lenovo job, Zielinski spent almost a dozen years at AMD, with his last two roles there being around the HP relationship, and around OEM sales. He came to AMD when it was still doing well in its feisty underdog battle against Intel, was there for the nadir, as the beleaguered company pulled out of one core market after another, and saw the start of their turnaround, as AMD delivered well-received new server chips, PC chips, and GPU graphics cards to the market. It was an experience that Zielinski said was helpful to him as he took the helm of Lenovo’s North American business.
“It teaches you how to fight,” Zielinski said. “There are similarities between the two situations. The beautiful thing about Lenovo though is that we are an underdog with means. We are fighting in the backyard of our two largest competitors, HP and Dell. When you look to design a business over four or five years, when you translate it into PC-speak, it translates into thinking long. Growing up at AMD translates into our new work here at Lenovo.”
Lenovo isn’t anywhere close to the same kind of turnaround situation AMD found itself in, and successfully executed. But with their dazzling double-digit PC growth rates now faded into the past, they are fighting from behind. IDC’s most recent numbers, for Q2, indicated that they are doing well, however, picking up share at a faster clip than Dell and HP, their two principal competitors.
“It has to start with product,” Zielinski said. “In the client space, we just have a superior product, especially on the commercial side of our business. We have the utmost respect for both of our competitors, but we think that we are hungrier, with a fighter mentality. We also have some differentiators that the competition doesn’t bring, with our new Smart Office products to evolve the conference room and the classroom – the Think Smart Hub 500 and Hub 700 collaboration tools. We are also doing some cool things with our Mirage Solo VR headset, to bring field trips into the classroom.”
Zielinski said that Lenovo has put a strategy in place to become the market leader in North America.
“We have an enormous stronghold in large enterprise and a big differentiator in our products in the Think brand. It lets us start from the top with the premium of a beachhead and a best-in-class product, with a phenomenal product set. We are, however, relatively under-indexed on the consumer side of things in both the U.S. and Canada. There are parts of the SMB and government where we have challenges as well, but we have had some significant consumer issues.”
The consumer market has become a major focus since Zielinski took over.
“We are making sure we do consumer better than we ever have in the past,” he said. “We set to build out that business, starting with the right brand and messaging. While the Think brand is very strong, the Lenovo brand has not been. It has vacillated over time, and there has been some inconsistency in how we addressed that. We are pivoting. We are driving our Yoga brand to create a halo effect. We have also seen the industry grow quite significantly in terms of gaming. We believe that the recipe for success in desktop gaming is putting together a best-in-class configuration in the coolest form factor possible, which is our Legion desktop. With our Legion notebook, it’s value proposition includes a cool slate form factor that you can also bring to meetings for work.”
Zielinski was cheered by the latest IDC worldwide PC numbers.
“We were the fastest growing brand in the last quarter,” he said. “I started in February, and we sat down and dissected and diagnosed the business to determine how we get to beast mode. We determined that we do that by taking a quarter to a half point of share every quarter. That was a message and mission that put us on a sustainable path to growth. It is sliced across equal parts of the business, and in both the U.S. and Canada.”
Profitability in the devices market doesn’t have to come at the expense of growth, Zielinski said.
“You can achieve both growth and profitability if you do it smart.”
“The messaging in the U.S. and Canadian markets isn’t much different,” Zielinski continued. “I believe we can be the number one PC brand in Canada within a three-year period. That would be very hard in the US. But we are very well suited to be very meaningful in the smaller Canadian market. We also believe we can double our share in the Canada consumer market from 5 to 10 per cent. In the US, we are 12 per cent of that market.”
Greater attention has also been placed on some traditionally underperforming parts of the business.
“Improving our position in workstations has just been a matter of sales focus,” Zielinski said. “For the region, we have assembled a best-in-class sales organization with an enormous amount of experience. That has been the key – increasing the focus and adding some hardcore sales folks. We did very well in workstations this spring, before seeing a little bit of softness in workstation market this quarter, although we are now seeing it bounce back again. The acquisition rate is solid and we are executing it well. The workstation business is very important to us and to our partners.”
“We have invested heavily to get growth in workstations, from the entry level to the high level, and for both Top Sellers and CTO [Configure-to-Order] models,” said Rob Cato, Lenovo’s North American channel chief.
Lenovo’s server business, never a strength historically, has been doing better lately, assisted by their growing presence in the hyperconverged space.
“Much has been made about our flawed strategy in servers,” said Colin McIsaac, Lenovo’s Canadian Managing Director. “We’ve adjusted course in the last couple years. We’ve completely revamped our product portfolio, and introduced our next-generation ThinkAgile servers. We believe that we build the best servers on the market today, with the lowest failure rate and the highest quality.”
McIsaac emphasized the growing importance of their partnership with Nutanix that generates Lenovo’s HX HCI appliances.
“I believe that Nutanix now views us as their lead horse in a three-horse race,” he said. “That’s the starting point, hitching our ride to a leading software provider, as we continue to build on our industry alliance relationships. Our hyperconverged partnership with Nutanix has shown tremendous momentum. In Canada that business has rapidly gone from zero to $10-15 million a quarter.”
In addition to the better focus on the product front, Zielinski said that there has been a similar refocus on the channel, following last fall’s changes to their channel model that were poorly received by partners, who said it made it too hard for them to make money.
“We are reinventing how we go to market, specifically in the channel,” he stated. “We have great products, but to a degree, the products alone have only become table stakes, because the competition also has good products. To succeed, we have to outsell the others. So it’s about how we better arm the channel. We made some tough investments late last year. We have redesigned our strategy, with a new program stack and a new mentality.”
Channel chief Cato, who stepped into that job in April, reviewed the recent changes with ChannelBuzz last month. He was in Toronto with Zielinski, however, and summed up the changes yesterday.
“The first step was to listen to our partners, and we heard we weren’t optimizing our investments,” he said. “We weren’t maximizing our potential with partners who were driving our investments. We wanted to make sure we could sustain that with our Platinum and Gold partners so we better aligned field resources to support them. We also wanted to make sure we would leverage distribution partners the right way for the long tail of partners. We didn’t have the resources and people for this before. The key will be reinvesting back into the channel so they see the benefits of the growth.
“The consumer market is really important, but the channel partners have to aggressively go after the SMB,” Cato added. “We want growth and acquisition, and we will pay for that – as we build a path to Platinum partner status for Canadian partners.”
McIsaac, who has been with Lenovo for ten years, and in the Canadian leadership role since 2013, said that the changes that have been made this year have had a particularly beneficial impact for Canada.
“What has changed from a year ago is focusing on Canada as its own region, within North America,” he said. “The consumer market is one area where that is making a difference. We just weren’t that focused on it – and its 44 per cent of the Canadian PC market. The path of Number One in Canada in the next three years focuses on the consumer market, as well as the ongoing pursuit of value, and the spirit of relationships and partnerships.”