Business Strategy and Mythology
Bloomberg
DARK HORSE: By the end of 2003, Lenovo had spent a total of 200 million RMB on rebranding. It hired William Amelio as its CEO from Dell and set up its R&D centre in Raleigh, North Carolina. The rest as they say is history
Towards the end of 2001, a US headquartered personal computer (PC) manufacturing company invited four consultants from four different companies to a resort hotel in Penang. I was one of them. Two others were from strategy consulting firms. One of them was a technology analyst.
After breakfast, we were sworn to secrecy. We signed a non-disclosure agreement about what was about to be revealed to us. With much fanfare, the strategy was presented to us including the underlying data and projections. I was expecting to see a movie that I have watched many times before in “war rooms” and “strategy sessions”. The CEO usually declares an intent to become the absolute leader in the business usually in a year distant enough to ensure that he would not be around. This is followed by thunders of claps from sycophants in the room.
However, in this meeting, nothing like that happened. The CEO asked the following question: “Tell me which of my competitors are smarter and who has the best chance of destroying my business.” The partner of strategy firm A had come prepared. He presented a SWOT analysis of the company, described the changing technology landscape, the consolidation taking place in the industry (a mega-merger had just happened) and predicted a winner. Not only did he predict the winner (which was not the company that invited us), but he also explained why.
The second strategy consulting firm B’s partner disagreed with firm A and said that if our host CEO did certain things right, he would emerge as the undisputed leader. The techie came on third and much of what he said I did not understand. He was not exactly incoherent. He talked about semi-conductors, advanced chip design, monitor resolution and lean manufacturing using technical jargon.
I was the tail-ender. I told the CEO what my brief was: ( per his country manager): I was to comment on some thinking of the company about its future — I had no canned presentation or ready-mixed solutions. Why had I agreed to come? To tell a story about our mythology; a story that struck me when I was a child and has stayed with me. It is a story worth remembering when designing a business strategy — about king Kansa.
It was divulged to king Kansa in a divine prophecy that the eighth child of his sister Devaki would be his terminator. Kansa flew in rage. He could not kill his sister. Therefore, he held Devaki and her husband Vasudeva captive. The paranoid Kansa murdered the seven children of Devaki.
Enter Lord Vishnu. He ordered the Yogamaya (the goddess of illusion) to step in, who created a trance. As the prison guards slept, the babies were switched. When Kansa came to kill the purported eighth child of Devaki, the child sprang to the sky (it was Yogamaya in disguise) in her fearsome form repeating the divine oracle: “He who will destroy you is growing up in Gokul.” Thinking of his nemesis, Kansa trembled in panic. The eighth baby, foster-parented by a cowherd couple in Gokul, was none other than Lord Krishna who fulfilled the divine prediction by slaying Kansa.
The CEO politely nodded as if to say, “Nice story buddy, but what has it got to do with my company?” So I cut to the chase and said, “Show me the little Krishna who is not on your chart.” The gurus in the room said, “By global market share, we have everyone on the chart!” No they did not. Who was the cheapest cost producer, or someone who was a leader in a specific geography, however small? Or who was growing the fastest? Someone who was growing in Gokul and you could not find him because you were looking in the wrong places?
After much prodding, the chief strategy officer conceded that there was one company in China called Legend. But they produced shoddy computers for the local market. Their brand was pathetic. They did not have a strong North American presence. How will they hire top talent? How will they develop R&D? I had to respond, “They can do all that with money — often other peoples’ money”.
The crux of the matter is that many businesses ignore a growing competitor at their peril. I had a gut feel that this company was falling into that trap. I must confess that back in 2001, I did not have a notion of the dramatic events that were to follow. In April 2003, Legend publicly announced its new name, Lenovo — a portmanteu of ‘le’ (from Legend) and ‘novo’, Latin for new. By the end of 2003, Lenovo had spent a total of 200 million RMB on rebranding. The company acquired IBM’s personal computer business in 2005. It hired William Amelio as its CEO from Dell and set up its R&D centre in Raleigh, North Carolina. The rest as they say is history. According to the latest IDC report, Lenovo holds on firmly to its top position among PC vendors.
Is history going to repeat itself in the mobile telephony handsets market? Today —among many challengers — the leaders are Samsung and Apple. Known as the Chinese Apple, Xiaomi, which literally means a little grain of rice, was founded in June 2010. The founder picked the name from the saying, “A single grain of rice of a Buddhist is as great as a mountain.” Xiaomi is busy disrupting the mobile business just as Dell had done for PCs. It sells online and has a superb supply chain.
Indian brands such as Micromax, Karbonn and Lava combined are out-selling Samsung in India. Lumia Windows phones from Microsoft are the new kids on the block. So will the current leaders re-invent themselves? Or will they be disrupted by upstart start-ups in the game? Will they make the Kansa blunder or prevent the arrival of the new dark lord who might be their slayer through innovation and creativity? The jury is out.
(The writer is managing director of Deloitte Consulting, India. These are his personal views)