14

Lenovos 20 05 acquisit ion of IBMs PC oper at ion

set up a far-reaching business challengehow
to create a new global operat ing model t hat would
managing the companys business diversit y: a range
of customer s in mor e t han 160 count r ies, t wo
dist inct pr oduct br ands, and mult iple market ing
models. The second was how to meet senior man-
agement s desir e for gr eat er st andar dizat ion and
financial management and coor dinat ing pr oduct
sales more t ightly.
For Lenovos IT organizat ion, char t ing how to sup-
por t t he new oper at ing model was daunt ing.
Inher ited legacy IT systems had to be replaced by
an enterpr ise-resour ce-planning (ERP) system
that could foster standardized processes yet remain
local market s. Rolling out a global I T syst em is an
enormous challenge t hat many CIOs have taken
on but few have managed to pull off. Xiaoyan Wang
became Lenovos CIO in 2009 to lead the com-
panys global t r ansfor mat ion. She under stood t hat
to int roduce it on t ime and on budget , she would
have to prioritize tasks and wouldnt be able to
accommodate ever y business demand. Her slogans
became Schedule is king and 100 percent
I T solut ions ar ent possible.
McKinseys Kevin Wei Wang, a principal in Shanghai,
sat down wit h Xiaoyan Wang at Lenovos head-

15
quar ters in Beijing and discussed what it t akes
for a CIO t o lead t his t ype of t ransfor mat ion and
Lenovos progress to date.
What
were Lenovos st rat egic goals in launching t his
t ransformat ion?
First of all, we needed to migr ate
from mult iple set s of legacy IT systems onto one
st rategic plat form using SAP. In t he meantime, we
wanted to provide t he IT solutions to enable t he
companys global operat ing model, which offer ed
new business capabilities, such as management
of global account s and elect ronic t ransact ions wit h
our channel par t ners.
What
were the key challenges Lenovo faced during this
ambit ious t ransformat ion?
It was challenging in a number of
ways. The legacy I T systems we inher it ed had
high maintenance costs and could no longer suppor t
new business capabilities after r unning for more
t han 20 years. So t here was an urgency to migrat e
from t hem. At t he same t ime, we had no system
ready t hat could suppor t t he new oper ating model.
Our SAP system in China was a good base, but
it needed t o be enhanced so it could suppor t our
end oper at ions. The PC market, of cour se, is ver y
link our I T t r ansfor mat ion road map closely wit h
business pr ior it ies and adjust when necessar y.
Finally, our people wer e fr om differ ent cult ur es
and wer e just lear ning to work with each ot her,
while most of us were new to a tr ansfor mat ion on
t his global scale.
One
of the big st umbling blocks to implement ing
ERP systems globally is that they are eit her too
cent ralized, and thus diluted in terms of local
impact, or too local, and thus very complex. How
have you approached this problem?
The key has been balancing
supply chain that can be globally standardized
wit h t hose of areas such as sales and market ing,
which have specific local r equir ement s. For
itizat ion of product s and pressure on margins.
So you need t o lever age t he global scale of manu-
facturing and supply chains. Similarly, sourcing
components and manufact ur ing in Asia while deliv-
er ing to customer s in t he US means cent r al-
izing infor mat ion systems to get accurate product
cut ing global order t ransact ions.
At the same time, we need to acknowledge that there
ar e st ill r egional differ ences in our market s,
involving requirements for customer interact ions,
go-to-market st r uct ures, and pr icing practices.
For inst ance, we have well- est ablished business
pract ices for working with channels in China,
while in t he US our business relies mainly on direct
sales to business customers, which have ver y
PC pur chases. So our IT systems need to have
as oppor t unit y management and pr icing approvals.
To do t his, we chose to deploy one inst ance of
SAP to suppor t t he global oper at ing model while
needed to oper ate in different geographies.
16 McKinsey on Business Technology Number 23, Summer 2011

How did the IT leadership decide on the road
map and t imetable?

we found t her e really wasnt a highly r elevant
indust r y case for us t o follow. We lear ned t hat it
global I T system of a similar scale, even wit hout
t ion t hat we have faced. But we chose t hat t ime
frame as a t ar get.
The pat h we chose st ar ted with an upgr ade of our
China I T platfor m to make it a solid foundation
to suppor t t he overall global oper at ing model. We
piloted t he system template for factor ies wit h
our Shanghai plant and used a pilot in Canada t o
create the templates for sales. Then we moved
on to areas t hat required global standardized oper-
at ions, such as t he supply chain and finance,
separat ing them fr om their legacy systems. For
sales and market ing areas where local different ia-
t ion was impor t ant , we pr ior it ized emer ging-
market count r ies, where requirements were lower
and there was a business need to move urgently.
capabilities t hat suppor t more sophisticated t ypes
of sales interact ions.
We agreed to do all of this within the boundar ies
of IT funding const raints, knowing we would have
to deal wit h the tough cycles of t he PC market.
So we had to slow down for three quar ters dur ing
t he 2008 09 recession.

Was there pushback f rom businesses as you
rolled out the program? How did you manage to
cont rol the scope?

17 The lT factor in a global business transformation: An interview with Lenovos ClO
Its t r ue t hat scope cont rol is
essent ial. As a result , I have est ablished some key
pr inciples for achieving businessIT alignment.
solutionwe only t ar get deliver y of the cr itical
capabilit ies for r unning t he business. Enhance-
ments can be done later.
Schedule is king is another pr inciple. We have
to do whatever we can to keep our schedule commit-
ments. Ever yone in t he business has built their
plans around our release dates for the new I T sys-
tems. If we change schedule commit ment s for
one business, t hat will cause disr upt ions wit h
t r ansfor mat ions of t his scale. So you need t o
have a top-down view of how the business act ually
and to make fact-based decisions on t rade-offs
affect ing businesses and IT implementation.
CIOs need to have a clear under st anding of t he
business model, as well as a deep underst anding
of the legacy systems t hey are phasing out and
t he mult it ude of I T cost dr ivers t hat come into
play. And of cour se, on top of this, you have to
ear n the trust of business
t ransfor mat ion for ward.
Tell
change among Lenovos business leaders.
You need to cr eat e a top-down
alignment on the necessity of the changes. Senior
of t he changes and act as t he sponsor s to dr ive
our t r ansfor mat ion jour ney, our finance CFO
funct ion was a st r ong sponsor of consolidat ion of
IT on t wo rounds of dr y r uns when we changed our
ledger systems.
You also need to plan and dr ive the business change-
management effor t well before you star t imple-
menting any new IT. Cust omer migr ation and user
behavior changesthings like placing an order
on our new online e-commerce toolrequire a long
lead t ime. So IT needs to ar t iculate, in advance,
t he major things t hat will change and to plan back-
change-management act ivit ies and st ay on t he
agr eed-to pat h.
How
much of the cult ure did you need to change
to accomplish all of this?
CIOs need to have a clear understanding of the
business model, as well as a deep understanding
of the legacy systems they are phasing out and
the multitude of IT cost drivers that come into play.
18 McKinsey on Business Technology Number 23, Summer 2011
Befor e t he acquisit ion, our
leadership and management teams wer e predomi-
nantly Chinese. We had an almost militar y-st yle,
would not work after globalizing. In r unning a
global business, we needed to build a leader ship
team with var ious cultural backgrounds and dif-
lear ned to be more pat ient in order to build buy-
in for decisions and t o be mor e open-minded in
adopting a different leader ship and communi-
cation st yle.
Since
your base was legacy systems, did you have
the right people with the right skill levels for the
new environment?
As far as capabilit y building goes,
we clearly have t he advant age of being based in
China, where we have a good-qualit y and great sup-
ply of IT talent. However, our local team lacked
mat ion program and of suppor t ing IT syst ems
for a global base of user s.
So our people strategy has been to gradually build
t he inter nal I T t eam. At t he beginning, we needed
in areas like architecture, design, and test ing. In the
meant ime, our int er nal teams got on-t he-job
training during the projects. As we have moved into
t he later st ages, our internal team scaled up to
take more ownership in t he project s and became
skilled in managing programs on a global scale.
Our development costs went down accordingly.
Have
Since 2009, we have had t hr ee
major releases of the new system, and they have
been on schedule and on budget. We have launched
t he supply chain and successfully migr at ed all
emerging market s onto t he st rategic platfor ms,
leaving t he US and Wester n Eur ope as t he last t wo
Despite the ongoing t ransfor mat ion programs and
t he spending t hey require, overall IT spending at
19
to have an under st anding of t he capabilit ies
and const raint s of t he legacy systems you cur rent ly
have and t he new systems you are t ar get ing.
Finally, you need to be decisive. As CIO, you are t he
But remember t hat youll need a lot of suppor t from
The lT factor in a global business transformation: An interview with Lenovos ClO
t he company as a per cent age of r evenue has
dropped fr om 2.8 percent in 2008 to 1.3 to
1.4 per cent in 2010, lower than t he PC indust r y
average of 1.5 to 2 percent.
Can
ever y CIO do this? What are some lessons f rom
your playbook?
To do a major t r ansfor mat ion,
you need a deep understanding of your indust r y
character ist ics, your companys st rategic prior ities,
and the business operating model. You also need
011
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