I’m at a fascinating event this week at Lenovo. For the first time, Lenovo brought all the analysts that cover the company together as a group not to talk about each individual Lenovo product or service, but to chat about how Lenovo is executing its One Lenovo plan and creating an Apple-like experience that drives a “better together” concept. It’s the basis of why the company has become such a huge global success.
This is in contrast to Dell which has also been built from similar components but still appears largely siloed and defined more by internal conflicts than being a showcase of how to bring the full power of the company to bear on what remains a troubled market that’s struggling with how to deal with generative AI, foundation models, the metaverse, and whether employees come to work or work from home.
The contrast between the companies reminds me of my time at IBM when I could see what IBM was and how it originally became dominant, but experienced what IBM became while I was there in the 80s and 90s which was more a dysfunctional family that had lost market focus and customers and was struggling to keep the lights on.
In short, I see Lenovo transitioning to what IBM was at its peak, and Dell transitioning to what nearly put IBM out of business. And Dell is hardly alone in this trend. I’m somewhat of an expert on IBM’s decline because I got so frustrated with what was happening back then I researched and wrote a report on the causes of IBM’s decline, which had me both up for an award and nearly got me fired.
The Problem with Umbrella Companies
IBM was and both Lenovo and Dell are umbrella companies. An umbrella company is a firm often, but not always, formed through acquisitions that places each somewhat independent unit under a single brand. From the outside, it looks like one company, but inside, problems emerge when each unit competes with each peer unit for resources while the executives compete in terms of clout, status and the likelihood to lead the combined unit.
Customer needs tend to be subordinate to the conflict. You can see this play out in the market as Lenovo gradually has advanced on Dell and now tops that company in a growing number of areas, largely due to bringing the full power of the company against a growing list of customers that increasingly want suppliers to reduce, not increase, complexity in an increasingly complex world.
In short, the reasons that IBM nearly failed and Lenovo is out-executing Dell are tied to customer focus and using the power of the parent company so that the umbrella company becomes a competitive advantage instead of a disadvantage against smaller, more focused, efforts.
It Starts with the CEO
In looking back at IBM, that company started to break when Thomas Watson, Jr. retired. Until then succession appeared to be in the family so you had a leader that no one was likely to challenge and who could say “jump” and everyone in the company would ask how high. This is what Dell used to have when Michael Dell was more active and what Lenovo still seems to have. At Lenovo, the leadership is crystal clear. At Dell, not so much.
Succession is always an issue, but it only becomes a big issue should the CEO leave or when leadership is uncertain. What I’m seeing at Lenovo is that leadership is as strong as it was at IBM under Thomas Watson, Jr. (or Sr.). At Dell, leadership started to degrade when Michael Dell first tried to retire in the early 90s. Now it seems divided across a number of people while Michael Dell seems to be taking a far less active role.
This lack of focused and singular leadership is problematic in an umbrella company because each division leader then attempts to fill the leadership vacuum, and the resulting lack of a global authority and vision means they are often working at cross purposes rather than acting like they are on the same team.
Wrapping Up: Lenovo’s Competitive Advantage Is CEO Yang Yuanqing
While this starts with a clear and growing problem at Dell and uncertain leadership, Lenovo may experience this problem in the future should its current CEO either repeat Dell’s mistake or depart without assuring a similar concept of leadership that he enjoys. The Watsons clearly didn’t anticipate well enough what would happen when the family no longer led the company, and companies that remain in business over 100 years are the exception, not the rule. It is not uncommon for a firm to lose its way when a strong leader is replaced by someone that lacks experience, leadership skills, implicit/explicit authority, or market understanding.
This may be the strongest argument for why AI needs to focus on assuring the CEO job because that isn’t only the most highly compensated position, but it is the one position that, when it degrades, can put the company into decline. CEOs like Michael Dell, Yang Yuanqing, and Thomas Watson, Jr. are rare, yet we do little to assure the aspects that made them successful are sustained after they leave. Perhaps the most powerful use of AI will be to assure that a CEO who is exceptional is also virtually immortal, then use this to create that same dynamic so that every exceptional employee is also virtually immortal, thus ensuring the immortality and success of the company.
