Case Study of Lenovo: Project Management Improves Strategy Execution and Core Competitiveness

I. Background

In recent years, the personal computer (PC) industry has been developing by leaps and bounds. Global sales of PCs totaled 230 million units in 2006, representing a 9 percent increase over the previous year. Lenovo has a product line that includes everything from servers and storage devices to printers, printer supplies, projectors, digital products, computing accessories, computing services and mobile handsets, all in addition to its primary PC business, which made up 96 percent of the company’s turnover as of the second quarter of 2007.

Since its acquisition of IBM’s Personal Computing Division in May 2005, Lenovo has been accelerating its business expansion into overseas markets. The company transferred its corporate headquarters from Beijing, China to Raleigh, North Carolina, USA. Today, the group has branch offices in 66 countries around the globe. It conducts business in 166 countries and employs over 25,000 people worldwide. Lenovo is organized into four geographical units: Greater China, America, Asia-Pacific, Europe, and the Middle East and Africa (EMEA). Within each unit there are functional departments that include production, transportation, supply chain management, marketing and sales. Sales outside of Greater China compromised 59 percent of the company’s total turnover in the second quarter of 2007.

II. Challenges

Before 2004, multinational PC makers like Dell and HP were experiencing difficulties localizing their business in the Chinese market and thus did not pose a serious competitive threat to Lenovo. However, their operations began to have a major impact on Lenovo market share in 2004, particularly among key accounts–mandating better execution and core competitiveness in order to increase market share and improve business performance.

III. Solutions

In order to address these challenges, Lenovo proposed substantial changes to its business model and strategy in 2004, employing a project-focused approach to develop its corporate strategy. Specific steps taken were:

Implementing project management as the tool for executing corporate strategy.

  1. After confirming the company’s overall corporate strategy, Lenovo set about organizing priority tasks that required multi-department cooperation into projects, referred to as strategic projects. Strategic projects differ from R&D projects in that time and cost cannot be used as yardsticks for success. Such projects may be about expanding into new markets, solving underlying problems, enhancing organizational efficiency, integrating strategic resources or improving employee satisfaction or capabilities. In the past, some strategic planning had not been followed up on sufficiently but the application of strategic project management solved this problem; strategic projects began to actually be executed and generated results.
  2. Lenovo also established a Project Management Office (PMO) to coordinate strategic projects. Beginning in 2004 and early 2005, Lenovo put in place the processes and the organizational structure for its PMO. It also formalized the relationships between strategic leaders and the PMO and budgeted resources for the office. Subsequently, all of Lenovo’s other departmental regulations needed to conform to PMO regulations, with detailed regulations being outlined by specific business departments. However, Lenovo’s PMO did not interfere with projects administratively; rather it offered training and established standardized procedures. Lenovo employees see the PMO as a kind of resource rather than an administrative facility. Designating a PMO as an administrative facility is one of several things that have doomed such offices in the past, but Lenovo’s office has thrived, winning the company’s excellent team award. The company believes that certain conditions must exist in order to successfully utilize project management: First, a company must face a challenge (i.e. an external factor that demands it to do so); second, the office must be prioritized by the company leadership; third, the office must be led by a professional team in order to guarantee that company-specific systems are developed; and finally, it must conform with the company’s organizational culture and be appreciated. Otherwise it’s hard to execute.
  3. Lenovo also earmarked money for strategic implementation. Previously, completed strategic plans were not financially supported. But with the strategic shift, the leadership set aside additional money to execute projects outside of the original budget and to provide bonuses for those involved–paving the way for the successful execution of strategic plans.

Valuing project management professionals.

  1. Lenovo sent its top talent in project management to take the PMP ® certification exam and apply project management standards. PMP ® certification is developed and managed by Project Management Institute (PMI) which is the largest professional project management institute in the world. The PMP certification is the most authoritative and influential of its kind and is the only certification genuinely recognized and accepted globally within the project management discipline. PMP ® certification conforms to A Guide to the Project Management Body of Knowledge (PMBOK ® Guide), the standards issued by PMI. The PMBOK ® Guide is also recognized and accepted internationally by premier authorities in standards. After Lenovo’s acquisition deal with IBM’s PC business, Lenovo project managers needed a shared platform to communicate with and manage teams in different countries. As the de- facto global standard for project management, the project management standards of PMI helped Lenovo standardize its processes. Starting from its functional departments (e.g. R&D, supply chain management, etc.) Lenovo selected a group of key professionals to receive training in project management and sit for the PMP ® certification. The returning professionals catalyzed project management in their respective functional departments and trained other team members.
  2. A hierarchy of project management positions was introduced within the company, in line with the position structure set up by the company’s human resources department. Lenovo Corporate Research & Development introduced this position structure between 2000 and 2001. Different levels for engineers included assistant engineer, deputy engineer in charge, engineer in charge, managing engineer etc. Professionals were appraised by experts annually on two fronts: First, based on their knowledge base, namely their background and relevant understanding; second, based on their performance, for example their ingenuity in R&D. In 2006, Lenovo kicked-off a global reshuffling of its positions. As an example, the company’s sales division is broken up into sequential levels such as assistant salesperson, sales manager and consultant. Positions are associated with salaries, but company regulations limit the percentage of employees at each level. For example, top-level positions can only occupy five percent of a given team. Full-time project managers can advance within the company’s project management hierarchy. There are over 100 full-time project managers in Lenovo, but nearly all staff of lenovo have participated in some projects. The hierarchy builds a professional ladder for project managers, serving as a channel for project management career development.

IV. Major Achievements

Lenovo’s experimentation in project management significantly advanced the transformation in its corporate strategy and improved its business model. The company’s project-oriented approach improved teamwork and leveled the playing field; team culture and corporate culture have been promoted; an innovative spirit has been instilled; and international integration has been improved. In terms of the market results, Lenovo’s adaptation of project management has improved the company’s core competitiveness with improved delivery and customer satisfaction. In turn, distinctive performance was delivered: In 2006, the company had a market share of seven percent in the global PC market, led only by Dell and HP. Its total turnover was USD 14.6 billion, a rise of 10 percent over the previous year.

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