Up until the time of the COVID-19 crisis, what has been the basis of Lenovo's competitive advantage? How has it managed to leverage its global operations to increase both market share and efficiency?

What vulnerabilities have been exposed by COVID-19 in Lenovo's operations? Using 20-20 hindsight, what could Lenovo have done better to build resilience into its supply chain? What trade-offs would Lenovo have had to made to increase resilience?

If you oversaw Lenovo's strategy, how might you exploit the COVID-19 crisis to improve Lenovo's market position? Do you see potential advantages from the crisis? How can Lenovo emerge from the crisis as a better company?

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Lenovo at the Crossroads: Coronavirus Meets Complexity

On February 20, 2020, Lenovo Group released its quarterly results, which showed that group revenues and pre-tax profits had hit all-time highs. The company's personal computer and devices businesses set all-time records for revenues at US$14.1 billion for the quarter, with PC sales growth outperforming the global industry by almost two percentage points. Its net income had increased 11% year-on-year to reach US$258 million for the quarter. And after overcoming a number of years of operating challenges, the company's mobile devices business (i.e., smartphones) had just reported its fifth quarter of consecutive profits.

Gina Qiao, Lenovo's Senior Vice President of Strategy and Marketing, was particularly pleased with the company's performance. Just six years earlier, the company had embraced two major strategic acquisitions, both of which had been challenging for the company. Then, in late 2019, Lenovo announced additional changes in strategy and structure in an effort to better position the group for what had become known as the Fourth Industrial Revolution. While these changes had yet to fully take hold, the latest financial results seemed to indicate that the company was on the right track.

Despite the good financial news, the company was dealing with a significant and unexpected new crisis: the emergence of COVID-19a global coronavirus pandemic. Beginning in early 2020, the number of COVID-19 cases surged exponentially around the globe, with thousands of deaths reported, causing major supply chain disruptions across all industries due to shuttered production lines, labor shortages, component shortages, travel restrictions, and declining demand.

Gina and Lenovo's entire senior leadership team were deeply concerned about the risks ahead. Lenovo was a global company that supplied products and services to roughly 180 markets around the world. As of February 20, 2020, in the short term, Lenovo's top priority was to protect employees' health while minimizing production disruptions. But in the longer term, and once the health crisis inevitably waned, Gina's concerns shifted to how Lenovo could best position itself on the global stage.

Four Phases of Growth

Since its inception, Lenovo had experienced four phases of growth. Each brought major changes for the company and its employees.

Phase 1: 1984-2005

Lenovo traced its roots back to 1984 through the creation of a predecessor company called New Technology Developer Inc. At that time, personal computers were just beginning to take off in the U.S. and Europe. In China, there were few personal computers to be found and no local manufacturers. In the early days, the company's chairman, Mr. Liu Chuanzhi, focused on importing and then distributing computers throughout China manufactured by large international companies, including AST, Toshiba, and IBM. In 1988, the company established an office in Hong Kong to facilitate access to international transactions and changed its name to Legend Holdings. Legend was the anglicized version of the Chinese phrase linked thought.

In the late 1980s, Legend found itself in an enviable position. Not only was China beginning a period of rapid economic growth generally, but Chinese people and companies were embracing technology and personal computers in particular. Soon, Mr. Liu sensed an opportunity to move from importing computers manufactured by others to controlling manufacturing in-house. In 1990, Legend launched its first PC with a novel feature: it included the country's first Chinese-language motherboard that would enable consumers to use [PC] technology in their own language.1

Legend's timing and positioning in China were fortuitous. While global PC sales exploded from 20 million units in 1990 to 140 million units in 2000,2 Legend focused its efforts on building sales and market share in the booming Chinese market. The company was praised for its ability to move PCs into ever-more-remote locations by foot, by bicycle, or on a donkey cart,3 if necessary. The company's pathway in China was also eased by the lack of foreign competitors, who seemed fixated on keeping up with growth in the developed markets.

A rising star at Legend at the time, Yang Yuanqing was known in the company as YY. In 1994, at the age of just 29 years, YY was appointed head of Lenovo's Personal Computer Division, the heart of the company. Colleagues described YY as brilliant, caring, and highly competitive. By 1996, Legend had firmly established itself as the market leader in China.4

As the personal computer market matured in China, more foreign competitors like Dell and IBM began to enter the market. At the same time, and no doubt encouraged by the practices of Western computer companies, Chinese companies began to demand a different approach to their relationship with suppliers. While consumers seemed almost entirely driven by pricing concerns, enterprise customers also started to request custom designs for their increasingly complex machines, as well as more services. In response, Legend reorganized its Chinese business around customer and enterprise segments. It also began to seriously consider expansion opportunities outside China.

In 2001, YY was appointed CEO of Legend. And in 2003, the company changed its name to Lenovo. The name Legend was far too common outside China's borders, which led to name-use restrictions in many countries.5 The new portmanteau name borrowed Le from Legend and added novo from the Latin word for new or, by extension, innovation.

Phase Two: 2005-2014

The year 2005 was momentous for Lenovo. In May of that year, Legend acquired IBM's personal computer business for US$1.75 billion, assuming $500 million of IBM's debt. The acquisition immediately quadrupled the size of Lenovo and made it the world's third-largest PC maker by volume. It also turned the company's name into a global brand.

For IBM, the sale was part of a longer-term move to emphasize services and solutions. IBM had offers from other PC companies like Dell, as well as several private equity firms, but IBM's CEO at the time, Sam Palmisano, chose Lenovo because of its location in China, which helped IBM establish itself within the country's lucrative market.6 In terms of what Lenovo attained through the acquisition, Chairman Liu commented:

We benefited in three ways from the IBM acquisition. We got the ThinkPad brand, IBM's more advanced PC manufacturing technology, and the company's international resources, such as its global sales channels and operation teams.

Integration Challenges. While the acquisition met clear strategy objectives, it also created huge integration challenges for both sides of the equation. This included the difficulty of integrating the cultures of two very different companies. Lenovo was known for its entrepreneurial pull yourself up by the bootstraps approach; IBM was notorious for its more methodical approach to decision-making. Furthermore, many IBM employees were shocked to be taken over by a lesser-known Chinese company which lacked the decades of proud heritage and brand recognition that IBM enjoyed. Others were concerned about mixing the deep research and product development skills at IBM with the scrappier mindset of Lenovo. Many of the differences could be traced to Lenovo's focus on PCs for consumer markets versus IBM's emphasis on commercial sales to large organizations.

Another challenge was integrating myriad processes and systems. IBM's compensation system was at odds with Lenovo's. Reporting relationships were different. Approaches to hierarchy, teamwork, and norms for working hours were also at odds. And all of this was exacerbated by language differences that were essentially unbridgeable, at least in the short term.

Lenovo executives realized that business as usual was not an option. As one executive described it, "Overnight, we were no longer a Chinese company. This was to be a complete makeover."8 Senior Lenovo executives went out of their way to paint the deal as a merger as opposed to an outright acquisition. It was to be a marriage of equals. This was followed by an announcement that Lenovo would operate from two global headquarters: one in Beijing and the second in Morrisville, North Carolina, near Raleigh-Durham, the former headquarters of IBM's PC business.

The restructuring went further. Chairman Liu Chuanzhi and YY both agreed to promote IBM executive Steven Ward to the position of global CEO. YY assumed the position of chairman. In an even bolder move, the decision was taken to make English the official language of Lenovo. This put the Chinese-speaking Lenovo executives at a huge disadvantage, because very few of them spoke English well at that time. And, of course, essentially none of the Americans spoke a word of Mandarin. Brutal work schedules combined with English language classes and frustrating meetings and phone calls took their toll. One Chinese media outlet referred to the deal as the snake that swallowed the elephant.9

In looking back on the integration challenges more than a decade later, Gina summarized the journey:

The integration with IBM was hard. IBM was bigger but was losing money when we bought it. IBM was also proud and, to be honest, we felt that they didn't want to work with a Chinese company. Also, IBM's leaders were older, and Lenovo's leaders were younger. So, there were lots of strains. It took four or five years to work it out. After 2009, we actually started to work together. And by 2013, we were number one globally. And we haven't looked back.

The Harder Path. Lenovo executives were in it for the long run. Rather than allowing two competing models, they took what became known as the harder path forward. It represented a commitment to build a truly global company. One executive commented on the key to making a global company work:

Everything depended on building trust and building relationships. This was, and remains, hard to do, especially when you are a global organization. It is an ongoing challenge. It takes constant maintenance. It is everyday communication and interaction.

After years of hard work, the merged company began to take shape. In 2009, YY was reappointed CEO. By 2014, the company had established three main R&D centers, including one in China, one in Japan, and one in the U.S. They also set up 12 more applied R&D facilities around the world. Among its portfolio, ThinkPad was the most well-established global product brand. It was positioned as a premium product targeting corporate or enterprise customers. ThinkPads were globally standardized with few local adaptations allowed. By 2014, Lenovo had also developed a global cloud-based platform for enterprise customers and channel partners. The company utilized its Lenovo brand for the consumer market and took a more locally focused approach. While built on a global platform, Lenovo-branded laptops often came with many local adaptations and configurations.

This dual approach to PCs allowed Lenovo to drive down costs through global sourcing and scale, while also allowing for a degree of customer intimacy through local adaptations. To connect with employees and customers on the ground, about 98% of Lenovo's leaders were local and focused primarily on local issues.

The key to winning over local consumers was not only price, but also ensuring local touchpoints and experiences. This included local websites, positive and localized point-of-sales experiences, fast delivery, and responsive repair service.

While the path to becoming global was the harder path forward, it produced significant benefits. Gina commented on this:

Working side by side toward our common goal made us stronger and better. It wasn't easy, but embracing and blending our international roots has been our distinct competitive advantage in an increasingly global business landscape.10

Being globally diversified also enhanced the company's ability to optimize its global supply chain. One senior operations executive explained it this way:

Lenovo has benefited greatly by our geographic diversity. One of the biggest benefits has been that it has provided a global division of labor. No one can do everything. We have 129 components in a ThinkPad laptop. We can't access these components only through outsourcing. Countries have comparative advantages. And we take full advantage of this. We are true believers in globalization.

Global scale and scope were Lenovo's best friends. By 2014, the company's share of the world's PC market was approaching 18%. The harder path was finally paying off. It was a proud time. And yet, as Gina remembers, "many of us had been so busy growing the business that we hadn't taken the time to look up at the horizon and see the road ahead."11

Phase 3: 2014-2019

The year 2014 brought another round of momentous change at Lenovo. In January of that year, Lenovo announced that it was buying Motorola Mobility from Google for $2.91 billion. Motorola Mobility was the maker of mid- market Android-based smartphones, including the Moto X and Moto G. Google purchased Motorola Mobility for $12.5 billion in 2012. The previous year (2011), Motorola had split itself in two, with Motorola Mobility taking over consumer products, including smartphones, modems, and smart television devices, and Motorola Solutions focusing on enterprise-oriented products and services.

Also, in January 2014, Lenovo announced that it was acquiring IBM's x86 server business for $2.3 billion. IBM had invested billions of dollars into developing lines of powerful and flexible servers used in banking, supply chain management, and online retailing. Over the past 20 years, servers moved from massive mainframes to lower-cost devices that could be stacked by the dozens or hundreds in server farms. More recently, the server market had come under intense pressure from web-based hosting companies like Amazon Web Services, Alibaba Cloud, and Oracle. Rather than purchase their own servers, buyers were increasingly working with these service providers, either by renting space on the cloud or turning over full data management to them.

Both acquisitions took place after considerable study and intense internal deliberations within Lenovo. The conclusions were that Lenovo's core PC business was at risk of long-term sales decline due to their commoditization. As consumers and enterprise customers were moving towards the Internet of Things (IoT), Lenovo executives realized that they must build new pillars of growth. Buying Mobility and pushing aggressively into servers provided Lenovo with additional options to rebalance its revenue stream from lower-margin hardware to higher-margin hardware with better position to add services and solutions spaces.

Challenges with Servers. While the acquisition of IBM's server business provided Lenovo with much greater strategic flexibility, it faced its own challenges. Lenovo's share of the global server market jumped to 8.2% in 2015, but it was still number four in the global industry, trailing HP, Dell, and IBM's remaining mainframe server business.

In the early days after the acquisition closed, Lenovo ran the x86 server business like it managed its PC business. And the results were less than impressive. Hwang Jann Lee, Executive Director of Global Learning & Development at Lenovo, explained the challenges:

We originally tried to use our PC business model to drive our servers and it failed. PCs have different lifecycles than servers. They require a different pace of product development. [Servers] target a different buyer group, which means we need salespeople with different skills to understand customer needs to close the deal. The salespeople for servers need a solutions mindset which is quite different than what is needed for PCs. We've learned a lot from this integration experience and figured out ways to resolve the challenge.

Exhibit 1 provides an overview of global server revenues and market share for Lenovo and its key competitors. Exhibit 2 includes a summary of global PC shipments and market share of Lenovo and key competitors.

Challenges with Mobility. The Mobility business faced even tougher challenges. When Lenovo bought the business from Google, it had been losing money for years, resulting in a nearly $10 billion write-off for Google. Motorola's phones had reached their zenith in 2004 with the Razr flip phone. Since then, sales had been battered by the dramatic rise of Apple's iPhone and Samsung's broad array of smartphones. More recently, a near flood of Chinese-manufactured phones from the likes of Huawei, Oppo, Vivo, and Xiaomi had come to dominate the Chinese market and were beginning to gain traction in global markets. Lenovo bought into an incredibly competitive market with an iconic brand that could be revived, but only if done right.

Stabilizing and then turning around Mobility took a lot of effort and money. It would use the Motorola brand for upscale phones, the Lenovo brand for mid-to-lower market devices, and launch a new niche-market online brand called ZUK. In many ways, Lenovo's strategy for its phones mirrored its approach to branding PCs. YY commented on the company's turnaround plans for its mobile phone business. "Our strategy," he said, "is to differentiate mature markets [...] which need brands and innovative products, from emerging markets where we need efficiency. So, we will have two teams catering to the two kinds of markets with different product lines."12

In late 2019, Lenovo announced the relaunch of its iconic razr phonethe Moto razr; this new phone had a foldable screen, plus a separate 2.7 inch quick-view screen on its front. Lenovo also announced a deal with Verizon to become the phone's exclusive distributor in the U.S. With a premium positioning strategy, while the anticipated $1,500 price tag was expected to limit demand, rave initial reviews were expected to help raise the brand's value.

Phase 4: 2019"Be the leader and enabler of intelligent transformation"

By the end of 2019, most of the previously assembled pieces had been stabilized. As a consequence, senior leaders at Lenovo were eager to move the company to the next level. After all, the vision for mobility wasn't just to sell more smart phones; it was to lead in wirelessly connecting all smart devices, including PCs, sensors, and a booming array of smart machines from factories to automobiles. And buying x86 servers wasn't just about selling more computer boxes per se. It was a move to bring Lenovo into the world of data processing, analytics, and services. It meant creating a stronger Lenovo that could leverage its global scope and add layers of product competencies to provide fully integrated solutions.

Nancy Liang, Executive Director, Lenovo Think Tank, reflected on the choices ahead:

Lenovo had excelled in the "product era" through its global outreach and operational excellence. Its scale, efficiency, global distribution network, and diverse team and culture had been the envy of many other players in the industry.

And now Lenovo faced a big choice. It could remain as a hardware player, expand into other form factors of hardware, raise the bar of efficiency, and potentially consolidate the hardware industry. Or, it could build on its past success in products but quickly grow its software and services capabilities to become a solution provider. The latter option would mean a big transformation in its business model and leadership capabilities.

Informing the company's path forward was recent research that identified huge market opportunities outside the company's core PC, smartphone, and server hardware businesses. It was estimated that by the end of 2020, more than four billion people would regularly connect to the internet. In addition, there were more than 25 million apps, 50 trillion gigabytes of data being stored, and more than 25 billion embedded and intelligent systems at work.13 And the rate of knowledge generation was accelerating. One study found that in 2020, every person would generate an average of 1.7 megabytes of data per second.14

New Vision and Mission. In addressing shifting markets, and eager to capitalize on the growth of the Internet of Things, Lenovo once again embraced the harder path and decided on another wholesale transformation. In April 2019, YY introduced a new vision, calling it Smarter Technology for All (3S Strategy). The company's mission would be to be the leader and enabler of Intelligent Transformation.

In September 2019, YY unveiled a comprehensive strategy to accompany the new vision and mission. It included three parts which were labeled Smart IoT, Smart Infrastructure, and Smart Industry Verticals. Accompanying the strategy was an adjustment in organization and approach.

Smart IoT. It was estimated that by 2025, the market for the Internet of Things (IoT) would be as much as $6.2 trillion, much of this tied to healthcare and manufacturing.15 In 2020, the majority of commercial devices were not yet smart, which meant being connected to the internet and capable of producing digital information that could be stored and analyzed. Edge computing was also taking off. Rather than funnel data to the cloud for processing and storage, Edge computing was carried out near the source. Devices connected to emerging 5G networks would rely on processing carried out on Edge computers.

In building Smart IoT, one Lenovo executive captured the challenge this way:

Lenovo's current devices need to become smartermeaning they are always on, always connected, easy to collaborate with other devices, adaptive to our customers' needs, with natural language interactions, seamless cloud connection, and enhanced security and privacy protection. But beyond this, we need to develop many more new smart devices.

Smart Infrastructure. Lenovo faced a huge opportunity to provide the computing, storage, and networking power to support its own IoT initiatives as well as those of its customers. This would include building and operating traditional data centers that enterprise customers would use for their core applications. It would also involve hyper-scale data centers for public cloud companies, as well as data centers that emphasized high-performance computing for scientific computing and artificial intelligence (AI) applications.

Over time, it was anticipated that AI would become imbedded in most smart infrastructure projects. This would enable Lenovo to work more closely with enterprise customers by linking their smart devices to AI- embedded servers though customized algorithms.

Smart Industry Verticals. Executives at Lenovo realized that the company would need to target a select number of industry verticals in its efforts to capture Smart IoT and Smart Infrastructure. Five industries were considered potential areas of strategic focus: manufacturing, retail, education, energy, and healthcare. The need to narrow the number of target industries emerged out of an appreciation that Smart IoT generated massive amounts of data. With the computing power from Smart Infrastructure, these data could be sorted, cleansed, and analyzed. By combining these data with advanced algorithms, Lenovo could develop and refine models that provided insights to dramatically enhance the processes or decision-making in the specific value chain or use case. But these skills were mostly contained within the boundaries of specific industries with targeted applications.

In manufacturing, Lenovo could literally transform the business for industrial customers by providing technical and consulting solutions, especially in the areas of manufacturing analytics, digital performance management, as well as digital twin software. In retail, Lenovo-powered devices could remove the need for customer-facing employees while at the same time optimizing inventory management. In education, Lenovo could help with, for example, English-language training with AI-embedded speech recognition devices and personalized learning tools.

The combination of Smart IoT, Smart Infrastructure, and Smart Verticals provided unlimited growth opportunities for Lenovo. While it was impossible to fully predict how markets and technologies would morph and grow in the future, Lenovo had its fingers in every key component of the Fourth Industrial Revolution, whereby the Internet of Things, data analytics, and artificial intelligence would permeate and link organizations with the physical lives of humans.

Organizational Structure. In response to the new three-pronged strategy, YY also rolled out a new organization structure (see Exhibit 3). This included:

Intelligent Devices Group (IDG) included two business units: personal computers and smart devices (PCSD), and mobile and smartphonesMobile Business Group (MBG). In 2019, IDG accounted for 88% of Lenovo's revenues.

Data Center Group (DCG) which included server-based hardware and software and services accounting for 12% of revenues.

Commercial Internet of Things (CIoT) would consolidate Lenovo's efforts to create devices that would gather data through customers' operations.

Data Intelligence Business Group (DIBG) would focus its efforts on the intelligent analysis of data and the transformation of targeted business verticals.

Lenovo Capital & Incubator Group (LCIG) would focus on strategic global incubation and investments to ensure the company remained at the leading edge of the continually changing technological environment.

A Reason for Optimism. Gina was highly optimistic about Lenovo's future. It seemed that the harder paths the company had taken in the past were paying off. The company was now the world's largest PC maker with 24.3% share of world markets. And, bucking the trend of flattening industry-wide PC sales worldwide, Lenovo's PC revenue grew over 14% year-on-year from 2018 to 2019. Its mobile phones held a number two position in market share in Latin America and were also strong in India. Across all its businesses, Lenovo operated in 180 markets around the world, employing 57,000 people, including over 10,000 scientists and engineers working in 15 R&D centers. As shown in Table 1, Lenovo's financial performance showed steady improvement over the past three years.

These positive trends continued in the just-released quarterly results. Overall revenues increased 0.5% year-on-year, gross profits increased 10.5%, and operating profits were up 12.4%. Beyond the numbers, Lenovo employees seemed excited and engaged. In 2019, once again, Lenovo made Fortune magazine's list of the world's most admired companies (a reaffirmation of the company's standing since it first made the list in 2013). It also won a long list of awards as the best employer for working moms, best employer for engineering graduates, and best employer for new dads.

Coronavirus Meets Complexity

Lenovo's executives and employees clearly had much to be proud of. Yet, Gina constantly wondered how to bring the company to the next level of growth. As she reflected on the future, the coronavirus crisis was bringing to the fore broader challenges of managing what had become an immensely complex organization.

The Coronavirus

Coronaviruses consist of a wide range of viruses, including SARS and MERS. The most recent version, known as COVID-19, which traced its origins to Wuhan, Hubei Province, China, started through animal-to-person transmission. The first reported case in humans was in December 2019. COVID-19 produced flu-like symptoms leading to respiratory complications and, in acute cases, death. It was easily transmitted from person-to-person and in less than three months had spread rapidly to over 70 countries around the world. In hard-struck areas in China, factories, schools, businesses had to be shut down for several weeks to contain the spread of the virus. Starting from February 10, 2020, production and businesses could be resumed as long as stringent preventative measures were properly taken by the employer, such as ample supply of facial masks, proper physical distancing between workers, and a 14-day quarantine for employees coming back from an impacted region. By February 20, 2020, Lenovo was one of the first companies in the country to resume production in three out of its five factories in China because of its meticulous efforts to ensure every worker on its assembly line and every employee in its office building was properly protected, with cafeteria, elevators, restrooms, door knobs, and other potential contamination surfaces all disinfected regularly and everyone's temperature taken multiple times a day.

The health crisis had not only impacted sales in China, it had also disrupted supply chains in China. COVID-19 put many companies at risk. Industries most impacted included industrial goods companies, toy companies, apparel companies, and technology companies. Coming on the heels of mounting trade frictions, the coronavirus had caused some to question China's key role in the global supply chain. Lenovo, the largest import and export company in the entire Hubei Province, of which Wuhan was the capital, was being watched and benchmarked.

Three Key Challenges

Gina believed that while the coronavirus outbreak would eventually sort itself out, it raised important longer- term opportunities and strategic decisions for Lenovo. Three questions seemed most pressing. First, how could Lenovo best leverage its supply chain to benefit rather than get hurt by the coronavirus situation? Second, did the company's approach to globalization need adjustment? And third, was the 3S strategy perhaps too complex given the enormous instability in the world economy?

Global Supply Chain Complexity. When the coronavirus crisis unexpectedly hit in early 2020, Lenovo, like everyone else, was faced with massive disruptions to its supply chain. Although Lenovo has 30+ factories around the world, it had five major manufacturing facilities in China producing a wide range of products including desktops, servers, laptops, tablets, smartphones, and other smart devices. One of the company's largest factories in the world was located in Wuhan, the epicenter of the outbreak. This facility produced mobile devices but had to shut its doors during late January and early February as a result of government directives aimed at preventing transmission of the virus among workers.

As the potential scope and scale of the crisis began to emerge in January, Lenovo anticipated a possible shortage of parts and moved aggressively to build its inventories of parts in China. Although Lenovo was one of the first to resume production, some of its suppliers needed help, as many were not able to implement the same rigorous steps needed to protect their workers that Lenovo had. As a consequence, some Chinese factories that made even minor computer components lagged far behind and were unable to resume production in late February.

YY commented on the risks the coronavirus posed to Lenovo's supply chain in an article he wrote for Harvard Business Review (Chinese edition):

Taking Lenovo's ThinkPad Carbon laptop as an example, it is sold to 180 countries and regions after being assembled in Hefei, a city in China, while its 129 components, such as batteries, keyboards, motherboards, and storage, come from many other countries.

If any component cannot be manufactured or shipped in, the production would be disrupted. In addition, other aspects of the process, such as personnel, material preparation, warehousing, and logistics are all crucial. This requires us to keep abreast of suppliers'progress, including the situation of the next-level supplier, and provide appropriate support to weaker supply chain members when necessary to ensure the normal operation of the entire supply chain.

Not surprisingly, all other players in the industry relied heavily on the ecosystem of suppliers based in China. In mid-2019, 70% of the workers on HP manufacturing lines were based in China.16 Likewise, in November 2019, 73% of Dell's global production was based in China.17 With HP Inc.'s number two market position in China and Dell's number three position, both companies also had major revenue exposure in China.

Lenovo's global manufacturing footprint allowed it to increase production in its smartphone manufacturing plants in both India and Brazil through overtime shifts and to offset some of the production lost from the shuttered Wuhan plant. The company also made full use of its server and data center equipment manufacturing facilities in Mexico, the U.S., and Japan.

Notwithstanding these efforts, it was difficult for Lenovo's factories outside China to entirely replace the capacity of its Chinese factories, particularly given their enormous size.

Clearly, Lenovo's global scope allowed it to diversify its risks. Still, Gina wondered how long it would take to resume the entire supply chain ecosystem, and the risks associated with its reliance on a highly dispersed supplier network. It was anticipated that the virus would probably impact different regions in waves, resulting in constant battles in one country after another.

As of February 20, 2020, although three of the company's key plants reopened, its large smartphone factory in Wuhan, plus a smaller facility in Chengdu, were still closed. However, by the end of March, Lenovo had resumed production in all of its factories in China, running them at almost full capacity. Fortunately, the three plants that reopened later ramped up faster than most other large manufacturers and were running at full capacity by mid-March.

Globalization. Over the past two decades, Lenovo's embrace of the harder path no doubt paid big dividends in terms of global scale and scope. Over time, the company developed what it referred to as Global-Local as a critical core competence. YY explained Global-Local in terms of 4Ss and 4Cs:

[We are] "global" in the sense that we are funded by shareholders globally; we source R&D, manufacturing, parts, and materials globally; we sell to customers globally, and our leadership team covers a spectrum of diverse backgrounds.

[We are] "local" in the sense that we hire local talent to develop local capabilities; we hold compliance and business ethics to the highest standard everywhere we operate; we respect local cultures; and we contribute to the local community as a responsible corporate citizen.

Yet even before the coronavirus hit, Gina also knew that the primary reason Global-Local worked for Lenovo was that its people had put a tremendous focus on communication and coordination. Lenovo executives traveled constantly and spent significant time on teleconferences with one another as well as with globally dispersed staff during odd hours of the night and day given the global time differences. It was the norm at Lenovo and was often cited as the biggest surprise for new managers joining the company. However, over time they adjusted to the pace and cadence of communication.

With the travel restrictions caused by COVID-19, Lenovo started to further emphasize the need for communication. Gina reflected:

Our people are so used to jumping on a plane to see a customer or partner face-to-face. Now when we can't do that, it's more important than ever to call them often, share information, emphasize the need for collaboration. This applies to both external and internal stakeholders.

In the earnings release on February 20, Lenovo teams collaborated remotely, yet seamlessly, from Raleigh, NC, to Milan, Italy, from Hong Kong to Beijing, from New York to Taipei, to assure its global investors that it was managing the situation effectively.

Besides communication, the company's organizational structure also helped make Lenovo's Global-Local approach work. From a business standpoint, some activities were highly localized while others were global in nature. Gina explained the allocation of responsibilities:

For each geography, we have a very localized sales organization. In product development and design, we use the best available global talent around the world. And when it comes to management, we let local leaders manage local operations.

One size clearly didn't fit all. Adding to the complexity was the fact that senior leaders were dispersed around the world. Some members of the executive team were based in Beijing, others in North Carolina, the CFO resided in Hong Kong, and others lived in Milan, Paris, Sao Paulo, and elsewhere. While geographic flexibility helped in recruiting and retaining diverse, world-class talent, it was sometimes difficult for lower-level employees to understand the rules of deployment and engagement. According to one senior Lenovo leader, "Being able to integrate local leadership that has a robust understanding of the markets with the global leaders is a big challenge for us."

For that reason, Lenovo deployed a site management structure, appointing a senior leader at every major site, including five Geo (regional) site leaders and 68 country site leaders, to look after all teams, all businesses residing at that site, regardless of their organization, business group, and reporting lines. YY explained:

With our sizable, visible, and influential presence at each major site, we need site leaders to be the advocate of One Lenovo, by connecting all resources and teams in that location to best achieve our goals. A site leader is the guardian of the family, building confidence and commitment in good times while solving problems and providing guidance in tough times. They are also the ambassadors of Lenovo, representing Lenovo locally to contribute to local compliance, culture, community, and building a strong local brand. Most importantly, site leadership is a platform to promote cross- business, cross-team collaboration around our strategic intent, and connect all resources to land our strategy at every site.

This site management structure proved particularly helpful while Lenovo's global operations were being hit by the COVID-19 crisis. Employees were guided to follow their site leaders' guidance on when they should start working from home, where to get masks if necessary, what travel alerts to follow locally, and so on. This allowed Lenovo to ensure that global standards were being met while allowing for local accommodations given the fast-shifting realities on the ground.

Another significant issue was the emergence of competing powerful Chinese and U.S. technology ecosystems. The U.S. was dominated by tech companies centered in Silicon Valley and Seattle. In China, Beijing, Hangzhou, and Shenzhen captured the bulk of technology companies. Lenovo's 3S strategy relied heavily on providing enterprise-level solutions to solve customers' holistic technology-related challenges. As a vendor, this tended to require a deep ongoing relationship built on trust. Lenovo, as a global company with Chinese heritage, had done well thus farit had built strong relationships with both American tech giants (including Microsoft, Intel, and IBM)as well Chinese ones(including Tencent, Baidu,and Alibaba). Going forward, several key questions loomed:

Would the two technology ecosystems further diverge? How customized would enterprise solutions become?

If customized, what functions besides the sales team needed to be customized, and how would that impact the Global Local model that Lenovo was operating and had excelled at for all these years?

Technology-Backed 3S Strategy. While the Smarter Technology for All vision was compelling and timely, not all the core businesses were in the best shape. Before the COVID-19 crisis, the only business that seemed in good shape was Lenovo's core Intelligent Devices Group (IDG). It made just over $1.8 billion in profits over the past year, most of it coming from PCs. In contrast, other units continued to underperform their peers globally. Over the past few quarters, MBG had turned a corner with stronger sales in Latin America and had become profitable with a pre-tax margin of 5.8%. DCG, the company's data hardware and software unit, showed flat sales. The x86 acquisition from IBM had yet to turn a profit. And both MBG and DCG were facing huge competition from much larger firms.

Building new capabilities in IoT devices, smart infrastructure, and solutions would require time and resources. Some wondered how Lenovo could juggle all these investments needed to incubate new businesses while keeping the core businesses sufficiently funded. One executive captured the dilemma: "Lenovo spent precious resources on acquisitions and fixing the mobile and server businesses. This was money that we didn't invest in our PC businesses."

To fuel the growth and drive the transformation, the company built good capabilities in A.I. and big data, but it needed more. YY explained:

Nowadays, customers keep telling us they need not just hardware, but solutionswith device, edge, cloud, network, and intelligent all bundled together, with full services of consulting, deployment, and managementthat solve their problems, in the simplest, easiest way.

It would not be possible or cost-effective to try to build every capability in-house, so Gina emphasized a need to consider a different approach: build-leverage-partner. As one executive commented:

The company has strengths which you can leverage across different businesses, such as E-commerce, services infrastructure, etc. Each business does not have to build its own capabilities when it can leverage the platform. On the gaps side, we need to build our own capabilities if it's critical technologies for potential repeatable use, and we can partner with others to acquire other capabilities for quick adoption. The point is, we don't have to reinvent the wheel for everything. We can adopt this approach so we can maintain our core IPs while encouraging collaboration and relieving some investment pressure.

While this kind of model made sense from a design perspective, aligning the requisite skills, behaviors, and internal networks posed a significant challenge. Some wondered if Lenovo's structural answer to 3S was more than employees could handle. One manager reported that it was "like changing a tire when the vehicle is driving down the highway." Did the strategy mandate an organizational solution that was too complex for average employees to comprehend or that would require too much time to sort out and soak in?

Stock Performance Impacted by Risk Exposure

While Gina was delighted by the company's most recent quarterly results, she was also aware that the company's stock had often lagged its competitors. Unlike many other tech companies, Lenovo's stock price and market capitalization had never reached their full potential. And the current crisis wasn't helping.

Lenovo's stock was listed on the Hong Kong-based Hang Seng exchange. After reaching a high of HK$13.48 (equivalent to $1.74) per share in May 2015, it declined and then recovered somewhat to trade at under HK$5.80 (equivalent to $0.75) per share in February 2020. Exhibit 4 reports Lenovo's Stock Price Performance from February 2015 to February 2020.

With a sagging stock price, Lenovo's market cap paled in comparison to its major rivals. In February 2020, its market cap was only $8.01 billion. For example, HP Inc. sold PC and printers, and its PC market share was just one percentage point behind Lenovo's. Its total sales were 15% higher than Lenovo's, but its market cap was

four times higher. Dell's product line was the most similar to Lenovo's in terms of the aspirations of the company's 3S strategy. And while its revenues were 77.5% larger than Lenovo's, Dell's market cap of $38.8 billion was 4.8 times that of Lenovo's.

It seemed that the market had yet to reward Lenovo for its record revenue and profit for the quarter. Its global footprint could be viewed as a double-edged sword. In one way, it provided geographic diversification, which Lenovo had leveraged in terms of its manufacturing capabilities. At the same time, it also exposed Lenovo to every risk that popped up around the world. Whether the global footprint was a risk mitigator or magnifier depended, in part, on how quickly and astutely its leadership could respond to events.

Options for the Future

Gina was pleased that Lenovo had become what she proudly described as "the most global company coming from China." Yet, as Lenovo's Chief Strategy Officer, it was Gina's role to think about how the company could capitalize on opportunities to drive growth and profitability. On this account, she was aware of YY's thinking on the coronavirus crisis. In a recent conversation with YY, he shared the view that "we need to turn this crisis into an opportunity to strengthen the core competitiveness of our business and promote the transformation to be more service and solution focused." Gina was in full agreement with YY on this point.

By early March 2020, global demand for PCs and tablets rose as schools and businesses closed around the world but needed devices to stay connected. In an era of social distancing, Lenovo's smart office, distance education solutions, and even gaming PCs were poised for additional growth.

Gina couldn't help but think that the company was at another crossroads. Beyond the global increase in personal computer use, companies around the world appeared more eager than ever to fully automate their factories and supply chains. This was particularly the case in ChinaLenovo's sweet-spot. At the same time, Gina knew that solutions were never easy:

I am left wondering, how can Lenovo best position itself at the intersection of globalization, technology- backed 3S strategy, and manufacturing/supply chain challenges posed by the coronavirus outbreak? How can Lenovo not only survive our current crisis but continue to thrive on the global stage?