Lenovo's Legend Returns

Liu Chuanzhi built China's first global computer company. Now he's rebuilding it

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Illustration by Piotr Lesniak

As China's economy gains ever greater global influence, its major corporations dream of conquering international markets. Liu Chuanzhi and Lenovo have been at the forefront of that quest. With Liu at the helm, Lenovo became China's first truly multinational corporation after its $1.75 billion acquisition of IBM's famed PC unit in 2005. When the deal closed, Liu gave up the chairman job and let the new Sino-American leadership team take over.

The acquisition, it turned out, was the easy part. Lenovo eventually became entangled in a struggle over the combined company's managerial culture. The internecine intrigue would prove costly. Lenovo's market share stagnated because the company wasn't adapting to new trends in personal computing.

Lenovo's problems are a looming challenge for corporate China in general. Since few Chinese executives have had meaningful experience operating outside the country, transforming their global aspirations into reality will be a difficult task. "Going global is going to be a big, big issue for Chinese companies," says James McGregor, senior counselor for consulting firm APCO Worldwide in Beijing.

Liu, 66, intends to fix all that. After four years on the sidelines, he took back control of Lenovo's management last year from its command-control American CEO and recast Lenovo as a global company with a consensus-style Chinese management structure. If that wasn't daunting enough, Liu has set his sights on another grand undertaking, to create an industrial conglomerate in China. His game plan: to pass the lessons learned over his long career to a new generation of Chinese CEOs and upgrade corporate management in the country. "For the past three decades, I have developed a very insightful understanding about China," Liu says. In the future, China's "potential will be driven by companies and [their] people. What we'll do is help the top management to improve."

He is already the wise man of Chinese private enterprise, a soft-spoken but relentlessly competitive entrepreneur who built a small start-up housed in a dusty, two-room Beijing guardhouse into China's dominant PC maker, with about a third of the rapidly growing market.

Since its birth in 1984, Lenovo has been one great management experiment, as Liu guided the company by trial and error through the rapid swings and shifts of China's ever changing economy. Though Lenovo was initially funded by the Chinese Academy of Sciences, a state institute where Liu worked as a researcher, he feared his start-up would become a bloated government behemoth and insisted that bureaucrats have no say in management, a bold stance in the very early days of China's market reforms. In the late 1980s, when Liu wished to manufacture his own PCs, he dodged an obstructionist communist bureaucracy by locating his first factory in more liberal Hong Kong. When China's computer market was opened wide to foreign competitors in the 1990s, Liu outmaneuvered them by launching a series of low-cost, high-quality mass-market PCs.

Back in 2003, Liu and his management team came to the crucial conclusion that Lenovo had no future as merely a Chinese outfit, no matter how big its home market was becoming. Scale mattered — global scale — so Lenovo had to expand its overseas operations. That thinking led to the acquisition of IBM's PC unit, which instantly gave Lenovo a worldwide presence and, perhaps more important, extensive foreign expertise in the form of IBM's executive team.

Liu wisely accepted that his Chinese colleagues were not prepared to run a global corporation by themselves, and he integrated the IBM veterans into the company's senior ranks. The first postacquisition CEO was an IBMer. Then in late 2005, Lenovo appointed an American executive from Dell, William Amelio. Lenovo's official language became English. Liu stepped aside, resigning as the company's chairman (though he remained a director). "I might not have had enough energy to take care of such a big business," he once said of his departure. Liu offered his guidance, but the new, very international team floundered.

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