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Commencement Speech by Mr. Chuanzhi Liu

Apr 18-2013   



 

2012 Graduation Ceremony

National School of Development at Peking University

It is an honor for me to be here and to share some thoughts with you today. Thirty years ago, I left Chinese Academy of Science and founded Lenovo. Today I am going to tell you the secret of Lenovo’s success in the last three decades, which is to set the right targets.

I was a technician in Institute of Computer Technology (ICT) of Chinese Academy of Science in 1984. At that time, my work at the Academy was nothing but doing research. The only target for me was to be a good researcher, win awards, and hopefully get a promotion or raise of salary. I soon realized that the whole point of my work was to show other nations about the advancement of Chinese technology, which had no practical value to the Chinese society. Therefore, I decided to leave the Academy and set my first target, which was to find a place that would not only provide me with a decent income, but also give me an opportunity to prove my value to the society. At the early stage of China’s reform and opening-up, I got 200,000 RMB from ICT and founded Lenovo. Soon, my colleagues and I developed Lenovo’s first Chinese-language computer input device, which allowed Chinese characters to appear on foreign PC. After that, we started to sell PC for some international brands. Within several years, our sales turnover reached 100 million RMB, with a net profit of 10 million RMB. At that time, this level of sales record had ranked Lenovo as one of the most successful companies in China. The success of Lenovo had proved my value and helped to popularize personal computer among the Chinese people. As my first target had been accomplished, I decided to set another target, which seemed to be fairly impossible at the time – I decided to build a Chinese PC brand. Before I founded Lenovo, China had only one computer company – Chang Cheng, which was founded and managed entirely by the government. Since it was owned by the state, Chang Cheng had infinite resource, and most importantly, it was the only enterprise certified to produce computer in China. Although we had the experience of working with consumers and understood their needs, the associated government department was frustrated about the bleak prospect of Chinese computer industry and refused to give us manufacturing license. In order to still accomplish my target, we decided to build our factory in Hong Kong, where manufacturing license was not necessary. Since then, we came back and forth between Hong Kong and the main land. In the end, we produced our own mother board and took it to an exhibition in Alaska. There, our product was noticed by the Chinese government, and we got our license shortly after that.

During the early stage of Lenovo’s computer department, we were forced to fight against great challenges and hardship. The most difficult time came in the 1990s, when China dropped its tariff and allowed foreign computers to pour into the Chinese market. International brands like IBM and Compaq quickly occupied the entire market with their superior technology, fund, management system, and human resource. Within one year, Chang Cheng 0520, the largest Chinese brand, went down, while Lenovo struggled to hold on.

Realizing the severe situation that we were facing, we started to study the advantages of our competitors, adjusted the structure of Lenovo, promoted twenty-nine-year-old Yang Yuanqing to be the head of Business Department, and tried to improve our performance. Shortly afterward, a miracle happened – between 1992 and 2000, we owned the largest market share (27%) in the Chinese computer industry. However, after the year of 2000, Dell came back with innovations in its business approach. After Dell crushed Compaq in the U.S. and European market, it decided to enter Chinese market, and we were defeated at first. In the next three years, we studied Dell’s strategy and created a new tactic to counter Dell’s invasion. Eventually, we resumed our domination in the Chinese Computer Industry and accomplished my second goal.

Now I am ready to set my third target. I was determined to make Lenovo an international brand. In 2004, the turnover of Lenovo was about $2.9 billion while that of IBM PC was over $10 billion. While most people thought it was impossible for us to acquire the PC department of IBM, we did it, and we expanded our turnover from $2.9 billion to $29 billion. After the acquisition, our global market share rate grew from 2.3% to 13%, and Lenovo was ranked around 400 in the World Top 500. 

Our data may have indicated the success of this acquisition. However, the most important value of this acquisition was that Yang Yuanqing had successfully incorporated Chinese and Western values into his management team. As we all know, cultural clash can easily destroy an acquisition. We spent a lot of time working with people from different background and figured out the best ways for them to contribute to the company. During the course of acquisition and integration, we had suffered from various challenges. Lenovo was once on the edge of falling apart, having a deficit of more than $200 million in two consecutive seasons. However, we strived to solve all the problems and eventually made it through.

In 2000, I figured that the responsibility of Lenovo’s CEO was too heavy for my age. Therefore I split the company and had Yang Yuanqing and Guo Wei to take over the position of CEO. One of them would continue to expand the market for Lenovo’s product; the other one would work on software and agency service. As for me, I turned to the business of investment and real estate. After succeeding in those areas, we combined our Hony Investment Advisor Ltd. and Lenovo Investment to establish Legend Capital. Today, Legend Capital has the largest scale and the highest investment return rate in the Chinese investment community.

After making Lenovo an international brand and successfully establishing Legend Capital, I started to plan a target that was even harder to accomplish. We looked at Samsung and realized that we wanted their world-wide brand influence. Therefore, we set out to build a company that can be relied, trusted, and respected by our consumers, suppliers, and even competitors.

My point of telling you all these stories is to have you understand that the key to success is about setting the right targets and going after your targets tirelessly. It is important to have a grand plan for your future, but it is more important to start off step by step. Nobody can be successful overnight. You must first set a target, go after it, accomplish it, then aim higher, and keep going.

Several years ago, a Japanese runner won the Beijing Marathon. During the interview, he said that before the race, he drove along the course and marked every ten miles. When the race begun, he aimed for the first ten-mile mark, then the second, then the third… Forty-two-mile is a long distance, if he had not divided it into sections, it would be really hard for him to pace himself and keep himself motivated.

I had once talked to a very young entrepreneur in a show. The young man told me with confidence that he would establish a World Top 500 company. Although he was yet only working in a noodles restaurant, he told me that he would make the best food for his customers. I thought that his approach of pursuing success is correct. However, the key for him is to figure out what the next step is.

I have kept telling you about setting and changing your goals because an entrepreneur should never stop upon completing his targets. There are several factors that have kept me going since I founded Lenovo. Firstly, persistency is essential to me. Before Lenovo could grow into one of the largest Chinese companies, we had faced myriad challenges and hindrances. For example, we had been fined over a million RMB when making Lenovo’s Chinese-language Computer Input Device. Under the planned economy, the Chinese Pricing Bureau prescribed that the price of our device must be set based on the cost of merely the hardware. The price of technology and intellectual property is completely ignored. Therefore, when we set the price higher than 120% of the hardware cost of our device, we broke the law and had to pay a fine that was more than the annual profit of the company.

This was not the only time that we suffered huge lost due to factors beyond our control and understanding. When facing such insulting and preposterous situations, it is very important to remember your goal and keep holding on. Like Dr. Qiren Zhou said before, everyone will be sick one day. To me, the worst memories are those when I was sick but still had to work. As for the other hardship, I always do my best to fight against it. Sometimes I felt like I was fighting against my own destiny, which was actually a lot of fun.

Besides persistency, it is also important to remain focused. After setting your target, you need to keep your eyes on the target and refused to be sidetracked by other disturbance. For example, between 1993 and 1994, the prosperity of real estate investment attracted all the firms in Zhong Guan Village. Although we looked at real estate companies as well, we managed to remain focused on our original targets. Later we invested in banking according to our plan and made huge profit. It is OK if we are not doing the business that has been proven lucrative, but it is not OK for us to deviate from our plans and targets. Some of you may be gifted in being persistent and focused, but I believe that the rest of you can develop these skills through hard work.

Secondly, learning capability is essential to a businessman. As I have noticed, many of the most successful entrepreneurs are self-educated. For instance, Shi Wang and Jianlin Wang came out of military service and became the top brass in the industry of real estate investment; Yun Ma, majored in English in college, founded taobao.com; Guangchang Guo, having a philosophy degree, founded Fosun Group; Yusuo Wang and Cunhui Nan never went to college, but succeeded respectively in the business of natural gas and home appliance. Therefore, it is very likely that your future will be founded based on the knowledge that you will learn later on. There are largely three approaches of learning: The first approach is to come back to college. For example, MBA is really good program because it combines your experience with lessons. The second approach is to learn from the people around you. When other succeed or fail, you need to learn from them so that you can avoid similar mistake or copy their success. The last way of learning is to learn from your own mistakes. To me, this way of learning is the most important and useful approach among all the three approaches. From corporate strategic planning to group discussion, I always think about every detail of the things that I have done over and over again. This habit has been helping me to learn from mistakes, discover better alternatives, and make more accurate predictions in the future.

Like I said before, learning from the past experience is very important. No matter how busy I am, I will always find some time to sit down and think about the recent events every half month or so. Before the year of 2000, I used to make annual speeches to my employees. Preparing for those speeches was another opportunity for me to conclude experience from events in the past year. This process had helped me to discover trends and knowledge that I failed to notice before.

When you think about the things you have done, especially those of your failure, you should never try to find excuses. The point of thinking is not to figure out a way to keep yourself from getting fired, but to help you learn something so that you will not commit the same mistake again.

Another experience of mine: never conclude a phenomenon to be a pattern too easily. There are things that happen only for certain reasons. Therefore, it is important to recognize all the associated factors through observation and repetition. Otherwise, knowing the wrong pattern can bring more disastrous results than not knowing at all.

 

There are three most important aspects in the management system of Lenovo: recruiting suitable members, creating the right strategy, and executing the strategy to every detail. Our management team always works hard to make sure every part of the system is functioning correctly, and the success in each aspect has helped us to acquire IBM PC and compete in the diversified market. Speaking of Lenovo’s management team, every member of the team is the best at what they do. However, not every one of them is a gifted genius. A majority of the members on our team has earned their positions through hard work and dedication. Having born with genius is certainly helpful to one’s success. However, genius is not always decisive in becoming successful. For example, the world has seen countless gifted basketball players, but there is only one Michael Jordan. I am not a gifted man, and thus I always need to work really hard, think really hard, and fight really hard in order to become successful.

I hope you will also work hard, think hard, and continue to do your best in every aspect of your life. I wish you all to be successful and accomplish your goals.

 

Thank you.

 

(Translated by Ricky Binhai Hu)

Commencement Speech by Mr. Chuanzhi Liu

Apr 18-2013   



 

2012 Graduation Ceremony

National School of Development at Peking University

It is an honor for me to be here and to share some thoughts with you today. Thirty years ago, I left Chinese Academy of Science and founded Lenovo. Today I am going to tell you the secret of Lenovo’s success in the last three decades, which is to set the right targets.

I was a technician in Institute of Computer Technology (ICT) of Chinese Academy of Science in 1984. At that time, my work at the Academy was nothing but doing research. The only target for me was to be a good researcher, win awards, and hopefully get a promotion or raise of salary. I soon realized that the whole point of my work was to show other nations about the advancement of Chinese technology, which had no practical value to the Chinese society. Therefore, I decided to leave the Academy and set my first target, which was to find a place that would not only provide me with a decent income, but also give me an opportunity to prove my value to the society. At the early stage of China’s reform and opening-up, I got 200,000 RMB from ICT and founded Lenovo. Soon, my colleagues and I developed Lenovo’s first Chinese-language computer input device, which allowed Chinese characters to appear on foreign PC. After that, we started to sell PC for some international brands. Within several years, our sales turnover reached 100 million RMB, with a net profit of 10 million RMB. At that time, this level of sales record had ranked Lenovo as one of the most successful companies in China. The success of Lenovo had proved my value and helped to popularize personal computer among the Chinese people. As my first target had been accomplished, I decided to set another target, which seemed to be fairly impossible at the time – I decided to build a Chinese PC brand. Before I founded Lenovo, China had only one computer company – Chang Cheng, which was founded and managed entirely by the government. Since it was owned by the state, Chang Cheng had infinite resource, and most importantly, it was the only enterprise certified to produce computer in China. Although we had the experience of working with consumers and understood their needs, the associated government department was frustrated about the bleak prospect of Chinese computer industry and refused to give us manufacturing license. In order to still accomplish my target, we decided to build our factory in Hong Kong, where manufacturing license was not necessary. Since then, we came back and forth between Hong Kong and the main land. In the end, we produced our own mother board and took it to an exhibition in Alaska. There, our product was noticed by the Chinese government, and we got our license shortly after that.

During the early stage of Lenovo’s computer department, we were forced to fight against great challenges and hardship. The most difficult time came in the 1990s, when China dropped its tariff and allowed foreign computers to pour into the Chinese market. International brands like IBM and Compaq quickly occupied the entire market with their superior technology, fund, management system, and human resource. Within one year, Chang Cheng 0520, the largest Chinese brand, went down, while Lenovo struggled to hold on.

Realizing the severe situation that we were facing, we started to study the advantages of our competitors, adjusted the structure of Lenovo, promoted twenty-nine-year-old Yang Yuanqing to be the head of Business Department, and tried to improve our performance. Shortly afterward, a miracle happened – between 1992 and 2000, we owned the largest market share (27%) in the Chinese computer industry. However, after the year of 2000, Dell came back with innovations in its business approach. After Dell crushed Compaq in the U.S. and European market, it decided to enter Chinese market, and we were defeated at first. In the next three years, we studied Dell’s strategy and created a new tactic to counter Dell’s invasion. Eventually, we resumed our domination in the Chinese Computer Industry and accomplished my second goal.

Now I am ready to set my third target. I was determined to make Lenovo an international brand. In 2004, the turnover of Lenovo was about $2.9 billion while that of IBM PC was over $10 billion. While most people thought it was impossible for us to acquire the PC department of IBM, we did it, and we expanded our turnover from $2.9 billion to $29 billion. After the acquisition, our global market share rate grew from 2.3% to 13%, and Lenovo was ranked around 400 in the World Top 500. 

Our data may have indicated the success of this acquisition. However, the most important value of this acquisition was that Yang Yuanqing had successfully incorporated Chinese and Western values into his management team. As we all know, cultural clash can easily destroy an acquisition. We spent a lot of time working with people from different background and figured out the best ways for them to contribute to the company. During the course of acquisition and integration, we had suffered from various challenges. Lenovo was once on the edge of falling apart, having a deficit of more than $200 million in two consecutive seasons. However, we strived to solve all the problems and eventually made it through.

In 2000, I figured that the responsibility of Lenovo’s CEO was too heavy for my age. Therefore I split the company and had Yang Yuanqing and Guo Wei to take over the position of CEO. One of them would continue to expand the market for Lenovo’s product; the other one would work on software and agency service. As for me, I turned to the business of investment and real estate. After succeeding in those areas, we combined our Hony Investment Advisor Ltd. and Lenovo Investment to establish Legend Capital. Today, Legend Capital has the largest scale and the highest investment return rate in the Chinese investment community.

After making Lenovo an international brand and successfully establishing Legend Capital, I started to plan a target that was even harder to accomplish. We looked at Samsung and realized that we wanted their world-wide brand influence. Therefore, we set out to build a company that can be relied, trusted, and respected by our consumers, suppliers, and even competitors.

My point of telling you all these stories is to have you understand that the key to success is about setting the right targets and going after your targets tirelessly. It is important to have a grand plan for your future, but it is more important to start off step by step. Nobody can be successful overnight. You must first set a target, go after it, accomplish it, then aim higher, and keep going.

Several years ago, a Japanese runner won the Beijing Marathon. During the interview, he said that before the race, he drove along the course and marked every ten miles. When the race begun, he aimed for the first ten-mile mark, then the second, then the third… Forty-two-mile is a long distance, if he had not divided it into sections, it would be really hard for him to pace himself and keep himself motivated.

I had once talked to a very young entrepreneur in a show. The young man told me with confidence that he would establish a World Top 500 company. Although he was yet only working in a noodles restaurant, he told me that he would make the best food for his customers. I thought that his approach of pursuing success is correct. However, the key for him is to figure out what the next step is.

I have kept telling you about setting and changing your goals because an entrepreneur should never stop upon completing his targets. There are several factors that have kept me going since I founded Lenovo. Firstly, persistency is essential to me. Before Lenovo could grow into one of the largest Chinese companies, we had faced myriad challenges and hindrances. For example, we had been fined over a million RMB when making Lenovo’s Chinese-language Computer Input Device. Under the planned economy, the Chinese Pricing Bureau prescribed that the price of our device must be set based on the cost of merely the hardware. The price of technology and intellectual property is completely ignored. Therefore, when we set the price higher than 120% of the hardware cost of our device, we broke the law and had to pay a fine that was more than the annual profit of the company.

This was not the only time that we suffered huge lost due to factors beyond our control and understanding. When facing such insulting and preposterous situations, it is very important to remember your goal and keep holding on. Like Dr. Qiren Zhou said before, everyone will be sick one day. To me, the worst memories are those when I was sick but still had to work. As for the other hardship, I always do my best to fight against it. Sometimes I felt like I was fighting against my own destiny, which was actually a lot of fun.

Besides persistency, it is also important to remain focused. After setting your target, you need to keep your eyes on the target and refused to be sidetracked by other disturbance. For example, between 1993 and 1994, the prosperity of real estate investment attracted all the firms in Zhong Guan Village. Although we looked at real estate companies as well, we managed to remain focused on our original targets. Later we invested in banking according to our plan and made huge profit. It is OK if we are not doing the business that has been proven lucrative, but it is not OK for us to deviate from our plans and targets. Some of you may be gifted in being persistent and focused, but I believe that the rest of you can develop these skills through hard work.

Secondly, learning capability is essential to a businessman. As I have noticed, many of the most successful entrepreneurs are self-educated. For instance, Shi Wang and Jianlin Wang came out of military service and became the top brass in the industry of real estate investment; Yun Ma, majored in English in college, founded taobao.com; Guangchang Guo, having a philosophy degree, founded Fosun Group; Yusuo Wang and Cunhui Nan never went to college, but succeeded respectively in the business of natural gas and home appliance. Therefore, it is very likely that your future will be founded based on the knowledge that you will learn later on. There are largely three approaches of learning: The first approach is to come back to college. For example, MBA is really good program because it combines your experience with lessons. The second approach is to learn from the people around you. When other succeed or fail, you need to learn from them so that you can avoid similar mistake or copy their success. The last way of learning is to learn from your own mistakes. To me, this way of learning is the most important and useful approach among all the three approaches. From corporate strategic planning to group discussion, I always think about every detail of the things that I have done over and over again. This habit has been helping me to learn from mistakes, discover better alternatives, and make more accurate predictions in the future.

Like I said before, learning from the past experience is very important. No matter how busy I am, I will always find some time to sit down and think about the recent events every half month or so. Before the year of 2000, I used to make annual speeches to my employees. Preparing for those speeches was another opportunity for me to conclude experience from events in the past year. This process had helped me to discover trends and knowledge that I failed to notice before.

When you think about the things you have done, especially those of your failure, you should never try to find excuses. The point of thinking is not to figure out a way to keep yourself from getting fired, but to help you learn something so that you will not commit the same mistake again.

Another experience of mine: never conclude a phenomenon to be a pattern too easily. There are things that happen only for certain reasons. Therefore, it is important to recognize all the associated factors through observation and repetition. Otherwise, knowing the wrong pattern can bring more disastrous results than not knowing at all.

 

There are three most important aspects in the management system of Lenovo: recruiting suitable members, creating the right strategy, and executing the strategy to every detail. Our management team always works hard to make sure every part of the system is functioning correctly, and the success in each aspect has helped us to acquire IBM PC and compete in the diversified market. Speaking of Lenovo’s management team, every member of the team is the best at what they do. However, not every one of them is a gifted genius. A majority of the members on our team has earned their positions through hard work and dedication. Having born with genius is certainly helpful to one’s success. However, genius is not always decisive in becoming successful. For example, the world has seen countless gifted basketball players, but there is only one Michael Jordan. I am not a gifted man, and thus I always need to work really hard, think really hard, and fight really hard in order to become successful.

I hope you will also work hard, think hard, and continue to do your best in every aspect of your life. I wish you all to be successful and accomplish your goals.

 

Thank you.

 

(Translated by Ricky Binhai Hu)