Puppy wrote:The question is whether Lenovo wants to do that. Using our example with digital camera, imagine Fuji still making a lot of money by cheap junk 1/2.3" sensor cameras without mechanical buttons, F3.5 or worse lenses and so on. Would they ever think of an X100 product ? Probably not. Lenovo is still #1 in number of PC, laptop and tablets sold. As you noted: "Their stuff sells", no need to change anything. Fuji was in a completely different situation, they had to introduce a new product (their only DSLR was Nikon based) because market of cheap P/S cameras was fading replaced by smartphones. So they tried the retro concept and it worked very well.
Yes, that's the classic low inertia of established market players.
It explains why Kodak famously failed miserably by missing the digital train... whilst ironically being a pioneer in the field; adding insult to injury.
And currently why Canon and Nikon have very reluctantly, and up to now very awkwardly, introduced mirrorless models. Too afraid to cannibalise their DSLRs... but not minding putting their whole camera businesses at risk as with their mindset.
There are nuances between the examples above, though. Kodak was relatively taken by storm, and had to face competition from a different industry (electronics vs chemicals). Canikon do not have these excuses: the mirrorless market has been slowly but growing, and it is part of the very same electronics industry to boot.
Is Lenovo more of a Kodak or Canikon, we could ask ourselves?
Let's see. Lenovo is big in computing, and the various competition it faces also comes from (broadly defined) computing.
Not a Kodak.
It also has put its eggs in various baskets: laptops, servers, tablets, smartphones.
Not a Canikon.
Going by that, Lenovo should therefore have no incentive to release proper Thinkpads. Why should it? Its sales are still relatively healthy
and it has hedged its bets. Carving the Thinkpad niche, instead of just scratching it, would just be a waste of resources.
Or would it?
As recently as 2010, PCs still made up the lion's share of the total SCD [smart connected devices] device market, with the combined desktop and notebook categories accounting for about 52.5% of shipments versus 44.7% for smartphones and 2.8% for tablets. By 2014, smartphones had grown to represent 73.4% of total shipment, while PCs had slipped to 16.8% and tablets had increased to 12.5%. By 2019, IDC expects the distribution to be 77.8% smartphones, 11.6% PCs, and 10.7% tablets.
(Source: IDC)
Things are no longer like when Lenovo bought IBM's personal computing division back then. The market has shifted dramatically in favour smartphones and tablets; and there's no chance to re-establish the balance towards PCs anymore. Lenovo must have somehow remarked this trend, since the company boasted that it
"became largest vendor of smartphones in China, with 12.5% market share."
That's why the company is so confident. The market, moreover, is going right in its alley:
Globally, the smartphone market is shifting from premium to mainstream – and this trend favors Lenovo’s strengths. We have experience from our PC success in building a strong, sustainable business in this kind of environment. Looking ahead, we will solidify our China smartphone business while focusing on profitable growth in this highly competitive market. We will also continue to boldly attack emerging market opportunities where we see even more room for growth.
That's beautiful. But that's also PR horsecrap, and calls for a reality check.
Mainstream? Lower quality.
Lenovo's PC experience? Chinese market mainly: lower quality.
Emerging market? Lower quality.
Profitable growth? Profitable Growth Paradox: "Most growth investment will at first reduce the profitability, *cost reduction efforts* to boost the bottom line usually have a negative impact on future growth." Lower quality again, because there's no free lunch.
Lenovo therefore sees cost-cutting as a potent strategy to ensure not only its survival, but also its thrive.
Let that sink in for a minute.
And now realise that with around 5% share of the overall smartphone market, Lenovo is small fry. Apple (the fruit guys again!) and Samsung are the ones to beat. Oh, and also the
other Chinese manufacturers who are expanding overseas. The domestic market? There are countless cheap competitors (Chinese vs Chinese, that's hardcore), and if you look above, the upmarket segment has recently seen very young yet very serious competitors: One Plus, Oppo, Xiaomi, etc.
Lenovo admit it themselves: "Our smartphone business in China make a little bit of money, but not so much." How are they going to maintain their ambitions, then? With their brand, Motorola's patents *cough* (or what remains of them after Google's ownership) *cough*, and their cost-cutting experience.
So... they have basically nothing to firmly oppose the competition. When the entry market no longer makes money, it is customary to target the premium market. But they can't even do that since it's already crowded. Uh oh. Cost-cutting isn't going to... cut it, it seems.
Then what? Lenovo's finished? No, maybe not.
In the words of a management consultant:
The only way out of the Profitable Growth Paradox is through Innovation, the capacity to find a new market space where competition is milder. Without Innovation firms will see their Business model eroding and the dream of Profitable Growth vanishing.
Phew.
But wait. What's the next big thing in the smartphone space?
Projectors? Not so new.
Huge foldable screens? The Koreans are about to release smartphones with such screens.
Errr... what about modular phones? The
Fairphone's already here and the
Puzzlephone will soon be out.
Ha ha, but what about the cheap ones? That's where Lenovo excels! Cheap with a strong brand, remember? The highly modular
Project Ara set to see a limited release next year should cost as low as 50€, and it's a Google project. Can't beat that brand name. Also, the upcoming
RePhone will be made of cardboard. Can't beat that low cost.
Well, well, well. Lenovo's future doesn't look so bright anymore.
If I were them, I'd certainly reconsider treating the Classic Thinpad as a side project that you can toss at Thinkpad loyalists like the half-baked treat which obedient lapdogs deserve.
Instead, I would diligently study the Fuji way of approaching the market and treating its customers, as I would
want to replicate their success for the niche I'll inevitably
have to rely on.
But that's just me; I'm an armchair Thinkpad loyalist after all
