At the recently concluded IFA 2016 in Berlin, Lenovo showcased a slew of new products, including the new YogaBook, which relies entirely on a touch-based Halo Keyboard along with the new Moto Z Play and a camera Mod by legendary camera maker Hassleblad. For Lenovo, India has emerged as an important marketplace and the company is now the third-largest smartphone vendor, according to latest IDC numbers. Lenovo’s Senior Vice President and President for APAC region Ken Wong interacted with IndianExpress.com during IFA on what the expectations are from the Indian market, why there’s still scope in PC market and why modular phones are the future. Here’s an edited version from the interaction.
On general expectations from India as a PC and smartphone market
In just Asia Pacific, the importance of India is much more apparent. The population is almost same as China, there’s a younger generation. Even the GDP growth is ahead of China, one of the strongest among the world, which is good to see. So India is definitely one of our most strategic markets, not just from Asia-Pacific perspective but also for the whole company.
On Make-in-India, Digital India initiatives of the government
In India we’re very happy to see initiatives like Digital India from Prime Minister Narendra Modi. It is a massive effort for a country of that size, and we are seeing fibre-link all over, which is an important infrastructural need for companies like us. We are seeing a lot of first-time demand coming out of India as well, and we are doing surveys to understand what these first-time buyers want from the companies.
Some of these guys have never been exposed to even Notebooks, maybe only used a phone or a tablet. I tend to believe they want something different from say those in the big cities.
The other thing is Made in India, which is also the PM’s baby. So last year, we arranged our meeting of our Chairman and CEO with the PM and we understood more about the initiative. Not only are we manufacturing PCs in India, but also our mobile phones, which in line with what the country is trying to move.
We think YogaBook could do well in India. Our belief is that the market is moving towards more premium, regardless of whether it is an emerging market or more mature market.
On Lenovo’s larger strategies with PC market which has been shrinking
So there are two levels of focus from Lenovo. Last year as Chief Strategy Officer, I spent time with our chairman and CEO to see what are the changes in the market. If you look at the PC market, it has been shrinking 5-10 per cent on a year to year basis for eight quarters. Some of the more aggressive comments coming out on the market is that PC is dead. The market is coming down.
But if you look at the root cause, the PC market is very boring… no new device coming out, no clear reason of buy for our consumers. One of our strategic focuses is innovation. It is about how we can innovate with products like YogaBook which will create hype in the market, create passion for our customer. The feedback on YogaBook has totally exceeded our expectations. The buying power is actually in the market, the issue is whether you can take that out, whether you can squeeze out the buying power in the market. We did that a few years ago when we introduced the Yoga NoteBook.
On why PC is moving more towards 2-in-1s and devices which offer unique purpose, rather one general all-purpose device
Look, the PC market is shrinking. But IDC only looks at PC market, laptops, desktops, they don’t add 2-in-1 and if you include that the market is actually growing. Asia Pacific is growing. This is an important insight for people like us. How your product portfolio can capture this, is very important as well.
And I think markets are moving from more general purpose device market to a more scenario based, very set use. When I say that I mean gaming, 2-in-one, thin and light. All these machines are more scenario based, and perfectly fit some of our customers.
For example with 2-in-one, it is more own experience, I cannot carry a 14-inch clamshell when I’m travelling in economy in a flight. I cannot fully open it. But with two-in-one, I can adjust the angle, and work comfortably. So that’s why we think premium is becoming more common. More premium part of the market, other than purely general-based will grow.
On the smartphone market, and why it needs innovation
In terms of phone, if you look at the worldwide number, the growth is slowing down and in some parts of the world it is negative. I think it is the same issue, the innovation slowing down. We have come with a different form factor. We think this is a equivalent to the software ecosystem that Apple and Google created. This is a hardware ecosystem concept with the Moto Z Mods.
On investing more in research, learning from customers
This is the way to go for us. If you look at the resources we put in innovation, last year we spent around $1.5 billion for R&D as a whole. From 2004-05 till now, our growth for R&D investment is average 20 per cent, that means we are increasing our R&D expense everywhere.
If you benchmark tech companies in this planet, we are definitely among the top ones in terms of absolute dollar spent, and the growth that we have in the past ten years. We have about 3200 engineers for R&D across the world. Now do R&D across many countries; and this helps with different inputs from across the world If the innovation has been done right, the market will not shrink.
We have started a new project last year: Voice of customer. The focus is to know what we have to do, to get an insight from the consumer directly. We have 5 million data points available to our engineers and product managers, we base on the big data technology to help them to get more insight from the customer. What kind of innovations should you build in your machine? You need input from the customer.
Strategy in India for smartphones
Our strategy in India in smartphones is to be a disruptor, challenger. One of the things I’ve learnt is that if you run your business based on IDC, you are for sure, will fail. History will not tell you what will happen. I think we are betting on a market that is non-existent today, because we are creating a new category with the Mods.
I think there is a clear value-add to the customer in the India with our modular phone, and our new 2-in-1 as well. There is a lot of work for us to do in order to create that demand, educate the bigger India market about these. We have done that before, we know how to create a market for new products.
On competition in the modular smartphones and why it is needed
With modular phones, based on our data point, we are convinced the demand will come. Different companies are working on different modular phone projects, some of them are smarter. We believe our solution is the most advanced right now and the competition is playing catch up.
The other thing to look at when you create a category is whether you want competition to catch up. It’s not always black and white. When more people are joining the camp, there will be more buzz created in the market, that is exactly what happened with our Yoga NoteBook, we led that market. Then a lot of our competition caught up and pushed similar design.
We see a demand for such design like with the Mods. I don’t think competition can catch up with us in a short period of time. And if they do, we are confident we can stay ahead. If more people join and create that category we’re super happy.
Disclaimer: The correspondent was in Berlin at the invite of Lenovo India