Mure Dickie is reporting in the Financial Times that Lenovo is on the verge of announcing a global brand strategy that will keep the “Think” brand (Thinkpad, ThinkCentre) for high-end products, and will keep the Lenovo name for “mainstream” offerings. Good so far.
What is interesting (and I use that word as a euphemism) is that Lenovo is apparently choosing to expunge the IBM brand from its products (as it is entitled to do for five years), forgoing the opportunity to leverage the IBM brand and going direct to tagging their products “ThinkPad by Lenovo” and “ThinkCentre by Lenovo.”
Who the hell at Lenovo is responsible for THAT call?
As regulars here will recall, the primary reason I was a supporter of Lenovo’s IBM purchase (from Lenovo’s standpoint – it was a no-brainer for IBM) was that Lenovo was going to have an opportunity to leverage the IBM brand for five years while it built credibility with customers. Anyone with just a little business sense knows that’s worth something.
In fact, it’s worth a lot. According to the August 1 edition of BusinessWeek and InterBrand, the value of the IBM brand – the third most valuable brand in the world behind Coca-Cola and Microsoft – is US$53,376,000,000.00. My point back in December was that Lenovo wasn’t buying a money-losing business for its $1.7 billion in hard currency, it was renting a highly usable $53 billion brand asset for a mere $350 million a year.
But Lenovo, under the expert guidance of Chairman Mr. Yang Yuancheng, apparently feels that not only do customers not need a transition, but Lenovo is unable to utilize a $53 billion asset to their benefit, an asset that they paid cash for and an asset that, arguably, was about the only useful thing they took from the deal.
Is the use of the brand “Think” worth that kind of money? I’m sure it’s worth something, but I’m not sure it’s worth $1.7 billion. And due to some stupid decision making at Lenovo, that’s all the company is getting for its cash.
If I were a Lenovo shareholder, I’d be screaming. Five years usage of a $53 billion asset tossed into the garbage? In the U.S., that would be grounds for an uprising at the next general meeting, and grounds to question the competence of management, and any auditing firm with a conscience would require a write-off of those assets as a one-time charge against earnings.
The burning question is “why?” I’d suggest one or more of the following reasons:
1. Lenovo leadership just doesn’t understand the esteem the IBM brand retains worldwide. Entirely possible since I’m not sure the Chinese side of the Lenovo house much understands the market outside of China.
2. Lenovo has no clue how to use the IBM brand. Also possible because they didn’t know how to use the “Legend” brand, and they did a poor job building the Lenovo brand in countries where they lacked explicit government support and fawning-lapdog media endorsement.
3. Lenovo is ignoring it’s advertising and PR agencies on a) the value of the brand, and b) how to use it. Having worked with Lenovo in an agency relationship and walked away when they weren’t listening to either us or our competitors, I’d say this is a pretty real possibility. Salesmen and Engineers rank highly at Lenovo. Marketers do not.
4. Lenovo’s advertising and PR agencies are incompetent and not pointing this out to Lenovo, or are terrified to do so because they think they’ll get sacked for talking back. Also possible, because who knows where Lenovo is actually getting assistance these days.
5. Somebody really high in the Lenovo organization genuinely believes that the Lenovo brand means more to businesses and consumers outside of the PRC than what it really does, which is “Made in China by a Chinese Company – Beware.”
Take your pick. I have my prejudices.
I genuinely hope Lenovo’s management reconsiders. If they don’t, I hope they’re prepared for the consequences, which they quite clearly appear to have underestimated. If nothing else, they will have screwed themselves out of the biggest asset they got from IBM.