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Reid Walker
Globalization Becomes Truly Global
Lessons Learned at Lenovo

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“ There will be major repercussions from the arrival in force

of emerging-market multinationals. As yet, these newcomers
rarely register on most corporate radar screens. Quite soon,
however, their impact will be sweeping and unavoidable.
And, rather like the adoption of digital technologies over the
past twenty years or so, they are set to revolutionize the
very nature of global business strategy.”—Richard Hames,
author of “The Five Literacies of Global Leadership”
(Jossey-Bass, June 2007)

Lenovo, one of the world’s largest manufacturers of personal computers, is a prime example of
the “emerging-market” multinationals Hames is referring to. With its 2005 acquisition of IBM’s
personal computer division, it is arguably the first multinational with its roots in an emerging market
to reverse the traditional direction of globalization. Over two decades, the company has developed a
unique global structure and business strategy that has its products, people, and facilities in 160
countries. Here are four lessons that we’ve learned along the way that can help other global compa-
nies—and those with global ambitions—derive economic and social value from globalization.

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1. Worldsource, don’t outsource.

In a world with just one time zone (“now”), business must source materials, innovation, talent,
logistics, infrastructure and production wherever they are best available. And it must sell where
profitable markets exist, anywhere in the world.

What’s the best way to do that? In many people’s minds, globalization strategy can be boiled down
to one word: outsourcing. That’s simply not the whole story, or the best option. Outsourcing is a
centralized, top-down strategy designed to save money on non-core operations by handing those
operations to a third party evaluated by a single criterion: the lowest price. Especially in competitive
marketplaces, outsourcing is a crude and unsatisfying tool.

There is a better way to compete and win on the global playing field: “worldsourcing,” a business
strategy that leverages the positives of globalization to maximize the value and quality companies
deliver to customers worldwide. In contrast to outsourcing, worldsourcing is a global, decentralized
strategy that distributes an organization’s core functions—innovation, design, management,
operations, processes and production—across multiple global hubs of excellence located wherever
the best resources, talent, ideas and efficiencies currently exist or can be created.

In a world with just one time zone (“now”),

business must source materials, innovation,
talent, logistics, infrastructure and
production wherever they are best available.

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2. Don’t try to homogenize cultural diversity, embrace it.

Many globalized companies try to impose worldwide cultural homogeneity from a single global
headquarters. As such, they tend to leave good ideas and top talent out of the picture. The wiser
course is to draw internal and external strength from cultural diversity. A company whose executive
suite looks like the U.N. General Assembly can gain advantage from the radically decentralized,
globally distributed model suggested by the worldsourcing strategy. Lenovo, for example, has no
corporate headquarters and distributes operations across regional hubs to get as close as possible
to its customers.

A distributed global management approach is required to make a company nimble enough to recon-
figure its resources and talent in real time, and respond to rapid shifts in local market demand.
You can’t get a feel for such shifts from an isolated corporate HQ. To truly grasp the nuance of local
market shifts, you need operational staff who know the cultures and norms. In addition to ensuring
that your supply chain remains efficient, this will help you gauge and respond to cultural shifts
that portend market demand changes.

The wiser course is to draw internal and external

strength from cultural diversity.
Worldsourced teamwork and cultural cross-pollination creates products tempered by world-girdling
innovation, design, and process. Our company recently designed the 2008 Olympic torch by
connecting specialists in the areas of graphic design, ergonomics, chemistry, engineering, materials,
anthropology, art and history. This team was distributed in Germany, Singapore, the U.S., Japan,
New Zealand, Italy and China. The tools of modern connectivity allow global collaboration. Use them.

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3. Blend the telescope and the microscope.

Since companies must source everything where the best talent is available and sell where the best
markets exist, worldsourced business functions should be located solely on that basis. A company
that practices worldsourcing can create value 24 hours a day, following the sun. It is British in the
UK, French in France, American in the U.S., Australian in Australia, Brazilian in Brazil, Chinese in
China, and so forth.

The global distribution of talent and markets argues for a “hubs of excellence” strategy. Our company,
for example, situated marketing in India, our design hub in Japan, fulfillment centers in North
America, and manufacturing facilities in China, India, Latin America and Europe. No doubt, globaliza-
tion has consequences in terms of job movement, but that’s inevitable in a highly competitive
world economy. If you’re working for a multinational company, you’re competing against skill sets
in countries around the world, but your job aptitude and career choices will no longer be limited
by your geographic location. Employees who embrace this movement and look for ways to collabo-
rate and contribute their best thinking, thereby driving and fostering innovation and better ways
of doing business, will put themselves in career-growth situations—the antithesis of career stagnation.

A company’s go-to-market strategy must also blend the telescope and the microscope. Collaborate
globally to develop the finest-quality products, and then zoom down to the local level to serve
customers in ways that are suited best to them.

In emerging markets such as China and India, a high-touch business model makes it possible
for customers to touch and feel high-tech products at local retail outlets, and to have these
products configured to their needs right at the shop. The point is to make using potentially complex
products easy.

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At a time when establishing an Internet connection in China was complex and challenging, Lenovo’s
“transactional” business model streamlined the process. Securing a home Internet connection in
China, prior to Lenovo’s introduction of one-key Internet access, involved government registration,
a trip to the local telephone office for user verification and data line provisioning, purchasing and
installing a dial-up modem and securing a password-enabled dial-up access point. By negotiating
agreements with China’s telecommunications companies, Lenovo was able to “bundle” internet
account numbers with its devices which came pre-loaded with all necessary hardware and software
to deliver unlimited first year Internet access. Customers took their aptly named Lenovo “Heavenly”
PC home and pushed a single button to be connected to the Internet.

This sort of one-to-one mass customization requires the development of an agile, streamlined supply
chain that offers customers configuration choice at the retail level, with as little inventory as possible.
Creating such a supply chain is a challenge, but it is well worth it: as companies enter emerging
markets in Asia, Eastern Europe, and Latin America, they will benefit from the combination of high-
touch personalization for their customers and low supply-chain costs for themselves.

A company that practices worldsourcing can

create value 24 hours a day, following the sun.

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4. It’s all about the brand.

Worldsourcing as a globalization strategy is predicated on the belief that brand trumps nationality
and geography. Brand is the most important flag a company can fly. The more broadly a company
reaches out to the entire world for the best ideas, people and processes, the more it becomes
the refined essence of its brand. It is evaluated not by nationality, but by the quality of its goods,
services, governance, transparency, environmental practices, degree of corporate social respon-
sibility, and, ultimately, the level of value it delivers to customers worldwide.

In an era when each new week brings fresh questions about product quality and safety, consumers
can continue to trust worldsourced brands. Worldsourcing, in fact, is a bulwark that protects both
consumers and manufacturers everywhere. How? As companies compete with one another to be
the first to market with innovative ideas, consumers will benefit from an ever more rapid evolution
and commercialization of new thinking. Global companies that worldsource their goods and services
are exposed to the probing light and criticism from demanding customers and government regula-
tors in many different countries. They can only create trust by adhering to the highest standards of
governance, transparency, compliance, and quality.

The more broadly a company reaches out

to the entire world for the best ideas,
people and processes, the more it becomes
the refined essence of its brand.

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The years ahead will undoubtedly see the rise of global companies with roots in
unexpected places. With knowledge, innovation, and the means to leverage them so
broadly distributed, there’s no way to tell where the next winners will come from. That may
be unsettling to defenders of the status quo, but to those with an appetite for reward and
the stomach for risk, it’s an exciting prospect.

The greatest thing we have learned on the journey to global presence is that labels don’t mean
as much as they used to. The products and services of companies that practice worldsourcing
may be labeled “Made in the UK,” “Made in Switzerland,” “Made in the USA,” “Made in China,”
or “Made in Australia.” But, in the connected new world in which we all now live, most products
should truthfully be labeled, “Made Globally.” The label on the outside simply identifies the
last stop on a complex global journey.

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info
About the Author
An expert in corporate communications across such multi-cultural global enterprises as GE and Honeywell,
Reid Walker is the vice president of global communications and sponsorships at Lenovo, a global PC company
with research, manufacturing, sales, and marketing operations on six continents. His passport never leaves
his side… You can find more from Reid at www.worldsourcing.info.

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This document was created on July 9, 2008 and is based on the best information available at that time.
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