By Yang Yuanqing
Updated: 2007-11-19 07:28
As a country taking its rightful place in the front rank of nations, China has an enormous stake in recent international controversies involving product quality and safety. Vigilant government enforcement of safety standards in China and throughout the world is a necessary first step. Beyond government regulation, there is a powerful emerging market force with its roots in China that imposes a potent natural corrective - "worldsourcing".
Worldsourcing is a business strategy that leverages globalization to maximize the value and quality companies deliver to customers worldwide. In a world with just one time zone - "now" - businesses must source materials, innovation, talent, logistics, infrastructure, and production wherever they are best available. And we must sell wherever profitable markets exist, anywhere in the world. In today's global economy, companies must worldsource or fail.
Worldsourcing is transforming the fundamental structure, operation, and culture of business on a global basis. It safeguards both consumers and manufacturers everywhere.
How? Global companies that worldsource their goods and services are exposed to probing light and criticism from demanding customers and government regulators in many countries. They create trusted brands by adhering to the highest standards of governance, transparency, compliance and quality.
The giant French retailer Carrefour, for example, worldsources fresh produce by training supplier-farmers around the world in the use of safe pesticides. Volkswagen has created a central, internal procurement platform for assuring the quality of all sourcing, analysis, and cross-functional activities around the world. Nike launches surprise inspections to assure its global manufacturers meet worldwide standards.
Lenovo is well recognized for maintaining the highest standards of quality assurance and worker safety in all locations worldwide.
It is important to understand the difference between the New World thinking of worldsourcing and the Old World concept of outsourcing. Outsourcing is a centralized, top-down strategy designed to save money on non-core operations by handing those operations to a third party.
Worldsourcing, by contrast, is a global, decentralized strategy designed to drive greater value and quality by distributing an organization's core functions - management, operations, processes, and production - across multiple global hubs of excellence located wherever the best resources, talent, ideas and efficiencies exist or can be created.
One of the first companies to fully leverage the cost structure and efficiency of China in establishing a global brand, Lenovo has been a pioneer not only in the development of worldsourcing as a winning business strategy, but also in enabling businesses and individuals to compete and succeed in the global worldsourced marketplace.
The company has believed in the transformational power of the personal computer, of quality, and of the market since its founding as Legend Holdings in 1984 by 11 researchers from the Chinese Academy of Sciences, in the same way many of Silicon Valley's global technology companies were founded by students and professors. From the beginning, Lenovo understood that personal computers would, for the first time, empower people in rapidly emerging economies to enter the global marketplace, but first we had to develop a way to bring PC ownership and Internet connectivity within people's reach.
Our "transactional" business model made it possible for customers to touch and feel Lenovo products at local retail outlets, to have PCs configured to their needs right at the shop. Our goal was to make using a PC easy. At a time when establishing an Internet connection required complex technology and a trip to the post office to buy an Internet user's account, we streamlined the process. Customers took their new PCs home and pushed a single button to be connected to the Internet, and to the world.
At the same time, as part of the "transactional" model we had to develop an agile, economical supply chain strategy that offered customers maximum choice with as little inventory as possible.
The lessons we learned succeeding in China were valuable as Lenovo turned its eyes to other developing and fast-growing PC markets in Asia, Eastern Europe, and Latin America. Last year, for example, we introduced the transactional model to India, and Lenovo's sales grew more than 40 percent.
As Lenovo approached the 20th anniversary of its founding, it was, like many Chinese companies, eager to help China's economy evolve from low-cost manufacturing to high-value intellectual property. We were ready to move our best ideas onto the global stage. The surest route was to establish Lenovo as a global brand, and to speed that journey in 2005 the company acquired the PC division of IBM.
Frankly, there were questions inside the company if such a bold move was wise. In China there's an old saying, "Don't be the first one to eat the crab". It's difficult to get the meat out, and you might be poisoned. Lenovo was the first Chinese company to "eat the crab" in acquiring a major foreign global brand. So far, we feel well-nourished and quite healthy. The crab was delicious.
Combining the best of East and West, Lenovo is moving into developed and developing markets, leveraging worldsourcing as our strategy to find and integrate the best people, talent, resources, and infrastructure available. Flying above us, everywhere we go, is the flag of the Lenovo brand.
While Lenovo is proud of our Chinese heritage, the most important flag for any global company is its brand. The more 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, degree of corporate social responsibilityand the level of value it delivers to customers worldwide.
That is why I say worldsourcing is a strong assurance of quality: consumers trust worldsourced brands. Brands earn that trust by collaborating globally with the best minds on earth. The products of companies that practice worldsourcing may be labeled "Made in Switzerland", "Made in the USA", or "Made in China", but in the new world in which we all now live, they should truthfully be labeled, "Made Globally". The label on the outside simply identifies the last stop on a complex journey.
The distributed logic of worldsourcing suggests a radically decentralized organizational model. Since companies today source everything where best available and sell where best markets exist, worldsourced business functions should be located solely on that basis. A worldsourcing company can work 24 hours a day, following the sun. It can be Irish in Ireland, Nigerian in Nigeria, Australian in Australia, Brazilian in Brazil, and Chinese in China.
Our company is a good example. I work from the United States. My company's CEO is an American based in Singapore. Other top executives are based around the globe. A meeting of Lenovo's senior managers looks like the United Nations General Assembly. We have factories in China, India, and Latin America, a marketing hub in India, sales operations in the Netherlands, and a fulfillment center in the US.
Leveraging the heritage and expertise of China globally, worldsourcing is the culmination of Lenovo's experience, history, and aspirations. It offers us - and other companies - a chance to deliver the promise and protection of our brand on the individual level, in a one-to-one interchange with a retail customer in a simple store, and on the international level, as the best global enforcement mechanism for product quality the world has known.
Many people think of Lenovo as a Chinese company that brings PCs to the rest of the world. We are that and much more: the company that is changing for the better how global business is done by bringing the great new concept of worldsourcing from China to the rest of the world.
Yang Yuanqing is chairman of the board of Lenovo, a global leader in the PC market with research, manufacturing, sales and marketing operations on six continents.
(China Daily 11/19/2007 page5)