Lenovo's Online Buying Experience Leads to Competitive Advantage

For Lenovo, the key to growing online market share is an intuitive user interface backed by a highly synchronized supply chain.

As vice president and general manager of Lenovo Global eCommerce and Direct Sales, Ajit Sivadasan is responsible for all global eCommerce functions including direct sales (online and phone) operations in Australia, Japan, Canada and the United States. This territory may soon expand, as Lenovo is exploring similar options for its customers in other mature markets, such as the United Kingdom.

In addition to sales responsibilities, he also leads several other eCommerce functions including capabilities development, site production and merchandising, usability, and design—with each element aligned to ensure an optimal online customer experience. Within a year of joining Lenovo—having spent a five-year stint with Gateway as executive producer and senior director of eCommerce—Sivadasan moved Lenovo from a traditional customer-to-fulfillment supply chain to an online configure-to-order (CTO) model to enhance the customer experience.

Partnering with i2, Lenovo redesigned its eCommerce user interface, linking all CTO processes and choices to back-end order execution, thereby optimizing the end-to-end experience for customers. Synchronizing the eCommerce strategy with supply chain execution resulted in triple-digit growth in online revenues and profits. Currently Lenovo's annual sales exceed US$16 billion, and the company employs more than 23,000 people worldwide. Lenovo made its first appearance on the Global Fortune 500 list this year.

What was your most pressing challenge upon arriving at Lenovo?

Our user experience online had several gaps from a customer's standpoint [after the Lenovo Group acquisition of the IBM Personal Computing Division in 2005]. The single biggest challenge was enabling customization and the ability for users to get access to products in an intuitive and logical manner. Our capabilities relative to competition were significantly lower.

Once we clarified our priorities, the next challenge was to figure out how to redesign the experience within the framework of the legacy constraints. We met with the i2 team and developed a blueprint that looked to dramatically improve the experience end to end, all the way from the research (configuring and ordering) phase through manufacturing and fulfilment phase. We crafted a solution built on the i2 Agile Business Process Platform that allowed for such an experience from a customer standpoint and that is scalable and manageable from Lenovo's standpoint.

What was behind the decision to change Lenovo's direct sales strategy to a configure-to-order approach?

The premise of configure to order (CTO) is not new—it's been done by several others in the industry, but it is quite complicated and requires great diligence to execute well. The value proposition behind selling online is that the ability to provide a much greater level of flexibility and convenience to users. In other words, the online channel has the ability to offer an almost infinite number of options to customers without traditional constraints of physical space faced by brick and mortar stores. The fact that we've seen such huge growth in online commerce signifies that customers want merchants to show them what they want to buy in a way that makes sense to the buyers. In our specific case, the switch to the new model allowed our customers to pick and choose what they wanted with minimal confusion.

At the end of the day, this is what most online merchants are trying to do—sell more by simplifying the online experience. This seemingly simple notion was missing in our online sales experience. This in no way was revolutionary—neither was this a new discovery—but it allowed us to catch up to our competitors in a big way on the customer-facing front end and make improvements in our planning processes on the back end.

How do you identify and segment your customer base?

We service a broad spectrum of customers online, from individual consumers who buy one or two items from the web site for their homes and home offices, to small and midsize business owners who buy for their businesses. Business customers also buy online but typically buy from customized business-to-business sites, where they can have access to their negotiated bids, volume discounts and specific models that fit their needs. Business customers fall into several segments ranging from mid-market—500 to 5,000 employees—to large enterprise customers with numbers from 5,000 and up. We also serve education customers—higher education and K-12 institutions that buy in bulk—as well as public service entities such as various government agencies in the federal and state ranks that purchase large volumes for their constituents.

In the case of business customers, we build custom sites that are password protected, have unique product sets, and occasionally highly customized workflows that enable flexibility and business efficiency for the company. In many cases, the procurement department uses these sites to place purchase orders with us directly on behalf of their user groups. The whole process also has an account management structure around it to ensure that customers have the ability to voice their concerns directly to Lenovo. Most of our business customers are looking for efficiencies, and ordering online is the most efficient way they can execute procurement. Billions and billions of dollars in sales happen through such B2B sites globally—it's pretty significant, both for Lenovo and others in the industry.

How do B2B channel revenues compare with revenues generated from the consumer/home business site?

Sales on the business side far exceed the consumer sales for Lenovo, especially outside of China, because until very recently the majority of the products we sold were for the small-to-medium business, public sector, and enterprise audience. The ThinkPad's reliability—it continues to be among the best designed and engineered products in the marketplace—has earned it a niche in the business community. However, Lenovo recently announced its Ideapad line of products, aimed at the consumer segment. These products have a colorful and stylish design and upscale features such as facial recognition for security and advanced Dolby sound capabilities. Lenovo looks to distinguish itself on the high end—as a company, our aspiration is to delight our customers through an unequalled ownership experience, whether they buy our products for their homes or their offices.

What was i2's role in the web site redesign and CTO shift?

i2 helped us conceptualize and develop a solution that worked end to end: from a customer's initial research through to back-end supply chain processes. The partnership has worked very well for us, in part because i2 is very focused on the customer. They go out of their way to make sure that the solution delivers value. In custom development it's all about how you optimize the code. At the end of the day every bit of code that you write should improve the overall user experience, while addressing flexibility and scalability. There are pluses and minuses with out-of-the box configurable solutions versus custom development, but with custom development you can control how you develop the application front to back.

Working collaboratively, we had to think about all the nuances on the eCommerce end to figure out how to execute each decision to do the things we needed to do on the back end—to drive sales conversion and all aspects that are important to the customer. We worked very closely with i2 on this project for the initial six months on what was a pretty significant amount of custom development work. All of the new processes have gone as planned, with only minor hiccups here and there. I would say that the relationship we have built, the team that we have today, and the quality of the people we work with—all of these things seem to click well for us and are not very typical of similar project teams I have seen in the past.

In the last 18 months, we've been through six or seven releases of custom-developed capabilities, and I'm very pleased that we have continually added value to the customer's purchase experience. We feel that there are things we can continue to do to gain a bigger share of the market, so we continue to focus on improving capabilities and focusing on user experience. The competitive landscape is tough—Apple, Dell and HP are worthy competitors, all trying to improve the user experience. I am confident that with our intense and unwavering focus on our customers, we will continue to raise the bar in customer experience.

How does this system now position you to handle future challenges more effectively?

The one thing I can tell you with some confidence is that, as Internet penetration continues, and people spend more time online researching products and figuring out what they want to buy, the purchasing decision is more and more influenced by the online experience. As an example, if you go on a web site trying to buy a computer, or for that matter anything, and if your experience on the site is bad in spite of the product being good, and all other things being equal, it can absolutely impact the buying decision. We know that 70—80 percent of customers who go online to buy don't follow through for one reason or another.

For me it is very simple. You have to really focus on things that help customers make that decision properly. Everything in the online experience matters from a user standpoint. For example, consider flexible credit options. We recently integrated PayPal because it's an easy way of transacting without having to worry about fraud from giving out credit card numbers. We've added chat capabilities where customers can interact online with our agents without having to call. We've added customer reviews—so customers can provide feedback and look at feedback from other customers to firm up their decisions. In these seven releases we've added 300—400 features that all look to help our customers make the right decisions quickly and conveniently.

How does this new system position Lenovo to contend with current economic fluctuations?

Market conditions will fluctuate from time to time. When the economy turns downward, Â customers may migrate to the lower end, and some may defer. But the surprising thing from a technology standpoint is that PCs have become so central to people's lives, it is almost impossible for most people to operate without them. In most cases, newer versions of products introduce significant improvements in capabilities, whether it is a new version of a graphic card, increased computing power owing to a new chipset, wireless bandwidth or some other capability. You really can't go on too long without upgrading if you want to take advantage of the advances in technology. PC sales continue to be strong. The current economic outlook may see some shifts in how customers buy, but at the end of the day, growth in this sector will continue to be strong.

— by Deborah Navas