April 20, 2018

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HOME FEATURES › INTERVIEW: Marco Andresen, Lenovo

INTERVIEW: Marco Andresen, Lenovo

by Stuart Wilson, Monday 26 February 2018

Marco Andresen, EMEA COO, VP EMEA Channel at Lenovo
Marco Andresen, EMEA COO, VP EMEA Channel at Lenovo

Vendor giant Lenovo remains strongly committed to indirect channels as it pursues its three-wave strategy to lead in core business areas, grow in key segments and invest in emerging technologies. With its new Engage partner programme up and running, Lenovo wants to simplify how it works with channel partners across EMEA. Last month at CES, Channel EMEA caught up with Marco Andresen, EMEA COO, VP EMEA Channel at Lenovo, to get the inside track on the vendor’s regional channel priorities and objectives.

Channel EMEA (CE): In the consumer technology space, what are Lenovo’s priorities in terms of evolving the product portfolio?

Marco Andresen (MA): Lenovo wants to show that we are innovative and thinking about the future. What you will have seen that we are launching – most of it is related to new technologies – such as VR and AR. this is what we are launching. Obvious we have a lot of traditional PCs coming during the year, but we really focus on the future and new technology. That’s the message we want to give.

We have a very clear three wave strategy. The PC is our first wave and something to defend, but our second and third wave strategies are about securing the growth for the future. The third strategy is about new technology and investing in what will be big in the future. And this is what we have been doing for a long time. This is a message we want to give to our customers and to the channel too. Lenovo is here to stay for a long time, thinking about the future and adapting our strategy to what will be the future of the IT industry

Phone ambitions

CE: What does this mean in terms of the product categories you focus on moving forwards?

MA: The PC is right now the biggest part of what we do – it’s 75% to 80% of what we do. Then we have our two new growth engines – one is server, one is Motorola for the phones. Phone is something where we will aggressively grow. We are relatively small but growing fast and we have an ambitious plan to grow faster in the phone business. The rest is all the new products that cannot be categorised as easily such as smart home, smart office. This is something where we already have products and there will be a lot more to come in the future.

CE: Has the smartphone become more important as the main device at the centre of a digital lifestyle?

MA: For sure, the phone is in the centre of all our lives now. This is why I think it was important for Lenovo to get in to this business. We already had Lenovo’s phone business, but we grew by acquiring Motorola – this is going to be one of the pillars of this company. The phone is the centre of everything in our lives, so it is very important [for Lenovo] to be there.

CE: Lenovo spans both B2B and B2C products and channels. What challenges does this create?

MA: The channel is one but there is a distinction in the way the consumer channel and the B2B channel operates. Of course, there is synergy in the middle - especially in the SMB part of the business. I think the two different worlds meet a little bit. Our consumer strategy is clear. We are one of the biggest players in the world in consumer [technology] and we work with all the big retailers. And then we have the rest of the channel where we mostly sell products that are meant to go to business and corporate. It’s a pretty solid division on how those two channels work.

Emphasis on innovation

CE: What are your current business priorities in terms of developing the consumer channel in EMEA?

MA: We are working on growing our share – that’s probably our first priority. We’re working on our bottom line, which is something we think about all the time. If you have seen the journey Lenovo is taking, we are growing and also growing our bottom line. Maintaining industry-leading profit is important and the third priority is to continue to show innovation. This is very important - especially on the consumer side - and a lot of the innovation on the consumer side will then be implemented in the B2B channel as well. For example, AR and VR is something that right now is very big on the consumer side, but we think it will be an even bigger opportunity on the commercial side in the future

CE: As you look to grow Lenovo’s overall consumer market share, does this mean embracing new channels?

MA: Obviously we are always open to opening up new channels, but it mainly means growing our existing channels. We are present almost everywhere and we only sell through the channel by the way – we don’t sell direct to consumers. It is 100% channel. As such we have almost all the channels set up as our existing channels, so it is more about growing the channels we have.

CE: How is the relationship with bricks and mortar retailers evolving in EMEA? Do you see any changes happening in terms of the compensation models?

MA: One of the challenges is the transformation in retail and e-tail taking a bigger and bigger share. Then there is consolidation in some countries. In the UK for example there is one big CE retailer left. Consolidation is not necessarily an issue for us as a vendor, but it is something to consider. The players are getting less and less, and you have this new e-tail channel which popped up some years ago and is getting bigger and bigger. Traditional retail and e-tail are not the same so we as a vendor have to manage and find a way to work with both philosophies. Then we have to manage the daily relationships with the retailers – as you said there is always discussions about margins and all this, but that is business as usual. These discussions are also present in the corporate channel.

Cross-border e-commerce

CE: Would you consider changing compensation models to recognise the value of the showcasing that takes place in physical stores?

MA: We’re not looking at changing the compensation model. I think we have a pretty fair compensation model to our channels. It is individual. It is customer by customer in terms of these discussions. My feeling is it is working well. Where we have issues, we resolve them so there is no big change planned. Of course, we see our retailers as our arms and legs out there to reach the consumers. Its very important to remember that the channel is our sales force because we don’t do anything direct.

CE: What impact is cross-border e-ecommerce having on channel structures and channel management?

MA: There are some discussions around this, especially raised by some resellers, but you have to remember that - especially in Europe - this is something regulated by law. You can cross sell to other countries, you can’t do anything about it. But occasionally there is someone selling in another country creating some disruption in the market. This happens and it is part of our daily management of retail and e-tail. For sure it happens but it is business as normal and is there to stay and cross-border selling will grow. It is just going to grow with e-tail – it is part of what e- ail is.

CE: Do you think channel partners now accept that policing the channel can’t now take place in the same way that it once did?

MA: I think so and maybe, to be a little bit bold, whoever is not accepting this is going to have an issue. I definitely think there is an acceptance already. Of course, there are some traditional channels that might be struggling with some of the new ones - but this is definitely here to stay

Online sales growth

CE: How closely do you monitor which channels consumers buy from on a country-by-country basis?

MA: On a daily basis we know where each of our products is sold and where it is sold through. We know on a unit basis where our products are being sold through.

CE: What are the key trends you observe from this data?

MA: E-tail is growing for sure. In some countries like Germany for example, some months e-tail is even bigger than traditional retail, so you see a clear trend of consumers not only looking online but also buying online.

CE: How do you differentiate between different e-tail models? There are clear differences between say a marketplace and a full e-tailer that stocks and ships.

MA: It’s a little bit like we do with traditional resellers to be honest. We have a distribution model where we can sell to a reseller or an e-tailer through a distributor where there is stock for the ones that don’t hold the stock; or we can sell directly to a reseller or an e-tailer. Very similar to a traditional retailer that does or doesn’t have stock. E-tailers are working the same way. The only difference is their operating model and margin structure. But we have a line-up for the resellers that hold stock and a line-up for everyone else as well, which is again standing in distribution and distribution is acting as their warehouse.

CE: Many major brands are investing in their own retail brand stores. Why not Lenovo?

MA: Physical stores? No. Again, we operate fully through the channel and don’t think we can do it better than them. You can never say never in life, but we are not considering opening stores. We have an online shop, which is pretty small right now. That is our way of getting close to the consumer because we want to have a touch and feel discussion with the consumer.

CE: We are seeing more major tech brands from Asia coming to Europe now. How does that influence the competitive landscape?

MA: This is also business as usual. In the past we have had a lot of competitors that are not here anymore. Some new ones are coming, some are going. So, it’s a dynamic environment and I think it is healthy that you have competition. Of course, when you have a new aggressive competitor it can be classed as an issue, but I think again it is healthy and buisness as usual. Competitors come and go. Some are here to stay for long time and others maybe not – consolidation is also going on. Is it a challenge? Yes, more than it was in the past.

Gaming growth

CE: Gaming is increasingly mentioned as a growth category. How important are games and gaming products to Lenovo?

MA: Gaming is very important – that has been a clear trend now for two years. It is one of the growing segments in the PC business. From our perspective it is really important to build a brand that the gamers respect. We’re trying to do it – hopefully we already did – with our sub-brand Legion.

We adapt to the gaming community. You have also to think the gaming community is big today and acknowledge there is a small part of the gaming community that is not casual gaming. Probably 90% are casual gamers and 10% are hardcore gamers. We’re trying to build a sub-brand that is accepted by that 10% to try and attract the entire 100% and we do this with Legion. We have products that are designed to handle everything a gamer needs.

The look and feel of the products is different from the rest of the line-up to attract what the gamers want. And you will get a similar answer from everyone in this industry – gaming is very important and it is here to stay, and will continue to grow for many years.

CE: Is there a better margin opportunity in gaming?

MA: It can be slightly better but the main game for us is the fact that the ASP is much higher in gaming. So, even if the margin percentage is not much higher – you know we operate on relatively low margins in this industry unfortunately – selling a gaming PC gives you better revenue, so automatically gives you some more dollars in the pocket. Of course, gaming can be a margin opportunity compared to entry level PCs.

CE: How do you currently view the growth prospects across EMEA?

MA: On the consumer side, we think it is still going to be tough in EMEA. On the commercial side we see quite a lot of light at the end of the tunnel. Consumer still being a bit stretched in the next year, but commercial giving some headroom. The good thing on both is the average unit price increased throughout the whole of 2017. We think it will continue. So even if number of units declines a little bit in 2018 on the consumer side, from a revenue perspective it will be more stable.

We see our target as having a certain share no matter what the market is doing. So we want to grow at a premium to the market. We want to do this no matter where the market goes, because we cannot really impact where the market is going. We try of course with better products and making sure the end user is willing to spend a little bit more on his or her PC. But the market is what the market is ultimately and we may see a small decline in units.

Market share

CE: Is there an upper limit to the market share a single brand can achieve in today’s complex vendor landscape?

MA: I think it is to difficult to point out where that is, but I don’t think the channel wants any player to be too big, right? When you start to be in our region of market share, which is above 20%, I think there is still opportunity to grow. But then when you reach 30% I don’t think anyone wants [a brand] to be any bigger than this. Difficult to say. Theoretically there is no limit but in real life I think somewhere between 20% and 30% is a healthy number one position to be at.

CE: How does that view inform your marketing approach? Do you focus on channel or consumer marketing? Push or pull?

MA: We believe, and have been really focusing on, approaching the end user directly [in terms of marketing] and being customer-centric. This is something we believe is really important to make sure the end user at the end of the day wants to choose a Lenovo product rather than something else. We still do a lot of channel marketing and we will never change this. We do a lot of marketing through the channel and this is very important.

But addressing the end user directly, making sure we capture the feedback from the end user, making sure we know what the end user wants is ultimately creating loyalty to the brand. We are probably putting more efforts on the end-user than in the past without compromising the marketing we do through the channel

CE: Are there any specific countries in EMEA where you believe Lenovo is underrepresented or doesn’t have the market share you want?

MA: There are a few countries where we don’t have the market share we want. UK is a country where we have a share compared to the number one and we are investing a lot. Italy is another country to grow our share, France is another one. Overall we are happy with our share so don’t get me wrong. We want to target those countries, but there is not a specific country target just to be clear. We target EMEA as a whole, trying to fill in when there is a clear gap like the countries I just mentioned to you. But I wouldn’t say those countries are focus countries more than others. It is more we see there is a gap to someone else and we want to close the gap.

Simplified channel engagement

CE: What are the biggest channel trends that will shape 2018?

MA: The consumer channels are going to look into new categories. So, what we are doing here [at CES] is launching new categories and that is something embraced by the channel. Everyone is going to look at how to secure their revenue and make sure it doesn’t drop by adding new categories.

So you will see companies hiring extra people for VR and AR and so on. Some people already did. Some people will do. I think you will see new categories popping up. I think you will see the consumer channels investing a lot in digital marketing – digitalisation that is already ongoing will continue strongly. I still think you will see e-commerce – not taking over, that’s not the right word – but aggressively increasing its base in this channel.

We are re-looking at the whole way we engage with the channel. We just launched last year a new global channel programme, Engage, where we believe we are much easier to work with for the channel. We have first of all a programme that is global so you can recognise the same things wherever you are. If you are an international retailer or channel partner you will recognise yourself in the Lenovo world. Really working on being lean and mean and fast to the channel – being the vendor of choice for the channel by simplifying the way we engage with the channel through this new programme.

CE: How exactly have you simplified it for channel partners?

MA: We’re making sure we have tools where you can engage with Lenovo and get all your answers quickly. We remove all the complications that we might have had in the past. We’re really listening to the feedback we get from the channels. Sometimes taking inspiration from something someone else did, but reinventing things on our own, to make sure the channel is choosing Lenovo as the vendor of choice.

If the channel thinks Lenovo is an easy vendor to deal with – this is the best tool we can have to help the channel proactively selling Lenovo to engage with us. Making sure we are not complicated to engage with – this is very important for us. We have 3500 people in EMEA, which sounds a lot but it’s not for the turnover we have – it’s pretty lean as an organisation. The spirit we are putting in to everything we do is about being simple. One word I want to push a lot is simplicity.

CE: Channel programmes can become more complicated over time.

MA: I think we were more complicated in the past by having different programmes in different countries, different criteria and so on. We are unifying and making it simple to understand and ensuring that Lenovo is easy to engage with.

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