The Story of the ThinkPad: Building a Global Success

  Chapter 3 From IBM to Lenovo—Constant Quality and Continuous Evolution

  Transfer to Lenovo—Taking the ThinkPad logo with us

  　

  On December 8, 2004, a strategic alliance between IBM and Lenovo that included the acquisition of IBM’s personal computer division by Lenovo was announced. This acquisition would include the PC division and its products and brands, such as ThinkPad and NetVista, and would entail the transfer of nearly all PC development engineers to Lenovo Japan.

  At the time, some in the Japanese press viewed this acquisition negatively, but I and the engineers of the Yamato lab, by and large, took this as a positive development. I said at one press conference, “Yamato lab engineers do not want to make IBM PCs. We want to make ThinkPads. We view ThinkPads as a part of ourselves.” This is the truth. And in that respect, nothing changed.

  Naturally, this announcement came as a shock to most of our engineers. Everyone had chosen IBM as the company they wanted to join. All were fans of the ThinkPad, but they had joined IBM because they liked IBM as a company. While some may first have learned about this acquisition from the newspapers or other media, in all likelihood no one would just casually say “Oh, is that so?” on hearing the company had been acquired.

  At the time, I had left to start my new post in the U.S. I had been made an IBM fellow in 2001. Fellows are specialists who are named by IBM’s chairman in recognition for their contributions to IBM’s technologies and business. This may sound presumptuous, but at the time there were only 52 fellows out of 320,000 IBM employees. What’s more, I was only the third Japanese person to have been named a fellow. Yutaka Tsukada, the second Japanese fellow, was a circuit board specialist at the Yasu Plant and later became a director of IBM Japan. The first Japanese fellow was none other than Leona Esaki. Both of these men were out-and-out technology specialists. As a systems developer, I was the odd man out. Having been thus honored, I naturally felt a bond with the company. And from 2003, I’d been posted to the U.S., in North Carolina, as Vice President of the Personal System Division and Chief Technology Officer (CTO). Thus I was already removed from the position of representative of the Yamato lab.

  That announcement of the acquisition of IBM’s PC division by Lenovo came when I’d been on my new post a little over one year. I immediately flew back to Japan to explain the situation to everyone in the lab. I talked about many things, and every single face I saw looked worried. But I knew that we could not resist the winds of change. Prior to the Lenovo deal, the LCD group had been bought off by another company, the hard disk group had transferred to Hitachi, and the silicon development group had moved to Epson. Further, the group that designed circuit boards and substrates went to Kyocera. This was the period during which IBM Japan withdrew from hardware technology development. The server business remained, but PCs were the last important part, so to speak.

  And so I told them, “This is a river that will have to be crossed sooner or later. This here is our best bridge.”

  I don’t know how many people were convinced, but I spoke from the heart.

  I also told them, “The IBM logo has been around since way before we all got here. But the ThinkPad logo we created ourselves. We can’t take the IBM logo with us, but the ThinkPad logo is ours. So what are you unhappy about?” I don’t think that everybody suddenly came around on hearing these words, but I believe chewing on them calmed them down. As a result, I think that their affinity toward the ThinkPad logo grew even more and, in a positive sense, their sense of ownership deepened.

  Unfortunately, there were also those who could not accept the change, no matter what. These members left the Yamato lab; I could not stop them, as I thought it could not be helped.

  In the end, I stayed in Japan for a couple of months and returned to the U.S. once at the end of February, to wind up unfinished business and move out of my house. Then in May, I went back to Japan as leader of the Yamato lab. This time, I was starting out as a Lenovo member.

  By that time, all the engineers were positive. And thus we got underway with a renewed sense of conviction.

  That this bridge was our best choice was no lie. The worst M&As are those that involve the acquisition of a company that is exactly the same as the purchaser. In such cases, restructuring is the next inevitable step to eliminate redundancies. However, in Lenovo’s case, there were no such redundancies. Our differences were clear-cut: we had a global market versus their domestic Chinese one, and we served the commercial market versus their consumer market. Few acquisition plays have such a perfect complementary relationship, and thus I thought that this was the best possible bridge.

  As I mentioned previously, several members of the team decided to quit, but we did not lay anyone off against their will, as each and every person was a valuable ally.

  PCs become a core business—market expansion after biding our time for three long years

  The Yamato lab is the only place where ThinkPads are developed. This has always been so, whether at IBM or at Lenovo. But there is one more reason why the engineers, including me, took our acquisition positively.

  It took a while before I could be sure of that, but I thought that at Lenovo, we might be able to give freer rein to our power as engineers than at IBM. I thought that we’d be able to expand into fields that had not been addressed to that point by IBM, and that we might be able to take on new challenges.

  IBM is a giant IT company with operations centered on mainframes, and the Yamato lab was a mere division. Lenovo, on the other hand, while also being a global company, is a dedicated PC manufacturer and so its PC division is positioned differently.

  Within the entirety of IBM’s business, regardless of how well the PC division did, and even if it had poor results, the degree of influence this would have on IBM as a whole was not that great. Regardless of how well ThinkPads sold, it had little effect on IBM’s share price. In Lenovo’s case, however, the situation was completely different. The ThinkPad’s business performance would surely affect the company’s share values, for it was one of the company’s core businesses. And in fact, the R&D budget for PC development increased greatly once we transferred to Lenovo. Given its centrality, the PC division could stand its ground better at Lenovo than at IBM. It was great knowing that my business was at the heart of the company, and this further increased my sense of drive.

  If people fully grasp this and realize that they hold the key to the growth of their company, their sense of ownership increases, as does their motivation.

  One concern was the worry expressed by some of our customers that now that we were under Lenovo, the ThinkPad might change. I addressed this at a press conference, among other occasions, emphasizing that “The ThinkPad will not change in any way. The foundation we have built until now will stay in place. Therefore, worries that the ThinkPad will become a different product are groundless. Users of future ThinkPads will continue to be able to enjoy the same high-grade experience they’ve come to love.”

  This is the kind of message I would keep on broadcasting at the time, because some people voiced the view that we might launch completely different ThinkPads following our acquisition by Lenovo. This was not an expression of anticipation, but of concern. To convince such persons that this would not happen, I decided not to change anything for three years, and I held true to that promise.

  And about the time the three years were up, I began telling people that we’d aim to change the ThinkPad. This did not mean that we would abandon what we had developed for the ThinkPad. I wanted to leave its essence unchanged while broadening and expanding the customer value we offered. This is the lot of the engineer, always wanting to take on new challenges. We don’t know any other way to live.

  In terms of ThinkPad series, we retained the A, X, T and R series started under IBM.

  The A Series, which was the standard model, was later renamed the L Series, a change sought by the marketing division that did not reflect any engineering modifications. The
SL Series of entry-level machines was also added. The X and T series, which consisted of “traveler,” or ultraportable, machines, were positioned as premium series in relation to the standard models. We also had the W Series, which stood for workstations. Then three years later, the Edge Series was introduced, as was the X Series tablet.

  I believed that we had to broaden our market, because Lenovo was still a young company and we were operating on a strategy of “protect & attack” as we aimed for growth. At the time, the corporate market, which was the main zone for the ThinkPad since the IBM days, was said to be mature, meaning that strong growth could not be expected. If that were the case, I thought, continuing to serve only this specialized market would put our lab in jeopardy. I knew that we’d be unable to survive unless we kept up with Lenovo’s growth and even surpassed it to become the lab pulling the company up, and to that end, we had to broaden the ThinkPad’s market.

  Timing the launch of the Edge—a ThinkPad for small business

  What we created was the Edge Series of lower cost machines intended for use by a broader array of users than just large corporations. This in itself was not a mistake, but the view that the corporate market was a mature, low-growth market was in error. The corporate market went on to grow strongly, as it does to this day.

  This was not our first attempt to introduce a low-priced ThinkPad, but we had not done it right the first time. As our budget for that task was limited, we thought that we’d put out a low-priced product just by making some minor changes, and ended up economizing too much in terms of time and labor. The problem was that customers could not tell the difference, and people would ask “Why such a big price difference?” If we sold a new low-cost version featuring the same design and color, but a slightly different name, for 100,000 yen or so, compared with 300,000 yen, in today’s equivalent, that a ThinkPad would sell for in those days, it would only be natural for existing customers to feel betrayed, and we’d immediately get complaints. This is why I opted not to change the ThinkPad and instead establish a new zone within the ThinkPad family.

  Introducing a new product that would serve as the cornerstone of this new zone meant not changing existing ThinkPads and thereby preserving that sacred domain. It is fair to say that we developed a new area so as not to compromise the existing relationship with our customers.

  We sought to have a greater number of customers discover and use the ThinkPad’s original features, its ease of use and its reliability, all developed as a total system. Our first answer was the Edge.

  This was a new product geared toward developing the small/medium-sized company segment, rather than large corporations. The target market, however, was more than just Japanese small/medium-sized companies, so the term “small business” might more closely express our intended meaning.

  Fortunately, this being Lenovo, a company that takes on one new challenge after the next, we were able to get the required funding. Of course, we engineers did our part. Although we would create twice the number of products, we could not very well use up twice the number of people and development expenses. Thus we endeavored each day to come up with ways to expand our development portfolio by establishing more efficient methods.

  Although the plan was only to expand the breadth of our offerings, leaving the ThinkPad unchanged, we knew that making this announcement might cause suspicion and turmoil in the market. People might think “I just knew they’d change under Lenovo.”

  For that reason, as reassurance that things would not change, we did not launch new initiatives for about three years. To be frank, I would have liked to get started right away. As a business chance, the timing was not bad. Still, protecting the brand and trust we’d built up and treating our customers with consideration were more important than taking on new challenges. Thus we bided our time for about three years.

  Soon after we started under the new system, we developed the machine called Lenovo 3000 and introduced it to the market. However, we did not use the ThinkPad name and the machine did not even feature a TrackPoint. To be honest, it was not that successful. This was a painful lesson—even if we proposed functions that we wanted for the ThinkPad on a different machine, the message might be lost. Production of this product was discontinued after about one year.

  Then, the long-awaited Edge was released.

  What kinds of functions did the Edge have? What made it different from the ThinkPads released to that point? The basic functions were the same. However, some of the features and specifications of ThinkPads are specifically designed for large companies, and as such were not needed. For example, IT managers may distribute as many as thousands or even 10,000 PCs to end users. Setting passwords and company policies at such time is almost impossible in physical terms. Therefore, all PCs come equipped with a security chip that enables the distribution of policies from LANDesk. There are also chips and functions to lower the total cost of ownership (TCO), an important requirement for large companies. Functions of this sort were the first to be eliminated.

  However, this was not enough. Some elements would actually drive up costs owing to design characteristics. Even so, we could not accept any reduction in reliability. The ThinkPad being synonymous with our lives, there were quite a few things we couldn’t do while continuing to work under the ThinkPad name. In need of a solution, we looked for ways to drive down costs.

  Ensuring full quality in the lower-price zone

  The specifications of the Edge were reworked any number of times. For example, for tests to measure durability, we proceeded by trial and error at first to determine how far to lower the standards. By this, I mean how far the existing standards could be relaxed, made less strict. However, I actually thought this to be a meaningless exercise, as this would have meant making compromises such as saying that “even though they are ThinkPads, quality equivalent to 80 percent of our existing standard will be sufficient for low-cost models.” This went against the ThinkPad way. And so I called for deliberations in this direction to be stopped.

  Instead, we’d stick to testing to the full criteria of the ThinkPad, and improve the points that could be improved in order to clear these criteria. If, after these efforts, there was a parameter that could not be improved unless, for example, high-cost carbon fiber were used, we’d think of an individual solution.

  The reason for this decision was that, going back to what I talked about before, when the engineers themselves would be asked at press conferences, “Is this product built to the same standards as the ThinkPad,” they’d likely be unwilling to answer “No, they’re made to 80 percent of the ThinkPad’s standard.” Could we proudly stand our ground if asked “Why just eighty percent? Can this product still be called a ThinkPad?” We decided among ourselves that producing such products would be no good.

  Our approach was successful. The resulting products were not entirely the same as existing ThinkPads. They were a little heavier, and to lower costs, slightly weaker materials were used and slightly larger gaps were used in some locations to clear the same standards. And thus the first Edge Series came into being. We still were not satisfied, however, and when we examined the results, we told ourselves that “This should be made thinner. How can we achieve that?” and we tried again and further refined the design.

  In other words, in making the first model, we did not think in terms of lowering the specifications for a lower price, but instead sacrificed lightness and thinness to some extent in a very tight contest. And when the first model change came around, we carried out development telling ourselves that “We’ve come this far, let’s work to restore the parts that were sacrificed to the original specifications.”

  We went on to gradually set the bar higher. At first, we ensured quality through the use of carbon fiber. But this resulted in higher product prices. Next, we compromised on weight and thickness to lower prices. In this way, we maintained quality. Next, I called for us to try to achieve weight reductions without using carbon fiber. And we came up with
new solutions. For example, we’d get ideas such as “Until now, we thought that we needed a one millimeter gap in this location, but based on our experience and data, a 0.8 millimeter gap should do.” We also devised alternatives in case a given idea didn’t work out. Through such trial and error, we were able to deliver products that we could confidently call ThinkPads in price zones lower than ever before.

  Even so, the traditional ThinkPads and the Edge could not really be said to be exactly the same. The Edge certainly met the standards of the ThinkPad, but the X Series and L Series of ThinkPads, for example, were of a quality that greatly exceeded this standard, showing how generous their specifications were.

  The experience of developing the Edge through trial and error by cutting all bridges undeniably allowed the engineers of the Yamato lab to grow a few levels higher.

  Costs naturally arise when one uses certain components, or switches to pricier materials to solve some problem. The only way to avoid this is to spend time on solving the problem. However, at present we can’t afford either. Higher costs are out of the question, and there’s no time either, because we must offer new solutions to customers in shorter cycles than ever before. And yet we can’t just work through sleepless nights or soldier on fueled by sheer determination and grit alone. Knowledge is also required. Engineers are constantly improving their skills in the area of how to shorten simulation time, streamline testing, and determine which tools are needed for this purpose.

  The efforts of individual persons do not end with these individuals, but contribute to building up the collective assets of the organization, and of the Yamato lab. I believe this growth rate to be high, rising faster than a straight line.

  ThinkPad Edge15 Black

  Style comes into its own

  With the Edge, the ThinkPad entered its fourth generation. The first generation was that of the 753. The second generation was the ATX generation, from 2000 to around 2005. The third generation demonstrated that the ThinkPad would not change under Lenovo. And the fourth generation began with the release of the Edge in 2010. We put a lid on adventurousness for the third generation, but this was the age in which the ThinkPad made new inroads into large companies. It was the period during which the foundation for the next step was strengthened. The market expansion toward small businesses then began with the fourth generation.

  Looking back, it might appear as if the third-generation ThinkPads stopped growing, but this was not the case. Despite discussions about sufficient speed having been achieved at the beginning of the 2000s, we worked to further increase the performance of the processors. What impelled us to do so was the fact that with increases in the number of programs, such as anti-virus software, running in the background, higher and higher performance was needed. Even maintaining the same apparent performance actually required raising basic performance quite significantly.

  This ties in to the debate on what constitutes performance for users. The third generation was a time during which we sought to further improve basic performance in such areas as graphics and wireless, which is required to boost the productivity of our customers. I trusted that this would enable us to create PCs that disappear from users’ awareness, which is our ultimate goal.

  Then on to the fourth generation. In the U.S. in particular, the trend referred to as the consumerization of IT is gaining momentum. Various devices such as smart phones and tablets are appearing as part of this trend. The current trend is how to incorporate such devices in business settings. Along with this trend, the questions of whether a product is “modern” or “stylish” are being stressed more than ever.

  This is an important factor, particularly for young businesspersons active on the front lines of business. This aspect differs from function, but should also be emphasized in the fourth generation because the user base that is the main target is changing. Of course, the traditional ThinkPads continue to occupy a central position in terms of design, but broadening of the user base, as typified by the Edge, will have to be given more weight in the future.

  We also made some lucky miscalculations. Although the Edge is a product designed for small business, it became a huge hit, selling 1 million units in its first year. Hearing its praises, a number of existing customers at large companies are reported to have requested their existing suppliers to “bring us PCs like the Edge.”

  The situation overseas was even more different. This was born from differences in distribution channels. In Japan, enterprise PCs are basically sold through direct sales by salespersons or through distributors called partners. The ThinkPad is no exception. However, in emerging markets such as China and Russia, enterprises PCs are predominantly sold in stores. When PCs are lined up on store shelves, looks tend to weigh more heavily, and people tend to focus on aspects such as modern and stylish designs.

  Incidentally, Lenovo had a product called IdeaPad, a Windows machine for individual consumers. The Yamato lab has not been involved with this product, as this machine was developed by a separate development division of Lenovo. It is ideal for entertainment, offers superb video and music-related functionality, and has a stylish and functional design. It is a low-end machine designed with an emphasis on entertainment.

  Of course, there is a sense of rivalry between the two divisions. We target different segments, large corporations and small businesses on the one hand, and individual consumers on the other. However, the distinction between small businesses and individual consumers are becoming blurred. In other words, there are aspects where our respective work is of mutual reference for us.

  Moreover, the Chinese market is growing extremely rapidly. There are periods when even a PC such as the ThinkPad sells more in China than in the U.S. From this, we can learn about the trends in emerging countries, as well as about national characteristics, such as the preference for graphics functions to be provided externally rather than internally. Successfully absorbing such information will allow us to increase sales volume.

  Another thing is that consumer products such as the IdeaPad require frequent model changes. As a matter of fact, the department in charge of development is developing the next machine on an extremely short time cycle. Such short-cycle development know-how would be of value for the Edge, among the various ThinkPad series. I believe that we should emphasize this aspect in the future.

  Can an engineer leaving the frontline turn sadness to motivation?

  Shifting away from hardware for a moment, let me talk about the steps in an engineer’s career path. A few engineers excel in a particular field and become uber-experts in that area, and deeply investigate it over many years, if not their entire lifetime. However, the majority of engineers, Yamato lab engineers included, have career steps provided for them that take them away from their field at a given stage and gradually turn them into generalists. Both IBM and Lenovo are the same in this regard. Almost all engineers come to this crossroad between the ages of 32 and 35.

  Around that time, most companies conduct leadership training for people on track to become assistant managers or managers. Normally, people go to a training camp for three days or so, and one evening is often reserved for talks with executives and seniors. I myself have often been called to such events.

  On such occasions, I talk about my own experiences, and I’ve come to realize that everybody runs into the same difficulty—even when people are told they will be promoted to manager, they feel tremendous sadness at the prospect of leaving their workplace.

  “I don’t want to become an assistant manager,” they say, almost hysterically.

  I usually tell such people, “You think that you’re very smart, right? But I’ll bet you’re not three times smarter than other people. You may be twice as smart, but not three times. You can’t do the work of three persons.” A person might be a genius who does the work of a million by discovering new principles or by inventing new technologies, but such people rarely appear.

  “No matter how hard you work, you can only perform
the work of two persons. But if you have ten persons under you, you can produce ten person’s worth of output. If that’s the case, rather than clinging to the work of two people, don’t you think that you should choose the work that allows you to produce ten persons’ worth of work? You have come to such a juncture.”

  When they hear this, about half of the engineers wear a resigned expression. In fact, this is the same line that I used to convince myself. I really wanted to go on working as an engineer and at times thought it would have been better. But I suppose this is what the times required—people working on the front lines were of course needed, but the organization wanted even more a person who could organize and lead the engineers. I believe this is why I was tapped.

  By the time I left my post, integrated circuits had reached quite a large scale, and the environment had become such that the work I had wanted to do with semiconductors and integrated circuits in the first place was now possible. There were a number of opportunities to personally take on various interesting design challenges, so I only left my post with tremendous regret. I wondered to myself why, just as I was coming into my own as an engineer, I had to take on the job of a master negotiator.

  It’s true that I would come to be called “Mr. ThinkPad” as we entered the ThinkPad development phase, but this too was just a matter of fate. It’s not as if I worked out a plan for us to start making ThinkPads. It was all the result of a chemical reaction that, in addition to the tide of the times, included the designer Richard Sapper, an excellent general manager, and a lineup of experts with various skills. I cannot flatter myself thinking that the ThinkPad came about because of me. Had I not been there, somebody else would surely have successfully brought off this project.

  And so, to be honest, being called “Mr. ThinkPad” is a bit embarrassing. However, a benefit of this title is that it gives me opportunities to talk in various locations, in various magazines, as a representative of the Yamato lab, and as a representative of all the people, past and present, who have been involved in the ThinkPad project. In this sense, I think that my position as a representative accounts for about 75 percent of all my responsibilities.

  From micro to macromanagement

  If I may be allowed to digress a bit, I can say that people don’t just worry before becoming managers. After becoming managers, we begin to worry about management style.

  At first, new managers all want to give detailed, hand-holding style guidance. Their subordinates are doing what they themselves want to do, but no longer can because they have been promoted. As a result, managers tend to evaluate their subordinates more strictly and they end up giving excessively detailed directions as they try to resist the temptation to give a hand at every turn. Such behavior on the part of leaders is not something to be proud of. Out of frustration, some managers will shout, “That’s no good!” and take a job away from the person doing it. Management that hands down detailed directions in this manner is called micromanagement.

  This is a never-ending challenge. Managers must evolve from such micromanagement to a macromanagement approach that optimizes resources while providing work directions and being considerate to the entire team. While all managers understand this, this is a barrier that is not easily breached. Moreover, it’s not a matter of selecting just one or the other of these management styles.

  When in a local skirmish, machine gun bullets come flying in from the opposite side, soldiers need directions from their commander. Surely no responsible commander, in such a situation, would tell his troop “I’m leaving you on your own” and take away the ladder, cutting off their retreat. However, in the case of a major engagement, if everybody waited for detailed instructions, it would become extremely difficult for 500 or 1000 soldiers to operate smoothly. At such times, micromanagement is definitely unworkable. Yet in the front line of business, it is not easy to determine where the local picture ends and the big picture begins. Many questions asked during training actually concern this topic. Everybody experiences the same difficulties. Unfortunately, there are no easy answers.

  Amidst all this, the next important issue is the formation of successors. I committed the same mistake all along for a number of years. I thought that cultivating my own successors meant creating lots of copies of myself. Of course, this is wrong. Making copies of oneself isn’t easy in the first place, but even if one were able to do so, one would not be able to develop people of the talent to surpass the original. So it’s not a good idea. Others do not necessarily excel where one excels, and personalities differ too. People’s natural styles vary as well. When you see that a person has skills you yourself do not, you should recognize this and coach that person accordingly.

  Servant leadership is well suited for macromanagement. It consists in not stepping forward oneself but instead providing the right environment and gently guiding one’s subordinates and motivating them. It’s about allowing one’s juniors to learn and grow on their own and sparing no efforts to provide an environment that is conducive to this. Under such servant leadership, you cannot just create copies of yourself. A true servant leader is someone who makes the most of a person’s individuality and helps that person make a commitment and grow.

  I myself work hard every day to become such a leader. To tell the truth, I do not think that I am suited to be a leader. At least I do not have the qualities of a natural born leader. This is why I experienced many difficulties, and I still have to work hard in this area even now. If there is a point that I can take pride in, I guess it could be the fact that these experiences have enabled me to understand the struggles and weaknesses of others. I am able to teach others how to push through their challenges by talking about my own experiences. Still, I don’t know whether I am really doing well in this regard. I would be in the dark without feedback from others, as it is difficult for me to judge this on my own. And there is the matter of position. It appears that my subordinates find it difficult to give me feedback, whether good or bad.

  And yet, I’ve worked to find way to encourage feedback. For example, I set up a database based on a system similar to the complaints boxes that were used in Japan in the Edo era. This database protects the identity of submitters by hiding their IDs. The potential submitters are all IT specialists, but I made doubly sure that even they could not find out posters’ IDs. Even so, when I tell them to “go ahead and post,” nobody does because they are all convinced their identities will be found out.

  I also make sure to collect feedback during general meetings. Since the Notes database retains submitters’ ID by default, we initially used a format that required registration. As participation was weak, we switched to an anonymous format, believing that the registration requirement turned people off. But the result was even lower participation. Thinking that this might on the contrary have sapped the motivation of people to make submissions, we switched to a format where the ID of a person making a submission is pre-entered, and giving the submitter the option to opt out. Even so, few submissions came in, and the submissions we did receive were mostly the type of things that would have been better said out loud on the spot, such as “The sound level of the microphone is set too low.” Of course, there were also frank opinions among the lot, but we didn’t receive direct views such as “I believe that your way of doing things is not right” or “You are wrong.”

  This is a sad situation, but I guess it can’t be helped. Leaders are said to be lonesome, and I agree with that completely.