A Tale of Two Cultures

When Chinese computer company Lenovo Group bought IBM Corp.’s personal computer division in 2005, there were a lot of skeptics who thought the East-West integration wouldn’t work.

Yolanda Conyers, Lenovo’s vice president of global operations and chief diversity officer, said naysayers described the acquisition as a snake trying to swallow an elephant. “No one thought we would become the leading computer company in the world because we had two such different company cultures.”

However, the company has been able to embrace the strengths of each workplace and management style to forge an aligned “protect and attack” strategy — one that has propelled Lenovo to the top of the market.

But there is more work to be done, Conyers said. On a scale of 1 to 10, she gave the Lenovo integration process an eight, mainly because the company continues to expand with acquisitions in Germany and Japan. “We have to stay focused on cultural integration — it’s a never-ending task.”
While most multinational mergers have cultural integration challenges, Lenovo’s deal for a peer organization was more complex because of strong differences between Chinese and American management styles as well as approaches to the engineering design process. Exacerbating these challenges, there is a significant language barrier in which word nuances are often lost in translation, leading to many misunderstandings.

“For example, I would email to request a meeting, which is the way we phrase it here in the West,” Conyers said. “But I learned that within the Chinese culture they found the expression a bit top-down as it implies the meeting is mandatory, while I’m thinking I’m being very polite.”

One Chinese peer told Conyers that such a meeting request connoted a sense of hierarchy, and wondered if Conyers thought the Chinese colleague was her “junior.” “But once we talked about it, they understood that my requests didn’t mean that, and I am able to continue to request meetings that way,” she said.

Colleagues also had to get used to markedly different communication styles during meetings. For instance, Chinese employees often wait for their turn to inject their thoughts, while many Westerners tend to be vocal whenever they have a good idea to share. As a result, the Westerners dominated the meetings while the Chinese could be perceived as disengaged, she said. “So now most global leaders know to call on our Chinese colleagues to solicit their opinions and remind them that we very much want to hear from them.”

Likewise, engineers in Lenovo’s innovation triangle — China, Japan and the U.S. — had difficulties aligning at first, but they came up with ways to collaborate well, said Daryl Cromer, vice president, Subsystem Research Lab.

Chinese engineers like to think about the big picture first — they need to see where and how a particular issue fits into the overall picture and how it interacts with every other element. Westerners, on the other hand, like to begin their analysis with a specific example and figure out a structure from there.

“In meetings, the Chinese may feel their Western colleagues are only looking at one case and not the big context, while the Westerners may feel the Chinese are not interested in solving a real problem,” Cromer said. “So we learned to both define the problem in a particular case, and explain why it is important and relevant. Then collaboration becomes a lot easier.”

While Cromer said Lenovo leverages “the unique talent and innovation heritage of the engineers” in each of its research and development bases, American engineers are particularly good at understanding how architecture can meet customer needs, especially those of corporate customers. Japanese engineers are good at designing products to make them sleek and light, and Chinese engineers can quickly turn a design or concept into an actual product.

While the U.S. and Japanese teams worked together for many years in the former IBM unit, the challenge was to figure out and integrate the strengths in the Chinese design team. “When they saw a great design concept, they couldn’t wait, and would proceed very quickly to turn it into a real product,” Cromer said. “As for their designs, they were good, though perhaps not as sophisticated as those from Japan. However, the most surprising characteristic was their expectation of success and the confidence to make it happen fast.”

Most of the cultural integration challenges came to light during the first several years after the merger, leading Lenovo to hire an outside consultant to survey and conduct focus groups with a cross-section of employees to get their take.

Conyers said the audit revealed a lack of trust. “So we peeled back the onion to determine what caused those issues.”

Lack of trust is at the core of most problems in mergers, said Kathrin Koster, a professor at Heilbronn University in Germany. And when people are unfamiliar with their mutual cultures, the problem may become even more severe. Before companies announce mergers, managers should first create a watch list of sensitive areas, where cultural integration challenges such as differences in communication could occur, she said. Ideally companies also should establish procedures for how they are going to tackle such challenges before the merger is made public.

After audit results became known, Conyers and her team created “East Meets West” forums to discuss differences and similarities. Through these forums, the team learned the trust issue was actually more about different ways of doing things and miscommunications, that in turn led to an assumption of disrespect. For example, the Chinese culture has a strong emphasis on being humble, and some behaviors that are normal in the Western culture can be perceived as self-promoting and therefore are discouraged. “Meanwhile, I was learning that if I wanted to be an executive, I needed to speak out, be assertive in order to be heard,” she said.

While the team was off to a good start in tackling such issues, the entire company was thrown off when the global economic crisis hit in 2009. As revenues dropped, senior leaders realized Lenovo’s business model had to be tweaked. The revamped leadership team developed a clear strategy that could be understood by all employees — “Protect and Attack.”

“Lenovo’s Protect and Attack strategy has us act like a boxer protecting our core strengths with one hand, such as China and global commercial PCs, while simultaneously attacking new high-growth opportunities with the other, such as emerging, global consumer and mobile markets,” Conyers said.
The new strategy to define Lenovo’s culture revolves around the Lenovo Way 5P’s: We plan before we pledge; we perform as we promise; we prioritize company first; we practice improving every day; and we pioneer new ideas. The fifth “P” was added in 2012.

By 2010, Conyers and her team began using the Protect and Attack strategy in employee training, using the Lenovo Way language on posters, presentations, as criteria for awards, even on employee badges. Additionally, all HR and business processes were revised to support the Lenovo Way.

The strategy helped revamp Lenovo’s supply chain processes, said Gerry Smith, senior vice president; president, Americas Group. When Smith joined the company in 2006, there were two different supply chains, one for Lenovo China and the other for Lenovo International — the former IBM supply chain — each with very different cultures.

“For example, in the West, meeting 98 or 99 percent of one’s budget was considered OK, but for employees in China, if they didn’t meet their budget 100 percent, it was terrible,” he said. “Given differences like that, it took a while to get clarity within each business unit.”

To help, Smith and his team simplified things — including reducing the number of key performance indicators from 150 to five: cost, delivery performance, cash conversion cycle, supply management and quality. By reducing the cultural nuances, people in every part of the world could focus not just on their little bucket, but on the overall performance of the organization.

“Everyone got aligned over time, and we achieved tremendous improvements in all of our five focus areas: costs went down drastically, our delivery time improved, our cash conversion cycle shortened, managing supply of our components was much easier and the quality of our products became nearly perfect at 99.9 percent defect-free. That helped us transform our global supply chain into a competitive advantage that it is today,” Smith said.

The success of the Protect and Attack strategy is apparent in Lenovo’s business results. At deadline the company had outperformed the overall market 19 quarters in a row and achieved 17 consecutive quarters of sales and operating profit growth with margin expansion.

Employee feedback from the company’s Lenovo Listens annual electronic survey also indicates the success of the strategy internally. In the most recent survey in June 2012, overall employee engagement rose to 83 percent, from 72 percent in May 2011. The normative comparison for major high-tech companies is 76 percent.

One critical reason why the Protect and Attack strategy has been effective is the company’s annual award and recognition program is now built around the Lenovo Way and the 5P’s, Conyers said. “Adherence to these principles is what wins employees honor in our culture.”

Katie Kuehner-Hebert is a California-based journalist. She can be reached at editor@diversity-executive.com.