Why Did People Still Love Lenovo's Thinkpad?

Ethan
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THINKPAD DOMINATION 

Do you know what the best-selling electronic of all time is? Well if you guessed the iPhone or the Samsung Galaxy, then you’re probably right, but that’s not all that surprising. iPhones and Galaxies are basically ubiquitous around the world having sold billions of units. 


But something that might be surprising is how many Thinkpads Lenovo has managed to sell. Over the years, Lenovo has sold a whopping 200 million Thinkpads. For perspective, that makes Lenovo the world's largest PC maker by unit sales, a title that they’ve held on and off for decades. 


When Did People Still Love Lenovos Thinkpad?


And what makes this achievement even more impressive is that Lenovo breaks basically every rule you can think of with the Thinkpad. For starters, the Thinkpad doesn’t look all that impressive. It’s not the sleekest laptop or thinnest laptop that Apple is trying to create. 


Nor is it the bulkiest and most overkill laptop that Asus is trying to create. Heck, Thinkpads still have those red TrackPoints in the middle of the keyboard as if we’re living in the early 2000s. In fact, Lenovo hasn’t really changed the design all that much since the Thinkpad was introduced way back in 1993. 


Yet, none of this has stopped the Thinkpad because while the Thinkpad might not be the coolest laptop, it does exactly what it promises. It’s practical, functional, reliable, and offers phenomenal value. From a grounded perspective, these are exactly what any consumer should be looking for. 


But as we’ve seen with the smartphone market, this doesn’t always hold up. In fact, some of the worst-selling smartphones are the most practical smartphones like the Google Pixel and HTC smartphones. 


Meanwhile, people tend to buy iPhones year after year even if nothing changes simply because the iPhone branding and marketing are so powerful. Yet, within the laptop market, Lenovo has been able to rise above all the hype and carve out a massive segment for itself. 


In fact, many would argue that if you want all the perks of a Macbook without the Apple tax or Apple’s antics, you get a Thinkpad. So, here’s the story of one of the last practical electronics that’s still killing it in the year 2024: the Lenovo Thinkpad. 



UNPARALLELED EFFICIENCY

Taking a look back, the story of Lenovo takes us back to November 1, 1984, to a group of Chinese engineers led by Liu Chuanzhi and Danny Lui. Originally, the company was called “Legend” and the team was focused on importing TVs, but after this effort fell flat, Legend pivoted to the rapidly growing PC market. 


This wasn’t all that easy either. Legend didn’t exactly have the technical know-how or resources to bring a PC to market and scale production. As such, they opted to fulfill background functions with the market. 


For example, they started off as a quality checker for existing computer brands. They would also go on to create a circuit board that allowed IBM-compatible PCs to process Chinese characters. But while these efforts were enough to run a small local business, Liu had much bigger ambitions for Legend. 


To even have a chance at those ambitions, Liu first had to hire a much bigger and more knowledgeable team that could handle a task that was as daunting as bringing a PC to market. As such, in May of 1988, Liu pulled the trigger and placed a job ad on the front page of China Youth News. 


They only had enough money to hire 16 people but given the novelty of the PC industry, Legend would receive an unprecedented number of applications. 500 to be precise for a no-name computer company doing quality checks. 


Liu decided to take advantage of the interest and move forward with as many applicants as possible. 280 would be given written tests, 120 would be interviewed in person, and 58 would be given offers even though they could only afford 16. 


And before they knew it, they would end up with a staff including 18 people with graduate degrees, 37 people with undergraduate degrees, and 3 students. One of these hires was a man named Yang Yuanqing who would go on to be the CEO of Lenovo but that was still a long way away. 


In the meantime, Legend had to figure out how to support a workforce they couldn’t afford. This mainly consisted of taking on a bunch of debt and living on scraps. In fact, money was so tight that Liu and his coworkers wouldn’t even take cheap public transportation, opting to walk everywhere. 


But, from Liu’s perspective, this was all more than worth it because he was spending all of this money on engineering talent and R&D, not flashy office buildings or corporate retreats. And that brings us into really the key advantage of Lenovo: unparalleled efficiency. 


Lenovo can run a leaner and cheaper business than even most of their Chinese counterparts. And when we’re talking about an industry such as PCs which have been largely commoditized over the past few decades, this is critical. 


In fact, the average net margin for computers and peripherals currently stands at just 3.42%. So, coming out on top in this cutthroat market is very much a test of efficiency and grit, an area in which Lenovo has largely excelled. 


In fact, Lenovo regularly boasts net margins that are far slimmer than even 3.42%. They usually hover somewhere around just 1.5%. So, if you’ve ever wondered how Lenovo can offer such value-packed devices, well there’s your answer. All the money you’re spending is directly going to just R&D and parts. 


Virtually none of it goes into fancy redesigns or advertising efforts. In fact, even today, Lenovo only spends $100 million per year on advertising. For perspective, Dell spends over 10 times that every single year. 


This tunnel-visioned focus of cutting costs everywhere except for where they really matter is what has allowed Lenovo to launch such value-packed computers which brings into the company’s first computer. 



MAKING A NAME

Starting in 1990, Legend would begin manufacturing and selling their own computers. One of their biggest hits early on was the KT8920 mainframe computer. A lot of their models from the 1990s were rather tacky and had odd quirks but back in the day, people loved these quirks. 


For example, in their 1998 Tianxi computer, Legend included a physical button whose whole purpose was to just connect the computer to the internet and open the default web browser. Obviously, such buttons seem rather out of place in 2024, but back in the 1990s, people loved it. 


Most of Legend’s consumers were first-time consumer buyers and having a dedicated button to access the internet was extremely helpful. In fact, Tianxi would go on to be the best-selling computer in Chinese history at the time, selling 1,000,000 units in 2000 alone. 


Such successes allowed Legend to crawl out of its debt hole in the late 80s and even host a successful IPO, but they never forgot about their roots and what actually made them successful. As such, they would pour all of their profits into improving production standards and R&D which would eventually allow them to launch their first laptop in 1996. 


By the end of the 1990s, Legend would become a household name, controlling 43% of the Chinese market. But, outside of China, Legend was a nobody which brings us into the Thinkpad. 


At this point, most people wouldn’t bat an eye if you said that Lenovo created the Thinkpad given that Lenovo and Thinkpad have been synonymous for so long now, but the Thinkpad wasn’t Lenovo’s creation. 


It was actually IBM’s creation. Shifting back to the early 1990s, Toshiba and Compaq had come out with portable computers that they called notebooks and IBM wanted a piece of the pie. 


So, they would deploy their vast international resources to create a competing notebook that they would brand with their famous slogan “THINK”. IBM launched the ThinkPad in October of 1992, and it was a great capable portable computer but it was by no means a sales driver largely due to price. 


The original ThinkPad for example started at $2,750 which is the same $5,700 today. And it went up to $4,800 or $10,000 today. As such, the Thinkpad really only appealed to businesses, universities, and the government. 


Fun fact: In 1998, the ThinkPad would become the first computer to be certified for use on the ISS, and to this day, it is still the only computer that’s allowed on the ISS. But aside from this fun fact, the ThinkPad didn’t really have much else going for it. 


At the end of the day, it was a niche highly priced product that was completely out of reach for the average person, but that’s exactly how IBM liked it. They didn’t want to get into the trenches and compete in a cutthroat market. 


They simply weren’t all that good at that. In fact, that’s why they got crushed in the PC market despite pioneering the way. They simply weren’t able to compete against cheaper alternatives from Dell, HP, and Compaq. 


Laptops, however, were a high-margin industry where they excelled, wait never mind, that didn’t last forever. By the turn of the century, laptops would also become a highly competitive industry with low margins. 


And by the end of 2004, IBM wanted no part of it. So, they would decide to sell ThinkPad to one of their largest suppliers, Legend, for $1.75 billion. From Legend’s perspective, this was their golden opportunity to make an international name for themselves. 


So, they wouldn’t waste any time in rebranding themselves as Lenovo and kickstarting a whole new era for the ThinkPad. 



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MARKET DOMINATION

Lenovo’s approach to ThinkPad was pretty simple and straightforward. The game plan was to simply apply Lenovo’s unparalleled efficiency to the laptop market while retaining all of the best features of IBM. 


For example, Lenovo very much adopted the transparency of IBM. Now, of course, you could argue that IBM isn’t all transparent to begin with but for Chinese standards, Lenovo made massive strides forward. 


For instance, Lenovo adopted the American standard of releasing quarterly financial reports even though they were only required to report twice a year back home. They also created committees for audits and compensation. 


And Lenovo even goes on to host the first investor relations conference in mainland China. But, not only was Lenovo go on to impress investors but they also impressed a lot of computer enthusiasts who swear by the ThinkPad. 


From their perspective, the ThinkPad was a no-brainer. You basically got a workhorse computer that used to be a status symbol amongst business users for an affordable price thanks to Lenovo. Since then, the status of ThinkPads has very much worn off but the practicality hasn’t. 


While the rest of the PC industry has trended towards “the Apple Way”, producing computers that look sleek but are a nightmare to repair or upgrade, Lenovo has stuck to their tried and true approach: essentially producing a no-thrills, pro-consumer MacBook. 


Now, of course, this doesn’t appeal to everyone, but for the people it does appeal to, they would choose nothing else. Over time, Lenovo has tried to apply this approach to other industries like the smartphone industry. 


For example, they bought Motorola from Google for $2.91 billion in 2014 in an effort to break into the smartphone market. But, Lenovo would figure out the hard way that smartphones are still very much a status symbol. 


And even someone like Google isn’t able to carve out market share using a practical phone. But, while smartphones didn’t work out in their favor, Lenovo has managed to find success in other no-thrills industries like the server market. In 2014, for example, Lenovo purchased yet another IBM business, their server business for $2.3 billion. 



Wrapping Up

Today, Lenovo stands as the 4th largest server maker in the world controlling 6.2% of the market. All of this has allowed Lenovo to grow to as much as $70 billion per year in revenue. For perspective, that makes them a top 200 company in terms of revenue. 


Given their meager profit margins though, this doesn’t even translate to $1 billion worth of profit today, but hey is that really something to complain about? After all, that’s what makes Lenovo the last practical electronics maker.

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