NAVIGATING THE DOWNTURN: LENOVO CEO BILL AMELIO

From INSEAD Knowledge (http://knowledge.insead.edu)

The economic crisis is forcing businesses everywhere to make hard decisions -- what's important is remaining agile and keeping an eye on the future, says Bill Amelio, CEO of Lenovo Group.

Amelio believes that companies need to be prepared to change, sometimes significantly, while holding on to their core values. "We must ensure that our knowledge, our decision-making and our expertise in our organization are decentralized so that people that are very close to the ground can make things happen," he says.

Like most companies, Lenovo faces major challenges. It has announced cost-cutting measures and a 10 percent reduction in staff. Unlike many companies, Lenovo made big cuts at the higher levels. Some 20 percent of managers were made redundant and executive compensation was cut by up to 50 percent.

"We wanted to send a clear signal," Amelio says. "Executives take the biggest risks and have the most payout when things are going well. Similarly when a restructuring of this magnitude has to take place, clearly the executives need to take the biggest hit."

That's just one example of how Amelio plans to keep Lenovo flexible.

"When the time comes, the winds, in fact, will shift," he adds. "And when this happens we can either be left behind because we've got derailed by our own internal quagmire or we can have our sails up, catch the wind to be ready for every opportunity."

One way Lenovo aims to avoid the quagmire is by having no headquarters as such, a move which has led the way in developing what Lenovo calls "Worldsourcing," in other words, a decentralized structure.

"What happens at a typical company with headquarters is you have this artificial gravitational pull that happens at the headquarters," he says. "But the last I looked, not too many things actually get created or innovated at the headquarters location."

This means that Lenovo executives such as Amelio travel frequently, but he argues that this also allows the company to empower its global hubs and staff members that are closer to their customers.

Staying close to customers is vital during an economic downturn. Amelio believes that helps the company understand not only the nuances of the marketplace, but also their customers' pain points.

"The idea is the following: it's to go seek out every opportunity with customers," he says. "Because even in a bad downturn there are opportunities."

Maintaining morale after job cuts isn't easy but the Lenovo CEO says that cutting a larger percentage of managers helped instill trust among the staff. He believes that the work his executive team has done over several years to build trust and engage with employees is now paying dividends.

"Building trust at all levels has been a great passion for me and our leadership team," he says. It has permeated throughout our entire organization. And never before has that investment been more important than over the past few weeks when we've done our restructuring."

Despite the immediate pressures of the crisis, Amelio believes it's important to remain focused on long-term goals.

"I think in my heart when you're an effective leader you've got to do two things extremely well," Amelio says. "You've got to be cognizant of the quarterly results. No question about it. But you've also got to be good at building the future, because if you're not good at building the future, it will catch up to you and you will be out anyway."

Amelio adds that he hopes to launch a "blockbuster product that will change the industry" by the end of this year.