Forward thinking, constructively tough minded and masterful evaluator of business opportunities—these are some of the qualities of a good CEO and Rahul Agarwal has them all. As CEO & MD of Lenovo India, Agarwal has been pursuing an aggressive strategy to capture a major share of the new-age mobility devices market comprising smartphones, tablets and convertibles. “We are seeing a healthy traction for our products and we expect our growth trajectory to continue with the introduction of newer models and focused marketing to strengthen our market in India,” Agarwal tells Sudhir Chowdhary in a recent interview. Excerpts:
How does Lenovo view the Indian market, as compared to the other emerging markets?
Every large organisation looks at India in a rather similar way—the market for the future. The perspective is not just an observation for one or two years, but 5-10 years down the line. They say India will be amongst the top three economies. It is growing fast, so at a macro level it gets everyone’s attention. But then, that’s a no-brainer. The moment you go beyond that, the answer can differ for different companies. For some companies India is a very huge market. For example, Nokia had 15-20% of its global turnover coming from India. For most organisations, India contributes 2-4% of the global revenue, and when any single country amongst the 100 major countries starts contributing 3-4%, it’s a beginner. This is usually because US and China will always be 30-35% of anybody’s market. So, out of the balance 60%, if anybody is 3-4%, that region becomes a beginner market and growing.
For Lenovo, India contributes more than 5%. I am adding the phone and server business also. So it has everyone’s attention. But twe wonder why the PC market is not growing here. The penetration levels and prices are very low. People’s willingness to pay premium for a good product is very low. The cost of doing business and unpredictability is high, ease of doing business is difficult and infrastructure is poor. However, the global management looks at India as a potential No.2 or No. 3 market. Are you satisfied with the growth trajectory of the company here? No, clearly not. I think we grew quite well in the past three to five years, but I am not very thrilled with the growth. Part of it is because of the industry, because of the market de-growth. We definitely need to figure out a way to beat that because market is not expected to grow, so either we grow the market, or we take away the competition’s share.
The PC segment is declining in most markets, but at the same time computers have never been this cheap before. Do you see a spike happening in markets like India?
Yes. My only reservation is that our penetration is only 10% since the last 2-3 years. In Russia, China, Indonesia, Malaysia, Brazil and other comparable countries, PC penetration is 30-60%. The key here is education. It is imperative for the masses to understand the importance of PC in education. But somehow the industry has not been able to convince people. A primary reason for this is that schools are not digitalised. Schools do not depend on computers. We believe over a period of time, increasingly, schools will go digital. Furthermore, the government is making a lot of effort, for example, state governments are encouraging education through digital mediums. Spike will happen but the question is when.
Ultrabooks were a big innovation. But we don’t see much of them now. Why is that?
That is not entirely the case. The fascination for thin and light will continue to exist. The bigger the car, the smaller the mobile phone, the smaller the laptop, the better it is. But that is not breakthrough innovation. The Yoga form factor is our innovation and the Yoga Book is one of the true innovations. Yoga Book, I think, is the sexiest looking product, ultrathin and light, and it can be moved 360 degrees. One can write on it, too. But the biggest innovation is, you keep a paper on the keyboard, and then start writing on it, it will directly copy it. So it’s a writer as well and becomes a personal notepad wherein all the records are digitised.
Moto Mods are also an example of true innovation, where one can attach a camera, a phone speaker or a projector. Nobody in the phone industry has been able to do that kind of innovation. What kind of traction do you see for product offerings here? In India, the top three PC brands own 70% of the market. In any other market, the top three brands have 50-55%. Lenovo is amongst the top three brands, and there is a degree of stability that share has. In the consumer market, we have the highest exclusive network. We are present online, in large format stores such as Croma and Reliance Digital. We have multiple channels and are also present in the mom-and-pop stores. Lenovo is quite a household brand, and in the enterprise space too, we have been No.1 with ThinkPad being the iconic brand.
I think there is enough traction. The story that we don’t talk about enough is the tablet story. It is in the commercial tablet market that is exploding. While consumers are buying less, the state governments are driving a lot of profits. Many state governments (AP, Gujarat, West Bengal) have different kinds of projects wherein they want to do mass implementation with tablets and not PCs. Additionally, banks are coming up with a concept called Micro ATM, wherein a tablet can be integrated into a small outfit, where you have a fingerprint authenticator, and you can use the Aadhaar card for people to disperse cash. Lenovo is undertaking that project. Third, the government is looking at launching many new projects based on the concept that scans the iris of the eye. Lenovo is working on that product, which will be used through Aadhaar. This market will grow, we have 48% share in the commercial tablet segment and we are quite excited about it. We have aggressive plans for the next year.
Where do you see the increase in technology spending coming from?
In the short term it will probably come from the government. With Digital India in the fourth year, we are hoping that the government will be able to push some mega projects. State governments undertaking the education initiative is one. Secondly, GST has potential to propel the market as there are a lot of small traders who feel the need to computerise their account. We see GST as an investment. So, they will not only need a software like Tally, but also need a laptop.
Is Lenovo putting in place any initiatives to gain customer traction in India?
In the consumer market, we feel that there are some states where we are not very strong, for example, Punjab. So we are looking at a different distribution structure there. If we can do better in six states then we can grow and do much better than what we are doing. Second, I would say that we will be more strategically aligned on the online and the large format because they’re growing faster. Third, we will focus more on the premium segment because earlier we did not realise that it would grow so much. So that’s a slightly changed strategy.
Additionally, we are going to invest significantly in after-sales service. On the SMB front, we have to increase our channel base. There is no magic strategy that we need. We just need number of standard business partners. And in the enterprise, we are doing quite well. So, there is no change in the strategy there. On tablets, as I said, we are working on new products, India-specific products with iris scanners. We are aligning with the state governments closely. It’s more about being there when the tenders are coming out.