Read how Lenovo configures a pricing makeover and aims for greater organizational consistency and market responsiveness with SAP Price and Margin Management by Vendavo

1. This article appeared in the JAN FEB MAR 2014 issue
of insiderPROFILES (insiderPROFILESonline.com)
and appears here with permission from WIS PUBLISHING.
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2. Lenovo
Conf igures a
Pricing
Makeover
Top-Selling PC Maker Aims for Greater
Organizational Consistency and Market
Responsiveness
by Ken Murphy, Senior Writer
When Lenovo acquired the PC division of IBM in 2005, beginning a
steady climb to become the top-selling PC manufacturer in the world, it
truly became a global organization. Lenovo had long been the No. 1 PC
maker in China, where the company was originally founded as Legend
Holdings in 1984. Since IBM owned a large market share in North America, the acquisition immediately made Lenovo a global player in the PC
market. A quick visit to the company’s website will reveal the scope of
the Lenovo brand — as a drop-down menu provides site visitors with
130 options for a country/region, from Algeria to Zimbabwe.
This global diversity of online users filling their configure-to-order
(CTO) shopping carts helps illustrate the size of the challenge Lenovo
faced at the time of the IBM acquisition. Imagine the complexity of
bringing an array of different IBM businesses, all operating on legacy
systems, onto a standardized IT platform. Admittedly, the Lenovo businesses did have some shared systems, but it lacked a centralized platform that could be used to standardize — and thus streamline — pricing throughout the expanded company. Without a unified approach for
price management across the organization, Lenovo’s vision for improved
revenue and margin through a standardized global CTO shopping cart
wasn’t feasible. Language and cultural barriers were just a couple of the
obstacles to standard pricing practices; but the biggest hurdle was the
multitude of systems in use that set and maintained pricing, analyzed
margins, or drove trade promotions — all of which conspired to muddle
the true profitability picture for Lenovo, which in turn added cycle time
to pricing changes demanded by the market.
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3. Cliff Preddy, Lenovo’s Senior Manager of Marketing and Sales
Processes for Corporate Business Transformation, describes the
immediate post-acquisition landscape, and the company’s rough
plans to standardize its overall IT landscape. “We were living in a
hybrid world,” he says. “When we began our transformation journey, we had to support the legacy IBM systems during transition
while also continuing to support the business needs. We had to
keep an eye out to standardize whatever we built, and to synergize around similar business processes. With a core template, we
could then extend that to all of our regions.”
A New Look at Pricing
The hybrid world Preddy describes, where there was no standardized pricing, central data warehouse, or concrete business model,
was not the optimal environment to provide for a 360-degree view
of business processes as well as performance tracking and analysis
of product lines. “The systems were all over the place, meaning
that some regions were using different methods or processes than
other regions to achieve the same end,” Preddy says.
With responsive pricing and true margin visibility clearly a business priority, one of Lenovo’s first initiatives was to extend CTO
shopping cart availability to every region, with a central system
responsible for ensuring that, for example, a ThinkPad T430 series
laptop configured to order by a customer in, say, Finland, would
have the same user experience as if purchased from the United
States. Just as importantly, Lenovo wanted pricing information
available globally, to be used as a baseline to model promotional
campaigns, or enable CTO changes based on a certain product or
product line’s sales.
With a patchwork of pricing systems around the globe, it would
be a challenge for Lenovo to assemble this disparate information together to form a baseline, let alone to make timely and
informed business decisions.
“There was a lot of manual work in pulling data, manipulating that data in spreadsheets, and releasing it in various
systems; and all of that was error-prone because of the many
different processes,” says Preddy. Clearly, this existing system
infrastructure was impeding Lenovo’s ability to react quickly
to market and competitive change. To remedy this, as part
of an overall solution, Lenovo turned to the SAP Price and
At a Glance
Goal: Lenovo sought to accelerate responsiveness
to market and cost changes, while automating and
standardizing pricing practices and profitability
metrics across the business
Strategy: Implemented SAP Price and Margin
Management by Vendavo
Outcome: A more market-responsive,
standardized, and price-optimized configureto-order platform, with automation of channel
program pricing strategies that resulted in fewer
resources expended, more accurate pricing, and
increased revenues
“When we began our transformation
journey, we had to keep an eye out
to standardize whatever we built,
and to synergize around similar
business processes. With a core
template, we could then extend that
to all of our regions.”
— liff Preddy, Senior Manager of Marketing
C
and Sales Processes for Corporate Business
Transformation, Lenovo
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4. Margin Management application by Vendavo, and targeted its CTO shopping cart functionality as the first step
toward achieving pricing visibility across the business.
Make Mine a ThinkPad
The solution for the CTO platform involved SAP Price
and Margin Management enabling the CTO shopping cart
functionality by providing pricing master data that the
CTO configuration engines would then execute to control
the CTO experience. Additionally, Lenovo targeted the
solution to achieve fully integrated campaign planning
and pricing. With the CTO functionality geared toward
the end consumer, campaign planning controls would
ensure an alignment of release strategies and pricing for
Lenovo’s many channel partners. Though a different customer base, the goal was the same: to align disparate processes onto a single pricing platform to give Lenovo a truer
profitability picture.
The first step was turning on the CTO shopping cart
functionality around the globe. Lenovo was able to initially
role this out to 18 different countries in just eight months.
Today, building a custom-order Lenovo PC starts by selecting one of the 130 regions or countries. Offers appear in the
appropriate language, and customers can select upgrades,
alternative options, and accessories on the model of their
Company Snapshot
Lenovo
Headquarters: Beijing, China
Industry: Personal technology, consumer manufactured goods
Revenue: $30 billion
Employees: More than 30,000
Company details:
• he Lenovo brand has been in existence since 2004, but
T
the company’s history begins two decades earlier. In 1984,
Legend Holdings was formed in China, and was incorporated
in Hong Kong in 1988, becoming the largest PC company in
China. Legend Holdings changed its name to Lenovo in 2004.
In 2005, Lenovo acquired the PC division of IBM.
• n the last 20 years, Lenovo has sold more than 75 million
I
ThinkPads.
• n 2013, Lenovo overcame HP to become the top-selling
I
PC company in the world with 16.7% market share to
HP’s 16.4%.
SAP solutions:
• SAP ERP
• SAP CRM
• SAP Price and Margin Management by Vendavo
choice. For many ThinkPads, for example, customers can
select from one of four processors and operating systems,
as well as choose a hard drive during the same transaction.
Product strategy teams finally had the baseline data
they needed to calculate various pricing scenarios. With
the new CTO platform, these teams were now equipped
with the insight to understand how a product’s price
affects sales on a global scale, giving them a view to whether a product is priced accurately, and helping them quickly
decide whether a product might benefit from a change in
campaign strategy.
With CTO functionality up and running, Lenovo then
focused on pricing controls for its channel programs. Similar to pricing controls on the CTO platform, SAP Price and
Margin Management gives Lenovo greater insight into pricing considerations for its channel programs and provides
product teams the ability to set appropriate clip levels and
rebate offers.
“Not having organizational control was one of our biggest pain points,” says Preddy. “That’s what SAP Price and
Margin Management brings to the table; it integrates with
our strategic solutions, pulls all of the necessary data that
concerns products and costs, provides the ability to set policy that allows users to manage the pricing, and gives those
users the ability to establish proper hierarchies of control
and workflow approvals for releases.”
Integration Opportunities
Because SAP Price and Margin Management allows for
easy integration with master data through Lenovo’s SAP
ERP system, the company is exploring how it can use the
application to improve pricing collaboration via integration
with its other SAP applications. “Thus far, we have focused
mainly on price-setting,” says Preddy. “But, in the future,
we’re looking to integrate more into the sales experience
and the sales cycle.”
Future opportunities include leveraging the integration
with the front-end tools supporting the price negotiation
process, which would provide sales reps the ability to adjust
quotes on the fly by tying price approval requests directly
to SAP Price and Margin Management. This would provide
Lenovo with greater product pipeline management and
give sales reps a tool to help better manage their accounts.
As Preddy says, any future integrations will be icing on
the cake. “There’s a lot of expansion opportunity with SAP
Price and Margin Management as a powerful suite of analytics tools, but we’ve just made a monumental achievement in terms of finally taking control of our own systems,”
he says. “After this major milestone, we will now have the
ability to be a bit more agile in what we go after.”
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