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

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

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  • 1. This article appeared in the JAN FEB MAR 2014 issue of insiderPROFILES (insiderPROFILESonline.com) and appears here with permission from WIS PUBLISHING. Subscribe today. Visit insiderPROFILESonline.com
  • 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. Subscribe today. Visit insiderPROFILESonline.com
  • 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 Subscribe today. Visit insiderPROFILESonline.com
  • 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.” Subscribe today. Visit insiderPROFILESonline.com