Lenovo's Think brand earns a premium because road warriors with expense accounts demand it. Making it appeal to a broad audience could destroy it.
By Cyrus Sanati, contributor
FORTUNE — Lenovo risks overextending its “Think” brand as it moves to separate it from its more mainstream PC business. The Think split, revealed in an internal memo over the weekend, comes as PC manufacturers try to recapture higher-end consumers back from Apple. But while Think is a recognizable and premium brand, spinning it off to be left to its own devices could backfire, leading to a string of questionable products, irreparably harming the brand’s reputation with its small, but loyal, set of customers.
Lenovo has confirmed a carefully leaked internal memo in which chief executive Yang Yuanqing lays out his plans to restructure the company into two distinct business units — Think Business Group and Lenovo Business group. Think, which will be headed by the current head of the company’s product group, Peter Hortensius, will focus on selling Lenovo’s Think-branded PCs, as well as other enterprise business services. Lenovo, which will be led by the head of the company’s mobile internet division, Liu Jun, will focus on everything else the company sells, ranging from its lower to midrange PCs to its smartphones.
Mr. Yang notes in the memo that the impetus behind this split was a desire to improve operating efficiency and “clarify” its brands. He hopes that the new structure will help the PC manufacturer better target the most lucrative parts of the waning PC market. “We tried to push the Lenovo brand in mature markets but we realized that, as a brand, Lenovo only works in the mainstream and low-end market,” Mr. Yang said in the email. “In the high-end markets, Think is our best brand asset and the only brand which can compete against Apple.”
By “mature” markets, Mr. Yang is alluding to the US market where Lenovo is still seen by many as this unknown Chinese company that bought IBM’s PC division eight years ago. That’s understandable given the dearth of advertising Lenovo has done in the US market. While it has recently teamed up with the NFL, the firm’s mainstream advertising in the US market has been very limited. When was the last time you say a Lenovo commercial on TV? What does the brand stand for?
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Lenovo has struggled for years to create interesting products. It is only recently started to make some headway in this department with the launch of several new products last year, most notably, its Yoga IdeaPad laptop, which is a PC/tablet hybrid optimized for Microsoft’s new touch-centric Windows 8 operating system. The PC can assume four different positions, one where its keyboard flips around, turning the PC into a tablet. It is like having a big iPad with the power of a real PC. At the Consumer Electronics Show currently taking place in Las Vegas, the company showed off the IdeaCentre Horizon Table PC, a 27-inch all-in-one that can be laid flat on a table for multi-user, multitouch game play.
But where Lenovo PC sales have shined the most in the US has been its Think-branded set of PCs and laptops. The key to the Thinkpad’s success is its loyal set of business customers who have used and trusted the Think brand to deliver a consistent and stable PC experience for 20 years, 12 under IBM and eight under Lenovo. It has somewhat of a cult following of road warriors and consultants who can be seen in airports and in hotel lounges with their jet-black Thinkpad laptop, presumably putting together PowerPoint presentations and excel spreadsheets.
The look and feel of this “serious” laptop is unmistakable — mat black, square corners and a red nub in the middle of its keypad, which functions as an alternative pointing device to the PC’s touchpad. (The 1995 “butterfly keyboard” Thinkpad 701 is a part of the permanent collection at the Museum of Modern Art.) For some, that little red nub is the primary reason why they opt to pay the premium to get a Thinkpad, which can run as much as $1800 and up for its top-of-the-line model, currently, the X1 Carbon touchscreen. For others, it is the Thinkpad’s distinct keyboard with its concave keys that makes typing easier and slightly more enjoyable that carries the brand. The Thinkpad’s austere look and feel has not changed in 20 years.
It is here where a lack of innovation and creativity has worked in Lenovo’s favor. It is exactly that consistency and familiarity of the Think product line, which has basically carried Lenovo’s PC division for nearly a decade in the US market. To be sure, as the largest PC manufacturer in the world, recently supplanting Hewlett-Packad HPQ in the fall of last year, Lenovo has sold plenty of its other computers to customers, some in the US, but as Mr. Yang said in his email, the ThinkPad still reigns supreme in mature markets.
But hiving Think off into its own division may not be such a great plan. As a standalone unit, the new management team will most likely try to put their mark on the brand to grow. Mr. Yang noted that the Think brand could one day compete with Apple AAPL . If that were true that would mean expanding the Thinkpad to a whole new set of consumers — those that, like Mr. Yang said, would be more inclined to buy a Mac. But the reason the Thinkpad earns its premium isn’t because it’s cool or user friendly — it still uses Microsoft’s Windows operating system — with the newest ones shipping with the not-yet-proven Windows 8.
No, the Thinkpad earns that premium because road warriors with expense accounts demand it. Windows dominates the corporate landscape, so as long as that is the case the Thinkpad will live on. That is, of course, if it still retains those little points that set it apart from other PCs, like, for example, that red nub. Even though that nub is vestigial with rise of the modern track pads and touchscreens, it may be tempting to get rid of it. But that wouldn’t be wise, as least not yet when there are so many old school users who will never want to use anything else to navigate their PC.
Before doing anything drastic, Lenovo would be wise to review the spectacular rise and fall of Blackberry-maker Research in Motion RIMM . The mobile handset manufacturer tried to take on Apple by launching a number of products aimed at the retail consumer after the launch of the iPhone. It released the devastatingly bad Blackberry Storm as a response to the iPhone and later the Playbook to take on the iPad. The Storm failed because it was hastily put together in a mad dash and lacked the signature Blackberry QWERTY keyboard — a must have for most big business types from Wall Street to Main Street. The Playbook failed because the Blackberry ecosystem had at the point of its launched more or less collapsed, making the Playbook just another iPad clone no one wanted. Meanwhile, the original Blackberry was left to wither away as the company focused on chasing Apple and wasn’t updated in a meaningful way, making it look just old and tired.
Could the same happen for the Thinkpad? Attempts to make it more appealing to retail consumers could backfire badly if poorly executed. Just imagine the hysteria if the Thinkpad was offered in shiny black paint instead of mat black paint. It only takes a change that small to cause what was once a loyal group of consumers to turn against you. The Thinkpad hardware should only be altered in a way that appeals to the business community. It is uncool and that’s ok — because it works.