Personal Profile:
1961-1967: Studied at the Xi'an Military Telecommunications Engineering Institute
1967-1968: Worked at the 10th Institute of the 10th Academy of the National Defense Science and Technology Commission in Chengdu
1968-1970: Labor training at the Baisheng Farm in Zhuhai, Guangdong
1970-1983: Worked at the Institute of Computing Technology of the Chinese Academy of Sciences (CAS)
1983-1984: Worked at the Cadre Bureau of CAS
1984 to present: President of Legend Group
1988: Won the Silver Award for the First National Technological Entrepreneurship Award
1990: Won the Gold Award for the Second National Technological Entrepreneurship Award
1993: Evaluated as an "Advanced Worker of the Torch Program" by the National Science and Technology Commission
1994: Won the Excellent Entrepreneur Award for the Second Beijing Science and Technology Light Award; Selected as an Outstanding Entrepreneur in Beijing's Electronics Industry; Elected as one of the "Chinese Reform Figures"
1995: Evaluated as a National Model Worker
1997: Elected as Vice Chairman of the All-China Federation of Industry and Commerce
1998: Elected as a member of the Ninth National People's Congress
2000 January: Selected as one of the "Asia's Best Businessmen" by Fortune Magazine
2000 June: Selected as one of the "Asian Stars" by Business Week
CCTV 2000 China Economic Annual Figure
Mr. Liu Chuanzhi graduated from the Xi'an Military Telecommunications Engineering Institute in 1966, is a senior engineer, and currently serves as the Chairman of Legend Group Limited, Vice Chairman of the All-China Federation of Industry and Commerce, and a member of the Ninth National People's Congress.
Mr. Liu Chuanzhi previously worked on scientific research at the Fourth Institute of the Tenth Academy of the National Defense Science and Technology Commission and at the Computer Institute of the Chinese Academy of Sciences. In 1984, he co-founded the Beijing New Computer Technology Development Company (the predecessor of Legend Group) under the Chinese Academy of Sciences. He became General Manager in 1986 and was promoted to President in 1989. When Hong Kong Legend was founded in 1988, Mr. Liu Chuanzhi became its Chairman. After the merger of Beijing Legend and Hong Kong Legend in 1997, Mr. Liu Chuanzhi became the Chairman of Legend Group.
Mr. Liu Chuanzhi has successively received the First Prize for the Second National Technological Entrepreneurship Award, recognition as a national outstanding middle-aged and young expert, selection as one of the "Chinese Reform Figures," evaluation as a national model worker in 1995, election as Vice Chairman of the All-China Federation of Industry and Commerce in 1997, and election as a member of the Ninth National People's Congress in 1998. In January 2001, he was selected as the "CCTV Annual Economic Figure" by 100 authoritative economists and financial journalists domestically, and twice consecutively won the "Wealth Person of the Year" title in the first and second editions by the Beijing Youth Daily and the "Most Outstanding Entrepreneur of 2000" by the China Enterprise Confederation. In January 2000, he was selected as "Asia's Best Businessman" by Fortune magazine, and in June 2000, he was selected as one of the "Asian Stars" by Business Week.
Entrepreneurial Story:
Starting entrepreneurship at age 40
In the past 20 years, Liu Chuanzhi has played many roles: researcher, intellectual entrepreneur, founder of China's largest computer company, football fan... But almost no one could have imagined that he would formally step back from Legend Group in a role he had never tried before: dealmaker.
Legend Group's acquisition of IBM's personal computer business is a globally famous transaction - although before December 8, 2004, "internationalization" had already become one of the most fashionable terms in China's business world, with bold testers like Haier, Huawei, and TCL, but Legend's big acquisition still made it leap to the pinnacle of China's overseas ice-breaking journey in the past 20 years: no Chinese enterprise had ever swallowed larger, more mature assets of a Western iconic company.
This experience of "planning before acting" was not the first for Liu Chuanzhi at the age of 60. When most domestic entrepreneurs were still racking their brains for survival, Liu had already provided exemplary solutions to a series of problems universally troubling Chinese enterprises such as survival, restructuring, and succession planning. Before his retirement, Legend, which started from the reception room of the Institute of Computing Technology of the Chinese Academy of Sciences, had become synonymous with China's IT industry, defeating Western computer giants in the domestic market, much like David. As FORTUNE magazine evaluated: "A small Chinese computer company strives to absorb the wisdom of its overseas partners, and then eats their lunch."
Liu was therefore widely praised by public opinion as a leading figure in China's business community. However, he was not a technical genius like Gates, who relied on the simple belief of "the key is indeed to do something" when he started his business; nor did he have a lot of management mysticism like Welch for peers to worship, but only formed a simple management concept based on traditional Chinese wisdom; he was not as versatile as Li Ka-shing, and Legend Group's always "half a beat late" diversification attempts rarely succeeded; in terms of creating his own brand, he fell short of Terry Gou, leaving a huge suspense for his successor. In terms of market strategy, he even fell short of Ren Zhengfei, failing to give Legend the ability to break through dangerous shoals forcibly. It is precisely this less-than-perfect Legend that has become the best representative of the hardships of China's self-created brands and the closest model to becoming strong and large.
Precious is that compared to other domestic banner entrepreneurs of the same era who are accustomed to "playing the lute while covering half of their face", Liu is willing to put Legend's successes and failures under the spotlight.
More demonstrative is the new corporate governance culture showcased by Legend. This is actually the most important foundation of Legend's success. Since its founding, Liu has firmly believed in the power of the market and management. He integrated his personal pragmatic, honest, and steady style into Legend's DNA. Although people still use words like "iron fist" to evaluate Liu's authority, in fact, in a system-deficient, "rule by man" prevalent commercial environment, the board of directors led by Liu has made Legend one of the most transparent modern companies in China, despite the increased pressure from capital markets, loss of vitality, and reduced efficiency.
Twenty years later, can the new Legend truly grow into a world-class company as Liu hopes? This remains an open question. However, Legend's road-building experience over the past twenty years has already placed Liu Chuanzhi far ahead of his time, having started a business at the age of forty in a society that had almost interrupted its commercial tradition.
Far from the headquarters of Legend Group in the Shangdi Development Zone in Beijing, near the southern road of the Chinese Academy of Sciences near the North Fourth Ring Road, there stand several gray, metallic buildings with a glossy finish: the Rongke Information Center. Just a few years ago, where Building A stands today, there was a relatively old-style white building - this was the original headquarters of Legend computers, now it has become the location of Legend Holdings, which owns 45% of Legend Group.
In his most frequently used meeting room, three engraved paintings hang: the reception room borrowed from CAS during Legend's founding, the White Building in Zhongguancun where they stayed for many years, and the current Rongke Information Center. Just like David Packard, Bill Hewlett, and Steve Jobs who completed their startups in garages in Silicon Valley, in 1984, Liu and eleven colleagues created a "legend" (Legend) in a place completely unrelated to any legend - the reception room.
Shanghai native Liu Chuanzhi graduated from the Radar System Department of the Xi'an Military Engineering and Technology College in 1966. Before and after the Cultural Revolution, he worked as a researcher at the Chinese Academy of Sciences, conducting research on magnetic recording circuits for 13 years until early 1984, when at the age of 40, Liu Chuanzhi got the opportunity to start a business.
At that time, typical ways for intellectuals to start businesses included relying on permits, relying on preferential foreign exchange rates, or smuggling. Although Liu Chuanzhi recalls today that he "proceeded step by step and summarized step by step," from the beginning he wanted to do something significant. The real difficulty lay in that after China had experienced a long planned economic system, Lenovo, which followed market rules for its entrepreneurship, had to create a corporate culture that broke traditional boundaries. Liu Chuanzhi, who always respected common sense, summarized its core into two points: being pragmatic and honest. Externally, companies should be honest with each other, internally, they should avoid doing things against their conscience and saying empty, false, or stereotypical words.
When Chen Huixiang, the author of "Why Lenovo?", first entered Lenovo, there happened to be an industry exposition at the Beijing Exhibition Hall. As the PR manager, Chen reported every day with good news about signing large orders. Liu Chuanzhi felt the numbers were too large and unlikely, so the next day he went to investigate himself and found that most of the orders Chen claimed to have signed were just intentions. Later, Liu severely criticized Chen at a company-wide meeting, leaving Chen puzzled: why was it considered good in other companies but bad in Lenovo?
It is precisely through this kind of "anti-traditional wisdom" effort that Lenovo grew rapidly. When Harvard Business School later wrote Lenovo into a business case, they believed it depended on the unique core competitiveness that Liu shaped for Lenovo, but Liu did not agree with this view. He liked to compare shaping a company to building a house: the roof is the company's core competitiveness, the walls are management capabilities, and the foundation is institutional culture. Compared to the mature Western business environment, some basic concepts of corporate governance need to be established from scratch in China, and this is Lenovo's greatest achievement.
Compared to foreign companies, Lenovo has gaps on the "roof," but not much difference on the lower levels, and may even perform better, Liu Chuanzhi believed. Early on, when he sold products for foreign companies, he had deep experiences, for example, if someone took advantage of the sales opportunity to embezzle, Lenovo would decisively expose them. And because of Liu's deliberate shaping of corporate culture, there is no obvious factional division within Lenovo to this day, which is the key reason why the Chinese team led by Yang Yuanqing can relinquish management rights after acquiring IBM's PC business.
When Legend Group integrated Hong Kong Legend in 1997, Liu systematically organized his corporate philosophy. There were two levels: mechanism and system, and management philosophy. The latter consisted of three elements: building a team, setting strategies, and leading a team. Building a team is the foundation of the foundation, with the key being that factions should not form within the company; setting strategies must suit execution, and leading a team is the solidification of corporate culture. "Regardless of whether it is right or wrong, you must have a set of philosophies; without philosophies, development will be difficult," Liu said.
If the management philosophy level reflects Liu Chuanzhi's strategic acumen, then Lenovo's successful reform more depends on the leader's tactfulness - Liu calls it "compromising."
The planning for Lenovo's reform began in the late 1980s, but it wasn't until 1993 that they officially proposed to the Chinese Academy of Sciences, not asking for immediate equity but dividend rights, and only 35%. After getting approval, it wasn't until 1999, when Lenovo saw the government increasingly emphasizing reforms for enterprises in Zhongguancun, that they again proposed turning dividend rights into equity. It wasn't until two years later that they finally got the chance to buy. Ten years of careful planning perfectly demonstrated his "big turn" mindset.
An interesting side note is that at the time, there were more than just Lenovo proposing reforms. The central leadership once sent auditing companies to carefully examine the accounts of various enterprises for three months, and in the end, only Lenovo received approval for reform. "This proves we are indeed a clean enterprise."
After being evaluated by state-designated auditing units, according to net assets, discounted by 30%, the value of 35% equity was over 300 million yuan. The cost of purchasing the equity was exactly the accumulated dividends over seven years: due to unresolved tax issues, the profits were recorded but not utilized, making the amount just enough.
"This requires great patience and insight. Even though many enterprises haven't done well today, at least taking one step forward shows that this matter can be done well," Liu Chuanzhi said.
Before the split of Legend Group in 2001, Legend Investment was established, headed by Zhu Linan. This venture capital company started with $35 million and increased its capital stock to $100 million by the end of 2003. Investments like Joyo.com have already yielded good returns.
Since the end of 2002, Rongke Zhidu and Tianjin Sunche Group jointly established Tianjin Sunche Rongke Zhidu Co., Ltd., developing the Tianjin Ruijing residential area with good returns, opening up Legend Holdings' appetite in the real estate sector. In 2003, they spent 2 billion yuan to purchase 2 million square meters of land, completing layouts in Beijing, Wuhan, Changsha, Chongqing, etc., managed by Chen Guodong, who had been with Legend for ten years and was previously quite low-key.
In 2003, Legend established an investment department, later renamed as Hongyi Investment. By the end of that year, Legend Holdings purchased a package of non-performing assets worth about HK$7 billion from Bank of China (Hong Kong) for 100 million yuan; in mid-2004, Legend Holdings participated in Goldman Sachs' entry into China's investment process, investing in the establishment of Gao Hua Securities by renowned domestic investment banker Fang Fenglei. Unlike the previous appearances of "Young Generals of Legend," Zhao Linghuan, an air-dropped commander, oversees Hongyi Investment.
Regarding Legend Holdings' recent multi-pronged offensive, even insiders at Legend are somewhat surprised. A joke goes: Liu Chuanzhi transformed the original canteen into the "Golden White-Collar Restaurant," which, with a 30% gross profit margin, became the highest-yielding project within the group at the time.
Is this Liu Chuanzhi's restlessness, or does it carry deeper significance?
Liu provided one answer: the biggest regret of his 20-year entrepreneurial journey was not cultivating enough talent. Today, as president of Legend Holdings, with each subsidiary fully responsible to different individuals, he can invest more in discovering and nurturing talent.
And when Liu determined to make Legend Holdings bigger, looking further down, he increasingly felt that the risks in the high-tech field pursued by Yang Yuanqing were still considerable, thus reinforcing his support for Yang.
"When it comes to taking risks, I, as a shareholder representative, must also have another line of business, i.e., a more stable and traditional business," Liu Chuanzhi said.
But in the foreseeable future, he will still need to frequently explain these two questions to outsiders: Was the acquisition of IBM's PC business too risky? Why does he firmly support Yang Yuanqing?
In the eyes of many media outlets and analysts, these two decisions involved too much risk. Particularly supporting Yang Yuanqing, who has faced much criticism in recent years, seems to be a misconception caused by Liu's excessive attachment to his "disciples" concept.
Liu Chuanzhi believes that outside comments are too arbitrary. His considerations at the time were very simple: "When I was around, conditions were relatively good, and I thought they would continue to be good. Unexpectedly, Yang Yuanqing and his team encountered the downturn in the IT industry; if I had continued, I might not have done as well as him, after all, my energy isn't as good as theirs."
One point that is still little understood by outsiders is that Liu Chuanzhi has faced strong doubts about Yang Yuanqing more than once. The difference between the two instances lies in the fact that last time, Yang Yuanqing had less credibility, the challenges faced by Lenovo were greater, and the pressure on Liu Chuanzhi was also greater: "This acquisition is about achieving greater results; last time, it was about survival. And at that time, my understanding of Yang Yuanqing was not yet deep."
That was in 1994, when due to strong attacks from foreign brands the previous year, Lenovo failed to meet its predetermined goals. To make a decisive move, Yang Yuanqing, who previously served as the general manager of the CAD department, was urgently appointed.
Yang quickly formulated a series of proactive reform measures: streamlining the team, focusing on the distribution system, improving incentive mechanisms... But unintentionally, he touched upon the interests of other departments within Lenovo: to enable the PC department to proceed lightly, Yang Yuanqing required a redesign of the cost settlement method for the components he took over, a proposal that violated Lenovo's previous sales methods and was met with much opposition inside the company. One vice president even told Liu Chuanzhi: giving Yang too much support disrupted the old rules.
Looking back, Liu Chuanzhi admitted that the pressure at the time was immense: "If the old rules are disrupted and new ones aren't established, what should we do?" Fortunately, after firmly supporting Yang Yuanqing, Lenovo welcomed a good outcome: by 2000, Lenovo's market share rose to 25%, becoming the leader in the domestic market, while Compaq, IBM, and HP's combined market share dropped from 21% to 10%. "This was greatly beneficial to China's informatization; otherwise, PC prices would have been unreasonably high."
Although previous achievements once brought Yang Yuanqing extremely high prestige, over the past three years, doubts about his lack of strategic vision and inability to enhance Lenovo's competitiveness during the industry's low period have persisted. Has Liu Chuanzhi never considered replacing Yang Yuanqing?
"Indeed not," Liu frankly answered, "a good leader is hard to come by." In his view, Yang's many advancements are rare and precious: Yang always puts the company's interests first, has a strong desire for progress, and possesses good learning abilities. What moved Liu the most was how Yang Yuanqing, who originally didn't know how to compromise with others, had become more adaptable: regarding whether the new Lenovo should have dual headquarters in China and the U.S., Yang gave more consideration to soothing American employees and agreed to establish a single headquarters in the U.S.
But mere recognition doesn't mean he would let Yang Yuanqing keep trying and making mistakes indefinitely. A senior executive at Lenovo interviewed by our publication stated that since August 2003, Lenovo reflected on the previously proposed "three-year plan" and made plans for the next three years. Initially, the reflection focused on tactical levels, but under Liu Chuanzhi's leadership, it gradually delved deeper and was elevated to a strategic level.
Tactically, Liu Chuanzhi admitted that one problem formed in these years was that compared to when he was in charge, the dedicated Planning Office responsible for execution work was not strong enough: "When I was in charge, I always had a relatively strong Planning Office. If the person in charge wasn't capable, I would replace them, adjusting until they were strong enough."
But the more serious issue was: diversification caused Yang Yuanqing to be overly distracted, making it difficult for him to respond appropriately when the market environment changed.
At that time, the internet revived, the future of IT services was uncertain, the mobile phone industry quickly entered a thin-profit era, and Lenovo's core business, PCs, was under strong attack from Dell Computers. Lenovo's predicament was clear: when the entire market was laughing at Lenovo for not persisting long enough to profit from the internet where they had invested heavily, what Lenovo lacked was not persistence but limited resources - if they had bet on the internet at that time, Lenovo's collapse in the PC market might have been even worse.
Even for Liu Chuanzhi, who had seen much, this was still a significant lesson: the divisional structure directly revealed Lenovo's insufficient execution strength. If adopting a more decentralized subsidiary system, due to the insufficient capabilities of personnel in each department, it might result in further loss of control. "Welch is mysterious to me; how can he achieve such large-scale diversification under the divisional system?" Liu Chuanzhi's confusion remains unanswered.
In the absence of an answer to this question, there was only one choice: to concentrate all efforts on a single or at most two businesses. When Lenovo Group announced its return to the PC strategy at the beginning of 2004, the outside world criticized it as a sign of the group losing its edge. For Yang Yuanqing, the direct effect of the change was that he had more time; even after completing the acquisition of IBM's PC business at the end of the year and assuming the position of chairman, he only needed to spend 40% of his energy on cooperation with IBM, and the remaining 60% on competing with challengers like Dell in the domestic market.
The courage to take such a big step under such internal and external difficulties was due to the sufficient preparation for this acquisition, "theoretically speaking, there shouldn't be any unexpected surprises."
When IBM proactively contacted Lenovo regarding the acquisition of its PC business at the end of 2003, Liu Chuanzhi emphasized more than ever "thinking thoroughly about the issues," using his "stepping out of the picture to see the picture" theory to clearly understand macro-level issues - what does Lenovo need for internationalization? Can we really get what we want from cooperating with IBM? What are the risks? How much cost do we need to pay? - seeing these clearly was crucial to deciding whether to proceed with the negotiations. After making the decision, each detail was deeply researched to avoid potential risks. To a large extent, this was a correction of insufficient consideration of issues during the previous diversification attempts.
As the integration with IBM still needs time, Lenovo has already welcomed a piece of good news: in the third fiscal quarter of 2004, Lenovo entirely turned the situation around in the PC battlefield, with both profits and turnover showing comprehensive growth. Liu Chuanzhi believed that this transformation had already shown results: "The first quarter was exhausting, the second quarter improved but still didn't show, if the fourth quarter performs well, it really indicates the success of the transformation."