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Structural Recommendtions for key SEA Markets - 2014 / 15


3 SEA markets set the pace for smartphone usage globally Daily Distribution of Screen Minutes Across Countries (Minutes)

1. ID, PH & VT are 3 out of top 5 for internet usage

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3. Smartphones clearly most popular access point - largely driven by Social and IM

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$500

Exciting potential for these high growth markets 90M $500

90M

68M$375

68M $375

68M

All 3 markets predicted to grow by approximately 40% in 2015, with ASPs in Lenovo ‘Sweet Spot’

$375

$250

90M$500

$226

$229

$244

$248

$258 45M$250

35M

$261

45M $250

$176

$172

$175

$243

$234

45M

$173

28M 22M

$125

20M

23M$125

23M

17M

16M

23M $125

23M

12M 7M

2014

2015

2016

Source: IDC March 2014 Forecast

2017

2014

2015

2016

2017

2014

10M

2015 ASP

13M

2016 Units

16M

2017

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Similarities in market dynamics and structure for all 3 All are high growth entry-level smartphone markets - carriers play limited role with thriving OC and retail distribution

Growth 2015

37.5%

41.6%

ASP 2015

$229

$172

$261

100 : 0

85 : 15

80 : 20

$3

$3.50

$4.50

Disty Retail : Carrier Carrier ARPU

42.8%

Key Partners

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Lenovo well poised as Samsung growth stalls Large and fragmented ‘Other’ category can be consolidated by Lenovo

Source: IDC Q1 2014

12%

5%

11%

27%

26%

26%

7%

29% 8%

14% 45%

36%

36%

Others

• Widespread feature to

• Thriving multi brand retail

• Increase in youth

• Huge multi-handset market

• Defecting BlackBerry base

• Growth in e-commerce

• Surge in mobile games usage

• Credit Card & affordability

smart migration

channels

disposable income

schemes to grow

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However - these markets share a set common challenges 5

1 Fragmented channels that are hard to control

Importation challenges

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2 Local teams / partners have dierent attitudes to compliance & ethics

Thriving grey markets

3 Local teams have dierent attitudes to accountability and communication 6


To realise full potential, operating model must include:

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A business structure that enables Predictability & Control of performance

Ability to measure root cause drivers of sell out at a customer and retail

A highly Accountable team, with strategic insight

Execution & propositions that balance local needs with a global brand

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decision making

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level

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Lenovo 5 P’s are enablers to this operating model

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Pioneering Planning Performance

2 Measure root cause drivers of sell out

Accountable team, with strategic insight

Balance local needs with a global brand

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Practicing

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Predictability & Control

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Prioritisation

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Pioneering: take a unique local position, and align portfolio and brand 1. Localised, Strategic Portfolio Management

LOCAL & COMMUNITY

• • •

Ensure all devices have clear positioning and segment focus Involve product team in country planning - improve influence for market specific models Develop tools to assist channel staff to navigate portfolio

2. Innovative Propositions • • • •

Unique local partnerships and offers to encourage evangelism. EG: Local Exclusive Airline Partnership (Indicative) Money Can’t Buy - EG Kobe Bryant in Asia Stand for more than a phone. Augment: accessories, financing etc

3. Be a part of the local community • •

FEATURES FOR PRICE

NEW IDEAS

Adopt highly local, insight driven execution. Tap into local communities. Review, adapt and fully localise marketing assets Sponsor and support key causes and local community groups

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Planning must be based on accountability & collaboration Key Planning Challenges for Distributed SEA teams:

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Resource / Investment decision makers looking for accountability, predictability and ROI

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Those that execute are looking for certainty of budget, resources and support

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Needs of both sides often not met - as budgets and approvals seldom complete in advance of quarter

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Outcomes often influenced by outside teams who aren’t directly accountable for in-market outcomes

Principles for successful planning:

Plans must be locked 6 weeks prior to quarter start - to support execution lead times

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Plans must be based on crisp strategic imperatives from senior leadership

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All cross functional teams that impact inmarket outcomes must collaborate in panning process

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Adopt structured quarterly and annual planning framework ‘Venture capital’ approach to initiative funnel - functional owners much pitch for investment - 9 WEEKS

TOP DOWN GUIDANCE

SCAN

• MD - Set’s Strategic Imperatives

- 8 WEEKS

IDEAS FORUM

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SHARE

• Teams presents 1st cut ideas

• Product - Roadmap

• Back of envelope validation

• Market Intel. team - key insights and trends

• Open safe, constructive debate

- 7 WEEKS

1ST REVIEW

!

SCRUB

• Ideas now commercially validated

! • High level execution plans mapped out

- 6 WEEKS

FINAL REVIEW

!

LOCK

• Final prioritsation & execution sanity check

! • Team leaves with opex and targets locked

QUARTER STARTS

EXECUTE !

DO & REVIEW

• Top 5 initiatives receive Post implementation review 11


Implement Weekly, Root Cause Performance Management Predictive management of emerging risks and opportunities, course correct intra quarter.

Data on Root Cause Drivers

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‘War Room’ Approach

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Sell-out Control

Customer source (competitor) Quality of Customer (ARPU)

Enables: Customer type (New / migrant) Churn destination Foot traffic by Mall Sell out by Geography Sell out by distributor Sell out by demographic

! 1. Start / stop / keep decision making to optimise campaign investment

! 3. Fast response to external drivers

! 5. Re-prioritisation of initiatives in market

! 7. Deeper connectedness to customer and channel

Obtainable weekly via quant. survey techniques 12


Prioritisation: Balance Performance & Health, do more with less 1. Performance (Quarterly Outcomes) !

• • • • •

Measure & Manage quarterly drivers of sell out

Continuously cut under-performing opex assets

Re-invest in proven initiatives

Teams re-pitch for investment each quarter

Eliminate concept of BAU functional budgets

2. Health (Long term assets)

• • •

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Devote specific portion of open / resources to long term health of brand and products

Apply different measurement criteria (intra quarter)

2 key categories:

140 Measure and invest in brand funnel health - from consideration to advocacy

105 70 35 Q1

Q2 Higher Performing

Q3

Q4

Large scale branded retail deployments for customer experience and as ‘brand beacon’

Lower Performing

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Evolve team to performance culture Natural Mode in Many SEA Teams: Functional Ownership

Performance Mode: Business Ownership ! ! ! ! !

BUSINESS OWNER

END TO  END   ACCOUNTABILITY

FUNCTION OWNER

Performance Expectations of business owners in performance culture

• • • •

Fully responsible for commercialising their initiatives – ie venture capital pitch

! Clarity on strategic intent of initiatives – and alignment with broader plan

! Can articulate portfolio position. Purpose and initiatives concisely – elevator pitch

! Clipboard approach – understand key business drivers – frequently monitors

BUSINESS OUTCOME BUSINESS  OUTCOME 14


Practicing - develop people to support performance culture Guiding Principles

1.

Development Plan (Indicative)

Treat business as your own

Regional Managing Director

• Articulate singular top down vision

• Available for constructive guidance (not just pass / fail)

Country Director

• As above

• Constructive leadership style

• Enhanced coaching for senior leaders

• induction for new recruits

Account Manager /

Marketing Manager

• Enhanced analytical capability

• Cross functional / matrix management / influencing

• Teamwork across borders

• Constructive leadership style"

Commercial Manager

• Commercial coaching to business owners

• Post implentation reviews

• Market orientation

Programs Manager

• Cross functional / matrix management / influencing

• Teamwork across borders

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3.

Constructive leadership at all levels

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5.

Root cause understanding (Ask Why? Why? Why?)

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It’s everyone’s responsibility to innovate

Adopt common language of performance

:

• Employee communications

• KPI’s and appraisal

• Rewards and recognition

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