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Posted : 2011-03-27 13:10
Updated : 2011-03-27 13:10

Finding a bridge for globalization



Filling gap between past, future is key to creating success

“When things are going well you like to keep it as the way it was. And that is a mistake. You need to be continuously on the lookout to change things. And you can forgive yourself failing at times but you cannot forgive yourself for not trying.”

By Kim Jae-kyoung

Major Korean companies, such as Samsung, LG and Hyundai, are rolling up their sleeves again to speed up globalization to get the upper hand in emerging markets and find new growth engines, with the global financial crisis fading out.

However, in many cases, their globalization efforts are failing due to various obstacles, such as cultural differences and internal resistance. One of the first examples was LG Electronics’ attempt to internationalize its manpower at the top level.

The Boston Consulting Group stresses that local players should focus more on building up a system that can create a global culture before expanding their overseas presence. The world’s top consultancy explains that when a company has a strong system in place where people know the rules everything is transparent, it’s much easier to have global people tag on that system and work together.

On the other hand, it points out that when a company’s system depends on one person or a couple of individuals, then it becomes less transparent and knowing how to play in that game becomes very difficult especially for non-Koreans. BCG CEO Hans-Paul Bürkner recently visited Seoul and BusinessFocus met with the strategy expert at the firm’s Seoul office on March 18 to listen to his views on how to become a successful global player in these turbulent times. ― ED.



Q: Samsung, LG and Hyundai are seen as multi-national companies. But if you look inside, nearly all their manpower is Korean. How can they internationalize their organizations?

A: Many companies call themselves global companies, but when you look at their leadership, it’s either only German or French or Korean or American or Japanese. I think we have very few truly global companies. I think globalization is still at the very beginning. If you want to be truly global you need to have people from very different cultures, and you have to make the best out of this culture.

Globalization takes quite a while. It’s not something that comes in a year or two or even a few months. Every company has a culture. Making it a global culture is a long process. And just by installing some foreigners, it doesn’t make it global or international. And you need to find a bridge between past and the future. If you just had a major cut-off, and then put somebody or something just new there, and there is no linkage, then there will be a breakdown and potential failure. For example, say you have a western CEO who has been successful in the Americas or Europe, saying now we are global and international doesn’t work, because there is no linkage between the new CEO and the team.

So I think it’s quite important to understand how change happens. I think we have globalization, business model innovation and transformation as key challenges for most companies. Among them, the most difficult is transformation because people don’t like change. And especially when things are going well you like to keep it as the way it was. And that is a mistake. You need to be continuously on the lookout to change things. You have to also take risks and you have to accept that there are failures. And you can forgive yourself failing at times but you cannot forgive yourself for not trying.

Q: From a management perspective, what would be the most urgent task for Korean companies to globalize?

A: I think it is important to start integrating foreigners. It doesn’t have to be at the top level, but really employing people around the world, making sure that they are really part of this organization, that they are taking over step by step responsibilities. And ultimately there is mixture of Korean and foreign. I mean Korean and foreign look like a dichotomy but if you have international management in leadership, you can develop this over time.

Innovator or fast follower?

Q: Korea’s manufacturers such as Samsung and LG are emerging as world class companies by adopting fast follower strategy. Now I think it’s time to become innovators by changing their strategy. What do you think of that?

A: I think one needs to understand that innovative, fast-follower and follower can all be successful. Apple did not invent the MP3 player. They were able to use it and package it in a very nice way, in a good design, and with a good business model. I think what we see with Samsung is moving from being a provider of low cost phones to ones with good design, good quality and features. I think they are doing a very good job. And the image of Samsung changed around the world.

Q: Low cost model has been Samsung’s unique value proposition. But with the China emerging, its unique proposition is declining.

A: There is not just one model that works. In some ways you can be the innovator, in other ways you can be the fast follower or only a follower. On the smart phone actually Nokia had the highest market share and now they are losing market share because the system from Apple was better and now it’s Android. I think you need to know it is a constant battle, and a constant push at the frontier. I would say for Samsung and the others the opportunity is to continuously push the boundaries and to try out new things. Sometimes you pick up on the developments of another sector and follow up fast and even do a better job. That’s perfectly fine. I mean copying and doing a better job is not a sign of failure.

Leadership

Q: In these turbulent times, leadership has become more important than ever. How you define leadership and how do you think leadership now is different from what it was in the past?

A: I don’t think that leadership is different from the past. I think leadership is about assuring that we really create value for all the different stakeholders long-term. It’s about mobilizing your team. It’s about your team around you. Given that we have a lot of volatility and uncertainty, I think one needs to be able to deal with ambiguous situations and you need to find a good path through this volatility and uncertainty.

Of course you could try to see all the options available. So I think that’s quite important rather being raced up and say I have one business model, I have one approach, and I will always stay true to this course. That is not working. I think one needs to be more flexible going forward. Flexible doesn’t mean that you have no values or you have no ethics. I think future leaders will be able to deal with both the good and the bad times in a more flexible way.

Q: Many companies are shifting focus or their strategies back to expansion from survival. How can enterprises become more competitive in this environment?

A: Yes they are moving back to expansion again. You can clearly see this around the world. Korean companies, Chinese, Indians also Europeans and American companies. World trade is coming up. Automotive, telecom, shipbuilding and consumer goods are all expanding again in a major way. But that does not mean that there are some companies who are struggling at the moment, but they are not necessarily struggling because of the crisis or the aftermath of the crisis, they are struggling because of the business model or because maybe they have missed some developments.

In order to be competitive, you cannot just protect the status-quo. You need to conquer new markets and compete with new companies. And whether you are a Korean company, European, or American company, I think what you need to do is to look at how I strengthen my position.

And when the world is globalizing, you need to be a part of this globalizing effort. If you are not part of the global place, you will likely suffer. And in order to be part of global place, you have to be strong in those markets which are growing the fastest. For example, if you are in construction equipment and you are not in China or India or the Middle East, I think you are in trouble.

Q: Many Korean companies, including Samsung, LG and Hyundai, are emerging as top-class companies. What would be the strongest point of Korean firms and the weakest?

A: I am always very impressed about Korea and Korean companies. Koreans are always self-critical. I think the strongest point is that they have indeed very high aspirations and high ambitions. And that they are working extremely hard to come up with innovative products, to improve quality and they are not afraid to go the toughest markets.

I think one of the weak points is (being complacent). I think everybody who is successful needs to understand that in every success, there is the beginning of failure, so you must not get complacent. Especially when you are very successful, you need to be on your toes.

Upbeat on global economy

Q: I think the global economy has shown signs of recovery. But there are growing uncertainties due to unexpected events, such as the Japan earthquake and turmoil in Africa and the Middle East. So what’s your outlook for the global economy?

A: I’m positive about the global economy. I think we will see good growth in 2011, 2012 and going on. The growth momentum will be strong, also driven a lot by Latin America and Africa, as well as Asia. But we also have to get used to dealing with significant changes. You know there are government debts, we see inflation coming back, we see the Euro crisis which will linger for a while and turmoil in North Africa and the Middle East.

I think there will be more volatility, more uncertainty going forward because all these events come into the living room of every individual. In the past when there was an earthquake, it was far away, you had the message on the news and it was over. Today it is in your living room through TV, the Internet, and the social media. And so they are all part of this event. And that has impact on the emotions of people, on their behavior and on their anxiety. Of course these also have impact on the global economy.

Q: The world has gone through an unprecedented global crisis. What would be the most important lessons we learned from this crisis so far? And what kind of effort should we take to avoid a recurrence?

A: I think this has not been the first crisis although it has been very deep and I think we will wrestle with the aftermath for many years. But I think we’ve seen exaggerations and irrational exuberance. I think we need to be careful not just to follow where everybody is investing. It is also very important that you really look at value creation for all stakeholders _ customers, employees, shareholders, and suppliers.

It is also critical to take a long-term view rather than to maximize short-term profitability. If people are too greedy they focus just on short-term profit maximization without value creation. For example, if you sell toxic assets, you know that these assets are not creating value and that you are even cheating customers, this is not acceptable. I think there must be a clear ethical approach to what you are doing.

BusinessFocus intern Chung Min-uck contributed to this article.

Who is Hans-Paul Bürkner?

Hans-Paul Bürkner has been president and chief executive officer of BCG since 2003. He joined the firm in 1981 and was a member of teams that opened BCG's Düsseldorf (1982) and Frankfurt (1991) offices. Before becoming the firm's first CEO from Europe, he was head of BCG's global Financial Services practice.

During his 30 years at BCG, he has counted among his clients many of the world's leading financial institutions. Bürkner has worked with them to redefine their strategies, spearheaded major global expansion initiatives, and supported them in fundamental restructuring.

He studied economics, business administration, and Chinese, receiving a diploma from the University of Bochum, an MA from Yale University, and a DPhil from the University of Oxford, where he was a Rhodes Scholar. He is now based in both Frankfurt and New York, and travels extensively among BCG's global offices.

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