Monday, October 20, 2014

Korea Facing 2014: the TF

As with the previous post, I highly encourage you to share your comments and feedback.
Questions? Comments? 
In this commentary which builds upon the previous Process articles, I would like point out that although the Korean model appears to move quickly, potential projects are, in fact, reviewed with a high level of scrutiny. 

Prior to the approval of any major initiative a “behind the scenes” dedicated task force (TF) is formed. The TF’s job is to research and benchmark the best practices of similar projects outside Korea. In many cases the team is cross-functional, comprised of staff from across the company—each member representing a department. Quite often the TF operates under a code name and work is kept confidential and private, even from most of their own organizations. Over the course of several months the team will compile a comprehensive report for leadership on which management can base a decision.  TF reports can vary from a PPT presentation to thick binders.

The preparation work by the TF can provide considerable data and establish timelines, benchmarks and a roadmap for the project. For the Korean market, with which Korean business is most familiar, there is little gap between this in-house planning and the start of implementation.

More significant gaps between planning and implementation occur when Korean firms expand globally and the TF are unfamiliar with the nuances of the local market. Plans crafted in Korea often have little relevance to the actual execution of an overseas project –the timelines, cost estimates and roadmaps requiring constant adjustment and revisions.  

As a solution, I suggest TFs solicit local support, and industry expertise--realizing that in many cases, especially in new global launches, there are no overseas operations yet to draw upon.  This means the TF not only benchmark best practices globally but also seek out common pitfalls, potential challenges and worst-case situations. 

In turn, local teams who will be required to implement need to realize and accept the Plan as more of a roadmap vs. a detailed blueprint.  Once leadership has approved the project, the teams assigned to the project are expected to make all efforts  to achieve  the milestones.  


Your Questions, Comments, Feedback?


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Tuesday, October 14, 2014

Korea Facing 2014: Process—the Feedback

My commentary titled “Process” provided insights into the differences between western and Korean project with a focus on planning stage. To recap, Koreans tend to move fast and make necessary adjustments going forward. In contrast, the western and the Japanese process invests considerable time initially to explore all the potential pitfalls and plan accordingly prior to beginning the implemention. In most cases timelines for Korean projects are considerably truncated— a potentially year-long project might be reduced to 3-4 months.  A follow-up commentary to ‘Process’ is underway; in the meantime I’d like to share some reader comments:


Thanks for the discussion.  I loved the topic.

These comments are like gold!
The conflicts between Western and Korean styles are really quite confronting  (baffling to any new staff), and your comments and explanations are like little rays of sunshine breaking through the black clouds. Please keep them coming.

A great piece. Matches my experiences to a T and helps put them in a context that I can understand. Captures some very important ideas.

Great read – my concern is cut twice measure once is not necessarily a proven option.

Thanks Don – you’re spot on here.

I’d also like to share Dr. Jennie (Chunghea) Oliver’s insights. Her academic work at the moment is focusing on globalization and international business.  As in the past Jennie’s input on my writing on Korea business is very much appreciated.


Jennie notes…
Understanding the cultural background of a host country is critical for international firms.  Culture, as a powerful force pervasively embedded in human interactions and behaviors, helps one get a glimpse of how society is organized and how members of society play their roles.  The differences between monochronic culture and polychronic culture, which also show strong connections to individualism and collectivism, have been widely discussed.  For example, while a monochronic person takes a serious commitment towards following plans, a polychronic person is willing to change plans as needed.  Another example is that while a monochronic person tends to tackle tasks one at a time, a polychronic person tends to multitask.  Besides these two examples, orientations toward relationships, time commitments, privacy, punctuality, and private belongings are also included in the differences described by Edward Hall in his book "Understanding cultural Differences: Germans, French, and Americans." 

Agriculture was a major element of the Korean economy up until the early 1960s.  In an agricultural environment, farmers plan their activities around meteorological factors which are uncontrollable by man.  In this kind of environment, time is cyclical as things are done around seasonal requirements.  As such, people tend to change their activities and plans as they go depending on the external elements, namely the weather and the needs of others if cooperative farming is practiced.  While waiting for the right time for seeding, planting, weeding, and harvesting, farmers tackle various other tasks.  Korean meals eloquently describe this tendency.  Korean meals typically consist of a bowl of cooked rice, stew (or soup), and 3 or more side dishes all at once.  The person who prepares the meal basically multitasks in order to complete the preparations in a timely manner.  While cooking rice, the soup and side dishes are made simultaneously. 

According to your comment about work process style, "measuring twice, cutting once" is standard in Western business practice (and Japanese) while Korean organizations seem to exhibit "measuring once, cutting twice" as their model.  These two perspectives show a stark difference in worldview.  Without understanding each other's work orientation and habits along with cultural background as described above, partnerships between Western companies and Korean companies is likely to encounter mistrust and dysfunction.  In this regard, there is a benefit of having outside consulting firms involved in partnership projects to help both parties meet their respective needs and expectations.


Working with others who do not share the same culture, language, and habitual norm is challenging for everyone and calls for a great deal of energy, patience, and strategic decision making.  There is no perfect business solution that works for all organizations.  Solutions that worked for some organizations may not have the same effect for others.  This thought also applies to work process style.  Some projects need a "measuring twice, cutting once" strategy while others need a "measuring once, cutting twice" strategy.  The local business environment contributes to this phenomenon.  Depending on how quickly the market moves, companies have to adjust their actions.  Nevertheless, there are business practices proven to be successful over time.  In this case, the best business practices are often taken into consideration for deciding on what kind of work process style is appropriate for a specific project.   


Jennie Oliver, EdD


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Tuesday, October 07, 2014

Korea Facing 2014: Process

This is the first commentary in a new series on Korean global business. My hope is you respond in an email and share your thoughts and comments. 

Like with my previous works, I will edit the series into a new publication (yet to be titled) and incorporate the valued comments and input. 

Don Southerton, Author

Process: Cut Twice, Measure Once?

During a recent workshop I polled participants on the differences they experienced between the Korean and western workplaces.  One attendees comment centered on how the Korean planning and execution process differed from not only his previous western background but also the Japanese model. 

When asked to elaborate, the participant shared that Koreans tend to move fast and make necessary adjustments as needed going forward.  This was in sharp the contrast to his experience with the western and the Japanese process in which time is taken initially to explore all the potential pitfalls and plan accordingly before implementing.

Others in the group added that the ability to report that the project was underway seemed of utmost importance to theIr Korean colleagues. Additionally, in most cases timelines for projects were considerably truncated a potentially year-long project might be reduced to 3-4 months.

Reflecting on the group's comments, I recalled that a colleague once noted the Korean model might be seen described as cutting twice after measuring oncea variation to the adage measure twice, and cutting once.

From a cultural perspective, the Koreans approach to managing projects differs from the West. To better explain dynamics in the Korean workplace, we need to draw on two cross-cultural terms. The first is "mono-chronic" in which people proceed according to linear plans made well in advance of the project start and carry out tasks one at a time from start to finish. For many this is considered a very western approach. The second term is "polychronic" in which numerous tasks are addressed but not necessarily linear. Multiple issues can be dealt with simultaneously while other assignments can be put on hold or elevated in priority. In many cases, this is the Korean workplace.

A polychronic work style can result in negotiations, planning, and project activities proceeding at major levels with conversations jumping back to earlier discussed issues mixed with new issues. On the positive side, Korean organizations are flexible and teams are used to change. Frankly, however, this can conflict with a workplace culture of high risk-avoidance and limited risk taking.


All this said, I have some suggestions.  First, recognizing this is the Korean model and adapting accordingly will save considerable frustration and stress.  I have seen efforts by western firms working with their Korean partners to institute a structured project management process to align teams.  In some cases this means bringing in experts and outside consulting firms to put in place a western project control system. Although the Korean teams are open to the training and cognitively agree in the value of the procedures, they rely on their own time-proven systems and defer to their own methods, especially when under a deadline. This can apply in U.S., global and Korea-based projects.



And, a final thought to consider.  Recently, I have found that Korean companies expanding internationally may spend considerable time researching the new market but stop short of a detailed action plan. Probing deeper into this approach, they see these first ventures as a 'learn as you go' experience and are open to what works and what does not.  Lessons learned are then used as a foundation for future bolder market entry project efforts.

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Comments requested :)






Tuesday, September 30, 2014

In the News: Hyundai pays the price for prestige

Building upon some of my comments in the most recent Automotive News, I see the media and some industry watchers who look­ solely at the high cost of the land purchase.

Frankly, land is pricey in Seoul and Gangnam even more so.... Following the announcement of the deal, the Hyundai Motor Group has dis­closed more details­­­ one point being that up to 30 sister companies will be tenants spreading ongoing costs across much of the organizations.

More significant with new tax laws soon to enacted, the Group will hugely benefit from the land purchase.

My perspective has been cultural. In short, the move is a bold statement. They brand will contin­ues to move upward and gain in prestige.  More so, in a status based culture like Korea a high profile corporate campus solidified the Group's position within both society and business.

Hyundai pays the price for prestige

$10 billion land deal brings swift backlash

Gabe Nelson
Automotive News | September 27, 2014 -

Hyundai Motor Group Chairman Chung Mong-koo got what he wanted: a spacious corporate home in Korea's most prestigious neighborhood.

Now he is paying the price.

With a record $10 billion offer, triple the appraised value of the property, Hyundai outbid rival conglomerate Samsung Group this month for a 20-acre plot in Seoul's swanky Gangnam district, which it plans to use for a headquarters uniting the group's far-flung offices.

The purchase provoked a swift backlash.

Investors sold off Hyundai stocks after news of the deal surfaced on Sept. 18, erasing $8 billion of shareholder value in a matter of days. Labor leaders called strikes at Hyundai and Kia assembly plants, and postponed contract talks in protest. Board members rushed to distance themselves from the decision, saying they weren't told the bid would be so large.

While the deal appears to have become a boondoggle for Chung, 76, who has steered Hyundai Motor Group to new heights since taking over the company in 1999, experts see the purchase as unsurprising, given Korea's status-driven business culture.

The deal will send an unmistakable message about Hyundai's place in the corporate pecking order, aiding in marketing and recruiting, said Don South-erton, a consultant on U.S.-Korea business relations whose clients include Hyundai.

"The dollars shock people, but it's really nothing out of the ordinary over there," Southerton said. "There's a feeling [in Korea] that if you want to be a global player, you'd better be in Gangnam, because that's where the serious global companies are."

Opportunity cost
Hyundai Motor Group is spending $10 billion on real estate in Seoul's splashy Gangnam district. What else could it have done with that money?
• Build 6 to 10 assembly plants: Hyundai spent $1.7 billion on its Montgomery, Ala., manufacturing complex. Kia is spending more than $1 billion on a factory in Mexico that opens in 2016.
• Redesign 20-plus products: Hyundai has said it spent 450 billion won ($432 million) to develop the redesigned 2015 Sonata and 500 billion won ($480 million) on the redesigned 2015 Genesis.
• Buy an automaker: $10 billion would go a long way toward a bid for a smaller rival such as PSA Peugeot Citroen (market cap: $10.1 billion) or Mazda ($15 billion), though there is no sign that acquisitions are on Hyundai's agenda.

Hyundai already has a smaller presence in Gangnam, the retailing mecca made world famous by the 2012 pop song "Gangnam Style." Hyundai's showroom there, called the Hyundai Motorstudio, includes a gallery, cafe, library, playground and tuning garage under a single roof; in the street-facing windows, Hyundai displays Genesis luxury sedans on spits that rotate the cars at unusual angles, like rotisserie chickens.

Seeking visibility

It is common around the world for car companies to seek visibility in ritzy commercial districts, as exemplified by General Motors' decision last week to move Cadillac and 50 employees to Manhattan's SoHo neighborhood.

But Hyundai is going a step further by moving its whole headquarters to Gangnam. And the property that Hyundai bought, held by state-owned Korea Electric Power Corp., was the only suitable property that was likely to come available, said JoAnn Hong, a director at real estate consultancy Savills Korea.

"There are no [other] large parcels nearby," Hong wrote in an email to Automotive News. In Seoul's three main business districts, she said, "this one is uniquely large."

Dabbling in real estate
Though Hyundai's $10 billion purchase is unprecedented in size, other automakers have poured money into big building projects in pursuit of prestige.

› Volkswagen AG's Autostadt
Wolfsburg, Germany
Each member of VW's corporate family gets a shrine at this $400 million complex, which opened in 2000. It was envisioned by Chairman Ferdinand Piech as a way to transform VW's gritty industrial hometown.

› Toyota Motor Corp.'s Amlux
Tokyo
Opened in 1990 in a flashy high-rise in Tokyo's Ikebukuro district, this tourist attraction was a showroom for past and present products, plus games and shopping, until it closed in early 2014.

› Ford Motor Co.'s Renaissance Center
Detroit
Led by Henry Ford II, the automaker spent $350 million in the mid-1970s to develop the iconic towers as an urban-renewal project. General Motors bought it in 1996 for its headquarters.

› Porsche AG's Experience Centers
Atlanta; Beijing; Los Angeles; Leipzig, Germany; Silverstone, England
Porsche is building tracks around the world for owners and shoppers to test drive its sports cars. Its latest, a 53-acre, $29 million complex near Los Angeles, is due to open this winter.

Still, the impact on Hyundai's auto business could be substantial. By spending nearly one-quarter of the $41 billion that Hyundai Motor Group's 10 listed companies held in cash at the end of the first quarter, the world's fifth-largest automaker will have that much less to invest in new factories, product development, r&d and acquisitions that could help it overtake competitors such as General Motors, Toyota Motor Corp., Volkswagen AG and the Renault-Nissan alliance.

Ongoing labor issues

Hyundai and Kia said this past week's strikes were not a direct response to the property purchase, but part of ongoing labor issues. Union officials didn't respond to requests for comment.

In a joint statement, Hyundai and Kia said the land purchase reflected the group's need for an "integrated control tower" to oversee its rapid growth.

Meeyoung Song, a spokeswoman for Hyundai Motor Co. in Seoul, said the company wasn't trying to generate a short-term return with its purchase, but rather "to establish a corporate campus that will create far-reaching synergies."

Southerton said Hyundai, which is Korea's second-largest chaebol conglomerate after Samsung Group, may also have felt pressure to keep up with its larger rival, which already has its headquarters in Gangnam.

"They need to secure this position in their society, and they need to maintain that position," Southerton said. "This is one way that they can do it."

Hans Greimel contributed to this report.

LINK   http://www.autonews.com/article/20140927/OEM/309299979/hyundai-pays-the-price-for-prestige

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