April 10, 2011The Korea Business Interview Series
"Global Expertise Within the Korean Business Framework at LG Electronics"
Didier Chenneveau is President - Asia Pacific for CEVA Logistics, and previously EVP and Chief Supply Chain Officer for LG Electronics from 2008 until the end of 2010.
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From 2008 until the end of 2010, LG Electronics did what's never been done before in Korean business. The company brought in five foreign executives to help bring the company up to international standards in a variety of areas. The experiment is over though; all the non-Korean executives have moved on, and LG Electronics is back in the hands of Koreans only, leaving a lot of unanswered questions about how prepared Korean multinationals are to become truly multinational.
Didier Chenneveau was one of the foreign executives and he served as Senior Vice President and Chief Supply Chain Officer for over two years. His insights from the experience are valuable for anyone interested in doing business in Korea, because they explore the limits of Korean business culture, the ways for Korea to improve and implications for others in making a success of their positions within Korean corporate business.
Tom: Hello, and thanks for joining us today for the Korea Business Interview series produced by KoreaBusinessCentral.com, the premier information and networking community for conducting business in Korea.
Didier: Thank you, Tom. My pleasure.
Tom: Let's start off by talking a little bit more about you, your background, and your experiences before working at LG Electronics; just a brief overview.
Didier: Sure. I started my career in Europe for Caterpillar in Geneva, Switzerland in the treasury department. I was the financial guy. After three years I moved to HP where I spent most of my career; about 17 years both in Europe and in the U.S., but mostly in the U.S. I started in the financial function, but moved fairly quickly into operation and supply chain management before moving to LG.
Tom: Let's talk about the sequence of events leading up to your position at LG Electronics. Having worked in the U.S. most of your career, what was it about the position at LG that made it a good potential fit for you?
Didier: The first thing is I wanted to work in Asia. I had done Europe. I had done the U.S. So I had a check mark, but not in Asia. I had been traveling through Asia quite a bit and my initial idea was to come to work in Singapore in the part of Asia I would call "Asia Lite." My first inclination was not really Japan or Korea.
Tom: I understand that you were one of several foreign executives hired into LG at the same time. Who were the others and what roles did they fill at LG?
Didier: There were five of us that came almost within a three to four month period. There was Chief Marketing Officer, Dermot Boden; Chief Procurement Officer, Tom Linton; Chief Strategy Officer. Then a little later, a Chief HR and myself as Chief Supply Chain; basically five guys coming into Korea.
Tom: So hiring even one foreign top executive is a big step for a Korean company and bringing in a whole team is unprecedented. Would you say that LG was brave or forward-thinking to hire you as a group, or would words like na?e or unprepared or confused be more appropriate and why?
Didier: Maybe all of the above; I don't know. I think the vision of the CEO Young Nam was really good. He was committed to this vision of globalization for LG. He understood that the LG world needed to look like the rest of the customers that LG has around the world and that the Korean management model has some limitation.
Tom: What was the initial concept for your foreign executive team's place in the organization? Specifically, what were the objectives of LG Electronics in bringing you in as their foreign chief supply chain officer?
Didier: Well, it was really to structure the organization. Actually, I was the first chief supply chain officer. The supply chain function had not really been aggregated across the company. So it was really setting up the organization, setting the vision for supply chain in LG, really trying to bring best practices from other companies to the supply chain world. It was setting KPIs.
Tom: Did you find that there was a divergence between the company's actual purpose in hiring you, and the others, and the reasons that were presented publicly and can you elaborate on that a little bit?
Didier: No, I don't think there was any divergence between what was presented publicly and what we had to do. It was a little hard because I think the globalization was getting a little pushback within the organization.
Tom: I'll come back a little bit later and ask you more about the cultural aspects of the work, but I'd like to delve in a little bit first into the supply chain related work that you actually did.
Didier: I think they're definitely closer to a Japanese model. I think it's not a very open system yet. A lot of the big Korean conglomerates, as we look at supply chains, tend to have their own internal logistic company. They have a lot of sister companies that they feed business to.
Tom: How about the strengths?
Didier: The strengths are obviously the hard work. People are committed to try to be best in class. They want to learn, so the willingness to learn has always been very high. What I do find, on the hard work piece, is that there's sometimes confusion about quantity and quality. People spend a lot of time and a lot of hours in the office. Are those hours very productive is always the question mark.
Tom: How does supply chain management fit into the overall Korean company branding effort?
Didier: Well, I think the CEO and the rest of the management staff really understood that great products and great design, which was one of the strengths of LG, and great branding and consumer insight can only work if those two things are linked by an underlying, strong supply chain.
Tom: What specific initiatives did you lead and what were a couple of the results that you were most proud of? Maybe talk a little bit about disappointments, if there were any.
Didier: I would say the biggest improvement we did was around the inventory management and supply/demand matching; orchestrating the whole supply/demand matching process across a company as large as LG can be very challenging. I think we start putting processes and systems in place that really improved the picture.
Tom: What was the hardest non-cultural issue that you had to deal with in raising the standard for LG's supply chain management?
Didier: Definitely the lack of IT system. IT, information technology, I think is still not seen as a strategic priority. Funny enough, it still reports to finance, which I really find amazing in this day and age.
Tom: That's an old-time model.
Didier: Very old-time model, and it's still the model in LG, but the lack of system was the biggest hindrance to making progress.
Tom: Let's talk a little bit about smartphones; perhaps the most visible business for LG Electronics right now is its competition in the global smartphone field. Things don't seem to have been going too well lately, though, for the company.
Didier: I don't know if strategic errors have been made and it's not for me to comment on the product. I think the smartphone area is really focused on innovation, software, ease of use, and partnership. Those are maybe areas that need to be strengthened.
Tom: Where would you say LG has been successful with regard to smartphones?
Didier: Design has definitely been a plus. The phone has been always recognized as I think smart design and attractive to customers. The software issue, I think, will be resolved and I hope they are successful in smartphones because the marketplace is going that way and should be big enough for three or four players.
Tom: Widening our perspective a bit, what would you identify as the top three critical factors that Korean companies will need to work on in order to compete with the likes of Apple and the other global majors? Can LG become a leading smartphone player once again?
Didier: I think so. They have not lost the leadership. I think by, again, focusing on innovation, focusing on understanding the customer needs and really creating partnerships. I think it's all about who you work with and who are your business partners in that model. They'll be successful again.
Tom: Any other thoughts on LG and smartphones?
Didier: No, this is not my area of expertise. I prefer to talk about supply chain things.
Tom: Understood. No problem.
Didier: Absolutely. It's still a very hierarchical organization where there's a huge respect for authority. For the foreigners, the challenging part was getting into that culture. Obviously the language is a barrier. We had to use a lot of translation during staff meetings, which is not always very easy to follow. There's always a lag in the translation and you don't always get the nuances.
Tom: How did these relationships evolve over time and how were they different than what you would have expected from a non-Korean workplace?
Didier: With the peers, they were not really warm and fuzzy. We got along well, but a few of us could be in a car and they would all speak Korean and there would be very little interaction sometimes.
Tom: Were there unique cultural and communication challenges and opportunities that could be generalized across the group of foreign executives at LG and were there specific issues that you encountered that the other executives didn't? If so, what were they? Elaborate on these things a bit.
Didier: I don't think there was anything specific to me that my other colleagues did not encounter. When we discussed the issue of consensus building, which is a key part of the culture, we always felt the same way; the five of us.
Tom: In facing these cultural and communication hurdles, what approaches did you take to open and maintain communication with your Korean associates? What worked and what didn't work?
Didier: Trying to be very open, I told them from the beginning, "If you expect Korean management style, you should have hired a Korean guy." I'm coming with my background, my 20-plus years of working in the West, so I manage and I behave as a Western executive; open door policy, straight talk, direct question, good news is as good as bad news, no need to tell me a story, just get to the point, give me your solution, not just your problem.
Tom: Congratulations on the accomplishment. That's fantastic.
Didier: I can talk a little bit to this. I think the very good answer is a new CEO came in, did not see the need to have such a diverse rank of executives so all the foreigners whose contracts were expiring in December and January did not renew their contract. I actually never met the new CEO for the three months I was still on the payroll there.
Tom: Looking back now, if you had to do things all over again, would you do things the same, would you do things differently? If so, what would it be?
Didier: I would do the same. It was a very positive experience. I think we did a lot of good things. I would ensure, however, that the CEO has a long enough mandate to do change. I think there is this three or four year rotation of executives that's institutionalized that I don't really understand.
Tom: Understandable. Where do you see LG and the other leading Korean multinationals developing in the next five to ten years? What would you say are the top three issues that you believe that the Korean corporations must deal with to further excel in the era of globalization?
Didier: I think they really need to take a good look at their management model. It's actually something we've discussed. The fact of the matter is that very few Korean executives are being recruited around the world to lead other global organizations. I think that should be a telling sign that even though it works in Korea, there's something that's not exportable about the model. I think there's really a call for some thinking.
Tom: Any other issues that have to be dealt with to excel in globalization?
Didier: I think excelling in globalization means you have to understand the various parts of the world where you work. Having only Korean marketing people, president in South Africa, Brazil, or any other market where you operate I think has some limitations.
Tom: Didier, we really appreciate your insights today. Learning from your experience certainly helps all of us to move one step further in our positive understanding of business in Korea. I want to shift the focus a little bit and if we may talk on a personal level.
Didier: As we say in Singapore, I'd say, "Okay, la." It's okay. Like I've mentioned, it's a hard place to speak English and I'm amazed by the amount of effort and money that's being spent in Korea on learning English, and little less positive about the outcome.
Tom: Any other positives about Seoul?
Didier: It's positive. It's great access to lots of good restaurants, lots of good museums. We lived in a beautiful part of Seoul. The spring and the fall are beautiful. We enjoyed the skiing. The family was okay; happy.
Tom: Having spent most of your career working in Europe and the United States, I understand that even after your Korea experience you're still based out of Asia. Can you tell us about your current work and plans for the future? What do you hope to contribute to global supply chain management in Asia and Korea now?
Didier: Of course I wanted to stay in Asia because from a supply chain perspective this is where things are happening in the world. So it's still the place where you are building, you're growing, you're expanding. In my current role as President of CEVA we are very large 3PL supply chain company. We are growing very fast in the region and I think this is where the stuff is happening.
Tom: For professionals, what top three bits of advise would you give for those who want to build careers working in Asia, working in Korea, working in some of the places you've work; specifically within the Asia region?
Didier: I would work in Korean, Western, and Chinese companies. I think the strengths of management is really the strength of the experience you accumulate over your career. I would not encourage people to do single company careers, which stands to happen a little bit in Korea where it's really hard once you've entered Samsung or LG to go do a career somewhere else. It's still, I guess, not viewed very positively. But I think this should change.
Tom: Certainly great advice. Any other thoughts that you'd like to leave KBC members with before we finish up?
Didier: I think we have to think about innovation. Lots of the Korean companies are very good at manufacturing processes, but I think there's still a question; why Google, Groupon, Facebook are not Korean companies. The future is around innovation, open systems, collaboration, and I think partnerships in general.
Tom: Certainly great insights. We truly appreciate you taking the time to share your experiences, your thoughts. It's been great. It's been fascinating. You, no doubt, have had a wonderful career up to this point. We certainly wish you all the best as you continue to move forward in your profession.
Didier: Thank you, Tom. I was my pleasure. Good luck to all of you.
Tom: Our guest today has been Didier Chenneveau, currently President Asia/Pacific for CEVA Logistics, but previously Chief Supply Chain Officer for LG Electronics in Korea.
This has been the latest in our ongoing Korea Business Interview series. I'm your host, Tom Tucker, inviting you to improve your business results in Korea by joining KoreaBusinessCentral.com today.
Thanks for listening and have a great day. We'll visit with you next time.
톰: 안녕하십니까, 오늘 이 자리에 함께해주셔서 고맙습니다.
This is very good and informative interview. I am listening it right now while working on my project. I will listen it several times for sure. Thanks for sharing.
A lot of the cultural conflict topics covered in this interview have been discussed at length on KBC before. Didier addressed these in a factual and unemotional manner that I appreciate.
The one item that is billed as non-cultural (but actually may be) that continues to amuse me as a current Korean foreign worker is what he described as "the lack of IT system. IT, information technology... not seen as a strategic priority."
Both companies in Korea I have worked for have relied on homegrown IT and web development whose function are exclusive to Korean language operating systems and make it difficult for non-Koreans to even find their websites. We made some changes to our English website at my current company last year to address this and it has helped quite a bit.
If you look at business at large, the commercial word processing system "Arihangul" doesn't even have full functionality if you use Vista OS in English.
I suspect the root of this is a bit of the "not invented here" mindset in many Korean business. There's may be an unconscious supposition that IT has to be locally built from scratch to be useful to Koreans.
Actually at LGE, they have state of the art 'off the shelf' 'American' ERP systems standardized globally in English, even Korea as well.
It may have been a education come information problem that was the real problem or gap which I have also seen quite extensivily at LGE.
SAP is used everywhere. LG, SK and Samsung. You deal with SAP if you deal with expense, procurement, etc. Otherwise you will encounter a highly customized system (perhaps spawned off of MS SPS) or ground up developed system. Hence is the nature of the IT market~ customers demand unique solutions for their system environment which makes it close to impossible to package a stand alone product.
The process of which development vs customer needs in the Korean IT services market make it very difficult to compete in the global stage, regardless of the top class developers and engineers.
I would later like to write a book about this and distribute it to all my facebook friends. And perhaps my twitter followers
Here inside Samsung they use strictly internal, company-developed garbage (oops! ...I mean IT & software programs ^.~)
Very different. For example, Hyundai Kia Alabama was forced to use a virtual security platform for product development because HQ and all the branch offices were using the same one. Only Korean (the people who made & developed the system) would go near it and still could not resolve the issues caused. It was unanimous that IT environments in the West and in Korea were extremely different.
...And that packaged solutions (standardization) was the only way to resolve Korea's lack of success in the software industry
Agreed. Although SAP is pretty standard in any large corporation, most systems are highly customized and not highly compatible with foreign environments. Good for Korean companies, but difficult for Korean companies that are trying to export their IT solutions.
Thank you so much for this interview. Since news of C-level hires took place, I had some suspicions that things were not going well at LG. It could not possibly have.
My readings on C-level executives influence on corporate culture often point out that C-level executives are rarely effectual change-agents for communities of workers in an organization. Titles do not necessarily correspond to REAL influence. Research shows that organizations have change-agents and "go-to-guys" who wield strong informal power base and influence over the firm that at the surface is not readily evident. Replacing C-level managers with foreigners was window dressing and signaling to shareholders of LG's larger, global ambitions. And perhaps it had it's isolated effects that led to real changes in outcomes. But you can't expect to change a company the size of LG with 5 executives who were vaguely familiar with the LG corporate culture to begin with and understood Korean culture even equally so. Companies do well irregardless of CEO experience and acumen. It's really about allocation of resources to your profit centers that's key for a chaebol as large as LG and Didier points this out early in his insightful discussion.
We shouldn't forget that culture change is also a political act and a political process. Without garnering support for change from within and educating sympathies over long periods of time, it won't work. Furthermore, one need more foreigners placed in strategic positions throughout the firm and incentives toward "global" work behaviors. Currently, Koreans are rewarded for discipline and endurance, not for creativity and ingenuity. This reward system is consistent throughout their cultural institutions. Did you know designers are some of the worst paid workers in Korea?
Another thought: Open door policy? I hate to say it, but this is really not engagement! Passive attempts to engage rarely works in Korea. To be a change agent, one has to go out there and make change and communicate it through as many channels as possible. But I think Didier may have himself not been sure of how long this mixed marriage of convenience would last. Recall, some of the C-level foreigners left earlier on their own call. There appears to have been an attitude of just "playing along and doing what one feels one is called to do - such as updating LG's supply chain system. But there doesn't seem to have been any one who felt they had the responsibility for the globalization of the company except the CEO, Nam Yong - who as an engineer probably knew little about dynamics of organizational culture.
Very well put. I'm glad you're part of this community Abraham, some very relevant insights you have.
Designers really need to get paid more in my honest opinion. As do musicians and actors. For they work so hard and long for such little money and recognition.
Add me to the ranks of those who agree ...you made some well-worded points!