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. My name is Tom Tucker. I’m the host today. I’m pleased to welcome Didier Chenneveau who is currently based out of Singapore as President Asia Pacific for CEVA Logistics, the world’s fourth largest logistics 3PM company and owned by Apollo of the United States. From 2008 to the end of 2010, Didier was Executive Vice President and Chief Supply Chain Officer for LG Electronics in Seoul. Before that, he was Vice President of America’s Operations for Hewlett-Packard’s imaging and printing business. Didier, welcome and thanks for joining us. It’s great to have you with us today.
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. But a headhunter came by and said, “This is a really great opportunity. There’s a great CEO. There’s a willingness to globalize a big organization. Would you be interested?” I did a couple of rounds of visits and really understood the vision of the CEO and I was really keen to be part of that big transformation. That’s how I ended up at LG.
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. There were a few presidents that were eventually nominated in the countries as the head of the country, but that took place six months later.
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. I think it was a genuine attempt at globalizing the company and trying new things. Everybody knows that the limitation of the Korean management model. I think the best illustration of this is that not many Korean executives run other companies around the world. It tends to be a model that only stays in Korea. I think his vision was great and he was really trying to go on the globalization model.
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. It was also willingness to look at outsourcing, which is something that traditionally Korean companies have not done; so really looking at the non-strategic piece of the supply chain and see if those could be outsourced. I would say it was kind of a globalization, transformation, and setting up of the organization role. All the people that were hired were really aligned. So we were staff functions; we were not really driving a business, we were not in charge of a region or in charge of a P&L. We were mostly advisors, at the staff level, reporting to the CEO.
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. It was the vision at the top of the CEO, but as you went down the rank-and-file in the organization a lot of people who did not understand or did not want the globalization who felt challenged in their own jobs and their own position. But I think the public statement was absolutely correct.
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. What’s unique about the global supply chains of Korean companies? Where are they strong? Where are they weak? Do Koreans tend to run their supply chains based on a Japanese model or are they closer to a Western model?
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. They, in general, accept property for Samsung who’s widely recognized as having a top supply chain organization among the Korean companies. I think, generally, they’re relatively weak. The model is not really about supply chain collaboration. It tends to be more of a closed model; whereas the leading edge companies have more of an end-to-end approach, more of an open, collaborative model with other partners. I think this is an evolution required. I spent a lot of time explaining the concept of end-to-end supply chains; having KPIs that really measure end-to-end processes and the starting point was relatively low.
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. It would mean nothing to have really great design, R&D centers, and great consumer understanding if you cannot bring those products to the shelves and to where the customers want to buy it. So I think an underlying supply chain that’s operationally excellent and really focused on execution is really critical to the success of the brand. I think the CEO really understood that, and that’s why he was pushing for improved capability and skill around 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. We did, also, quite a bit on outsourcing; so trying to take non-core manufacturing or logistic activities such as basic manufacturing, but also warehousing and distribution activity out of LG was a success. It was difficult that we didn’t do as much as I wanted to do. I think there’s a cultural resistance to this. But I think it brought a lot of benefit and, in some aspect, I think much more should have been done.
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. What’s your perspective on the smartphone business and where do you see that LG has been successful or not successful in this area? Has LG made strategic errors or would you say the company’s results reflect its technical capabilities at the moment?
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. The only piece I would give you the supply chain ?I think focusing on manufacturing where there is very little added value should not be strategic priority. I think maybe we focus too much on manufacturing process and internal manufacturing when a lot of these could have been outsourced to more nimble competitors and move the resources more to product development where I think the value gets created. I think, maybe, overtime there needs to be a shift. Successful smartphone companies, today, do not really manufacture anything. Apple does not manufacture anything. It’s focused on brand and product development and the software.
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. Our community at Korea Business Central is focused on doing business in Korea and many of our members are working in Korean workplaces. Because of that, our membership has a keen interest in the challenges, the opportunities, and solutions for working in such environments. How would you describe the dynamics of your interactions with your peers at LG, with your superiors, and with your subordinates? Did they differ depending on rank or gender? Talk about those things.
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. There was an effort, in the beginning, to do the staff meeting in English with the CEO, but that stopped fairly fast and reverted back to Korean. I think the effort to globalize the language, even though it was widely publicized outside of the company, was a limited effort. Other aspects have been taught by others before. The evening social drinking is not something that most of the foreigners enjoy. I certainly did not enjoy it too much. I was willing to do it because I knew it was part of the culture, but I did not want to make a habit of this. The concept of open door policy is still not accepted even though I mentioned, several times, that my office door was always open; that people could come and talk to me. None of my second-level people ever did it. I think my direct management team finally got used to this and would pop in, but never asked me for lunch if I was in my office by myself. They would always wait for me to go ask them out for lunch. There are all these little things that are different for Westerners.
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. I think we were not fully ever integrated. It’s hard to make very close personal relationships. I don’t know if it’s because we did not do enough of the drinking, but it was challenging. It’s not as easy environment. But I think we made good progress. We were respected for our knowledge and our expertise of having worked around the world in the different organizations. But it still remains a very close society, very structured, hierarchal culture.
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. Very often we felt that consensus was the one-way thing. We had to create consensus around our ideas and what we wanted to achieve with the rest of the management team, but the reverse was not necessarily true. Nothing unique and very different for each one of us; I think we all had the same remark and assessment of the situation.
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. So in the beginning they were a little bit surprised. It took a little bit of adjustment with my direct staff in particular. But I think over time they really understood how to work with me. I understood a little bit better how to work with them. I still remember the first time that I asked the question: what do YOU think? They were surprised. “You’re the boss. You tell me what I’m thinking. You tell me what to do.” I said, “No, no, I want to have your opinion. What would you do if you were in my shoes?” They were not always used to those types of question, but eventually grasped it, understood it, and we worked well together. We had great results ’08, ’09, the beginning of 2010 were great progress in supply chain. We were measuring based on the Gartner Group; how we’re doing versus the rest of the world. In 2007, we were ranked 65 in terms of world’s best supply chain, which was not something to be proud of. I think we jumped all the way to rank 27 or 28 last year ?a huge improvement in terms of the work we had done and the recognition we got outside from the broader supply chain community.
Tom: Congratulations on the accomplishment. That’s fantastic. The experiment that LG started back in 2008 in hiring the foreign executives was widely regarded as a success until late last year when word got out that your team was leaving. This came as a shock to many of us. Could you talk about the situation surrounding your departure at the end of last year? What do you see as the root causes? Does it represent a failure at some point or was your work simply done? Is this change in evolution for LG in a new, positive direction?
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. I think it was just the change of leadership at the top and they saw it differently. Personally, I don’t think it’s a positive image for LG going forward. It’s probably going to make it harder for them to recruit executives around the world that are non-Korean. At the same time, I’m not sure that’s what they want to do for the next few years. It might just be as well like this.
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. This yearly process in November to look at the top executive and reassign them after they’ve been in the job three or four years to various parts of the organization is still very puzzling to me. I don’t understand why an organization would do this, but that seems to be the model in many Korean companies. So yes, I would do it again. I would ensure that the mandate of the CEO is long enough so we can finish the job. The ending part was less pleasant; I have to admit.
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. I think there’s a risk that they don’t globalize fast enough, that recreate little Koreas around the world as they try to understand local markets. Yes, this has worked for the past 15-20 years, but can it work for the next ten years? Everybody looked at the Japanese model, and the last ten years, everybody has been talking about the last decade for many other reasons than just the management structure and management style. But I think that also had a little bit to do with it. I think there’s still a lack of transparency with all the sister companies providing services to the table. They’re not always very efficient and they tend to win business just because they’re part of the group. I don’t think that’s a successful model going forward.
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. The CEO understood this and had very good plans to globalize part of the management around the world. I think even if there is a pause, this will come back. Globalization is here to stay and the companies have to look in their management and in their employee base, like the market they serve.
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. How would you rate Seoul as a place to live with a family and why do you feel the way you do?
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. There’s a great effort, but there’s still a ways to go. I hope someday I can go to Starbucks and order my coffee in English, but I think it’s still going to be a few years. It’s a good place, but it’s still, like I said, a closed society. It’s hard to make local friends. You can make business acquaintances. It was a little harder for us, or at least for me, to make very close, personal friends.
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. I’m delighted to be in Singapore. I’m delighted to run Asia, including Korea. I still have numerous business with Korean companies and will continue to serve them. I think they will do more and more outsourcing. This is a long-term evolution, so this is a benefit for a company like CEVA.
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. Any young graduate that’s getting into the marketplace, I would do more than one company and do more than one country. I probably would do supply chain and another function – IT, finance, manufacturing. The future leadership are people that understand global trends, global strategy, have exposure to multiple businesses and geographies.
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. I think big Korean companies can learn a lot in this area still.
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, it was great talking with you today. We really appreciate it.
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.