The globalization model adopted by major Korean companies like Hyundai, LG and Samsung has made Korea one of the world’s most advanced economies. To stay competitive, however, those companies will need to adjust that model in many ways says Joe Fuller, co-founder and CEO of Monitor Group, a leading international consulting firm.
Speaking at a Business Roundtable Luncheon series program, Fuller said that if Korea is to meet President Lee’s ambitious “747” economic targets, the country’s growth will have to be led by its largest companies, which make up a disproportionately large share of GDP. To power the Korean economy forward, these companies will have to change their internal governance, human asset management, innovation strategies and product development assumptions.
Thursday, June 12, 2008
Beginning with internal governance, Fuller explained that Korean companies tend to be highly centralized, risk averse organizations. Those instincts need to change to allow Korean companies to promote a new culture of independence and risk taking among executives. Likewise, Korean companies presently have one of the world’s lowest ratios of non-nationals in senior management, thus missing out on new international expertise and fresh thinking. Korean multi-nationals are world-class and could do very well in competing for international talent, Fuller explained. They just haven’t made it a priority.
When it comes to product innovation, Korean companies focus their resources on developing new technologies, and new features for existing technologies. Unfortunately, this is one of the least profitable innovation strategies. Korean companies should diversify their innovation focus and attempt to develop new user experiences and new financing arrangements.
Finally, Korean firms need to change how they think about globalization. To date Korea, like Japan, has emphasized exporting uniform product lines. While this allows for the development of design and manufacturing excellence, it also makes Korean companies slow to react to changes in local markets. In the future, they need to emulate companies like Nestlé, where regional managers set the agenda for the company’s global operations.
Fuller acknowledged that these recommendations would be a tall order for Korea’s multinationals. “But I wouldn’t bet against them,” Fuller said, as he recalled how quickly they have grown so far.
The Future of Korean International Competitiveness
New Models of Governance and Corporate Strategy
with
Joe Fuller
Co-founder and CEO, Monitor Group