_ Reading customers’ minds key to becoming innovative leader
By Kim Jae-kyoung
For most big Korean companies, the biggest issue now is how to turn into innovative leaders from fast followers. Korea’s global manufacturers such as LG and Samsung are emerging as world-class companies by adopting fast follower strategy over the past decades.
However, with Apple becoming one of the world’s most powerful companies with its smart products, local players are feeling the urgency to revamp their strategies toward innovators.
Steve Jobs, who suddenly resigned as Apple CEO on Thursday, has become an iconic figure of innovation as his iPhone and iPad products have entirely changed lifestyles in the 21st century. Many business leaders have become enthusiastic about learning about Apple’s success. Particularly, they want to know how Apple instills innovative spirit into their products.
Kwon Young-soo, CEO and president of LG Display, the world’s second-biggest manufacturer of liquid crystal displays (LCDs), is one of the few CEOs who have some clues to the secret of the Apple’s success. He meets with Apple’s ranking executives on a regular basis as Apple is one of the biggest buyers for LG Display.
“It is quite simple. I think Apple is really good at analyzing and reading customers’ minds. You have to read their hearts and understand what they really want. The problem is that customer analysis is not easy,” Kwon told Business Focus during an interview held at his office in Seoul on Aug. 22.
“Apple conducted a thorough analysis on notebook computers. It is always trying to find what customers want. It seeks to keep expanding features customers like while dropping what they don’t like. That’s Apple’s core strength,” he added. “Touch screen is a good example. Customers are very sensitive to such features and Apple knew it and focused on maximizing that feature.”
In the eyes of Kwon, there is no imminent competitor for Apple at least for a while.
“It seems that there is no company able to compete with Apple, particularly in the tablet segment. It has good software, as well as high quality and price competitiveness. Without special issues, there is no doubt that Apple will continue to make a success,” he said.
“In the smart phone market, there is still room for other companies to play but even in that market, Apple’s influence is growing bigger,” he added. “We want to expand our supply to Apple. We grow along with Apple’s growth. Our strategy is to build up our relationship with Apple.”
Regarding Google’s recent takeover of Motorola Mobility, the 54-year-old CEO said that the deal is not likely to have a big effect on local players as Google, he believes, will not focus hard on the hardware market.
“I think that Google wanted Motorola because of its patents. I don’t think that Google is willing to manufacture hardware. In that case, the deal will not affect us,” he said.
No double dip
Kwon ruled out the possibility of the global economy slipping back into a double dip downturn but remains cautious about the future course, saying that the global economy is losing growth momentum.
“I think that the global economy is undergoing a low-growth stage. Since it is not contracting, I don’t think that it will enter a double-dip. However, I think people around the world have become overly sensitive. People get anxious about the future regardless of statistics,” he said, noting that what firms should focus more on is psychology, not just numbers.
The chief executive indicated that the situation will not turn for the better anytime soon.
“We have come up with three possible scenarios _ best, neutral and worst. We are now planning our business strategy based on a worst case scenario because I believe it is time to guard against the worst,” he said.
Despite the sluggish global economy and volatile financial markets, the LG Group’s flat-screen affiliate reduced its operating losses in the second quarter.
The company saw its sales rise to 6.04 trillion won in the second quarter from the previous quarters’ 5.36 trillion won. It posted operating losses of 4.8 billion won between April and June, an improvement from the first quarter’s 23.9 billion won losses. Its net profit also improved to 2.1 billion won from the first quarter’s 11.5 billion won losses.
“(In the second quarter,) we weathered turbulent times well on the back of our efforts to establish strong fundamentals, which helped us withstand shocks triggered by market volatility,” Kwon said.
“In the second half, we will continue to make efforts to overcome market uncertainties by adopting effective business strategies and increasing the portion of differentiated products using advanced technologies, such as FPR (Film Patterned Retarder) and IPS (In-plane switching).
However, the market outlook still remains bleak. In its latest report, Woori Investment Securities said that LG Display will continue to have difficulties for the remainder of the year due mainly to a slump in the IT industry.
“The company is passing through a trough. In the midst of the economic downturn, consumers are spending more on smart devices than on TVs and PCs due to weakened purchasing power, which has led to a prolonged slowdown in the IT industry,” Woori analyst Park Young-joo said.
The brokerage house forecast that the firm’s operating losses will balloon to 300 billion won in the third quarter as a result of sluggish demands.
kjk@koreatimes.co.kr