Case 1: Leadership during Crisis at the P Corporation

Company Background

The P Corporation in Korea started as a petrochemical company in the late 1940s and has become the fourth largest conglomerate in the country, with core businesses in electronics, telecommunications, chemicals, and distribution. In 2009, the P Corporation proudly announced that its mobile communication (MC) company has become one of the world’s top three firms in the MC industry. The company’s year-end meeting was full of cheers and promises for upcoming years. The company sold more than 15 million feature phones worldwide. Its market share was even 10 percent higher than that of the industry leader in North and Mid-America markets. Eighty-five percent of its profit came from the global market, and approximately 60 percent of its employees were employed overseas. The CEO declared globalization and marketing as two primary strategies. He adopted English as an official language for all executive meetings and reporting documents and hired several foreigners at the chief executive level from global Fortune 500 companies. However, to the dismay of its employees, the P Corporation’s profits of more than 1 trillion dollars in 2009 plummeted to a loss of more than 0.5 trillion dollars in the following year, and the firm’s image as a stronghold of electronics was severely damaged.

When Apple released the first iPhone in 2007, the P Corporation did not fully grasp changes happening in the US mobile phone market, where consumers were switching from feature phones to smartphones (that run third-party operating systems and apps rather than their own programs, as in feature phones). The company underestimated the growth of the smartphone market and treated the first iPhone as a smart device. In addition, the firm’s cultural tradition of valuing engineering resulted in adherence to developing incompatible features rather than leveraging portable third-party applications. Its multisite development operations resulted in inconsistencies and slower responses to device defects across product lines and led to damaged service-carrier relationships. More problematic was dealing with employees’ lowered morale, especially as they saw their archrival company in Korea emerging as the world leader in the MC industry. Media singled out the CEO’s misjudgment, cultural misfit of external hires, and poor communication among top leaders as primary reasons for the company’s poor performance.

In 2010, a new CEO took the helm of the P Corporation’s MC business. He implemented several radical changes to turn the company around. His motto was to become number one again, and he clearly communicated his willingness not only to overcome the crisis but also to regain company pride. Starting at the top level, one swift decision was to change the official language of all leader meetings back to Korean. The new CEO felt that communicating in English negatively impacted communication effectiveness. He also thought that the unprecedented hiring of several foreign chief executives had occurred too suddenly and harmed the organizational culture, which valued loyalty and seniority as important promotion criteria. To improve communication and collaboration with senior leaders, he created a program entitled Group Genius and led many workshops, eliciting participation from senior leaders with various expertise.

For system-wide changes, the new CEO mandated an hour earlier start in the morning to raise the sense of urgency among all employees. He introduced the Time Table program, a communication platform to share innovative ideas and work progress. He emphasized organizational creativity over individual creativity and started the Idea Mileage program, a bottom-up approach to generating creative ideas. Adopted ideas were recognized and financially rewarded. Different leader levels were charged with responsibilities for refining and acting upon employees’ suggestions. The internal electronic bulletin board ultimately became an official idea- generation process. Another intervention was to run a boot camp called Smart One. Teams with an idea that was approved for a strategic trial or pilot release entered the camp and, within one month, leaders of hardware, software, design, and finance divisions had to work together with a charge to develop an industry-leading model. Another program opened to all employees was the New Concept Construction (NCC) room, a physical place where employees could play with leading products in consumer markets, including fashion items and phone accessories.

Lastly, the CEO emphasized the fundamentals as the most important principle in every decision. The strong push for quality was met with questions due to the previous failure from feature phones; people thought that the problems were not in quality, but more in the lack of competency in software. However, the CEO determined that quality assurance through proven platforms and modular design was the only solution to win in the smartphone market, even at the expense of compromising profits from sales or marketing.

 
Source
< Prev   CONTENTS   Source   Next >