[sample translations]lee myeongu, fight with your enemy’s sword eng by LTI Korea Library

Sample Translations

Myeongu Lee Fight with Your Enemy’s Sword E ng l i s h

Book Information

Fight with Your Enemy’s Sword (적의 칼로 싸워라) Munhakdongne Publishing corp. / 2013 / 35 p. / ISBN 9788954620550 For further information, please visit: http://library.klti.or.kr/node/772

This sample translation was produced with support from LTI Korea. Please contact the LTI Korea Library for further information. library@klti.or.kr

Fight with Your Enemyâ&#x20AC;&#x2122;s Sword Written by Lee Myeongu

Prologue: Now is the Time for Difference Management After working for thirty-three years of my life for various companies, now I am teaching at a college. I spent half of my career in the United States, Germany, the United Kingdom, and the Middle East. I worked for Samsung for twenty-four years. As a Samsung man, I personally experienced the challenges of our countryâ&#x20AC;&#x2122;s companies and globalization and was able to eye-witness the companyâ&#x20AC;&#x2122;s compression increase; all these experiences are very precious. I also cherish those five or so years that I spent at Sony and Coca-Cola Enterprises, for I gained a more objective perspective regarding global management during that time. I think myself a lucky person because I have had such a variety of experiences. I worked for companies of different nationalities such Korea, Japan, and the United States. Most of the companies that I worked for were electronic companies, but there also were consumer-goods companies such as Coca-Cola. Most of them were global conglomerates, but I also participated in the management of one small but strong company, ReignCom Ltd. Developing along with all those companies, I found myself surprised to realize that regardless of the nationality, type, and size of business, the concerns of the management are very similar with each other. A manager should know what the business is about, who the clients are, who the competition is, for example. And they should also be equipped with the ability to understand changes in market and management factors that make possible the continuous growth of the company.

From the first day I entered Samsung on, I was inculcated with the spirit of “I Can Do!” With that “I-Can-Do” spirit, I was able to open a branch office in Jeddah, Saudi Arabia, introduce the VTR—the most advanced high-tech product at that time— to the European market, and open a new European computer and information technology corporation in my twenties. However, the more responsibilities and duties I had in any company, the more I had to know about “How To Do” in addition to the spirit of I Can Do. That challenge made me study for an MBA when I was almost forty years old and to continue on to earn a doctorate degree in my fifties. In this book, Fight with Your Enemy’s Sword, I look at the insights that I have gained through hands-on experience, deliberation, and the reading of books. This work has grown out of a series of columns that I have been writing under the title “Professor Myungwoo Lee’s Management Essay” in the Chosun Ilbo since January 2012. In this book I have tried to show my own deliberation about the “how to” of carrying out our mission well, while reflecting on my own errors and trials in the business management field over the past thirty-three years. The questions I have tried to answer in this book include: What am I selling? Who is my real competitor? How can I hear the silent voices of the consumers? What is going on in the world? Should I sell my product to whoever wants to buy it? How can I measure the relationship between the client and me? We cannot think of any future unless we try to approach our work from a different perspective than others and intentionally try to break old habits. The keyword for a successful management is “difference” or “differentiation.” “Difference management” refers to a management whose functioning is accompanied by the deliberation about what to differentiate, how to differentiate, when to differentiate, and

who to differentiate from in order to get results. Looking back on, I underwent many trials and errors and difficulties as I tried to work differently from others. Yet these made what I am now, I think. As I have been teaching college students recently, I found that there were scholarly and professional books that had already addressed many of the questions and problems that I had while I was working in the field of management. Whenever I encountered those books, I could not but blame myself, who had never really read such books before. I wish I had known better. Out of my own regretfulness, I have reorganized my own reflections on “difference management” under twenty-four themes. And as the encompassing message for these twenty-four themes, I am insisting on the rather aggressive strategy, that you must “fight with your enemy’s sword.” 

The True Master Fights with His Enemy’s Sword

The green grassland is so quiet that you could hear a pin drop.

There, two armored

warriors are confronting each other. Each of them are looking for a chance to get the better of their enemy; there is a strained atmosphere between them. At that moment one moves his hand and touches the sword at his waist. At the instant he draws his sword, the other warrior thrusts himself toward him and snatches it away from him. The fight ends with the victory for the warrior who has taken the other’s sword. The master fighters who appear in chivalry books never get blood on their swords. They deftly take their enemy’s sword and kill him. To keep one’s sword clean and subdue the opponent, this is the ultimate goal of fighting. The same is true in business: the master businessman fights with the enemy’s sword. By the “enemy’s sword,” I mean the market and the rival companies. But “fighting with the enemy’s sword” does not imply that you copy existing strategies. In

business, to “fight with the enemy’s sword” implies that you adopt, interpret, and employ, in your own new way, the strategies, tactics, products, and services that the market or the other companies have already used. For instance, iPod was not a completely new product of Apple’s. It was Sony who first introduced a digital music player to the world. Apple, however, made its own success by creating a new ecosystem on its own by creating

a marketplace where clients could download music into their

iPods. Active International, which is a company that generates profits by connecting one company with other companies, is another successful case of using “the enemy’s sword” in the business arena. They are a “catalyst company” which creates benefits, for instance, by connecting an electronic company with TV sets in stock with a hotel which is undergoing renovation. They have constructed a new business model by connecting two existing businesses. The market also seeks for new products, new services, and new victors; therefore, a lot of businessmen and companies pursue newness. Here, what is new is not something that has not existed in the world so much as making use of what has already existed but in a different way. In other words, in the business world to fight with the enemy’s sword means that you make use of what has existed, in your own way, so that you can create something new and different in value. In this regard, the word “enemy” refers not to those who I should fight against or am in conflict with, but all others who are not me. The “enemy” can be your client, customer, or co-worker. If I should choose a Chinese character for the word, I would choose 的, which means a target, rather than 敵 that means an enemy. Therefore, when I say that you should fight with the enemy’s sword, what I am saying is that you should learn from all others and make use of what you learn.

Business people in companies are required to have competitive powers such as creativity, originality, differentiation, and innovation. Although it is impossible for you to acquire all the competitive powers on the endless list, it is also true that if you do not have them, it is difficult for you to survive. Then, the question we should ask is, “How can we survive in this world of endless competition?” The answer for this question is surprisingly simple. If we can grasp the one principle which encompasses all the requirements, we will be able to satisfy them. The one principle is nothing but “difference.” Creativity and originality implies something different from what has existed, differentiation implies something different from others, and innovation something different from what went before. That is, depending on the situation, the object of differentiation changes: what, whom, or when. What is consistent, however, is the most important fact that you should be different. So here I talk about the topic of “difference management.” There is no right answer in management. Most of what I am talking about in this book is what I have learned and realized as I, myself, was working in the area of management, so this might lack scholarly depth. What I hope is nothing more than this: readers will take the chance to reflect on pending issues in the area of management. I hope that my knowledge and learning will be easily understood and interpreted by managers and business people so that they can get help from from what I have to say. I would like to thank many people who encouraged and helped me write this book. I would like to thank the companies that I worked for. I am especially grateful to Samsung, which allowed me to have many insights through much trial and error. I am deeply thankful to my colleagues with whom I worked at Samsung; they endured and walked with me along this not-so-easy path. Without the columns written for the

Chosun Ilbo, the cases introduced in this book would have remained obscure in my mind. I am thankful to financial editor Lee Jihoon, who suggested the series and allowed me a space in the financial section of the paper, and senior editor Kim Youngjin, who affectionately encouraged me to keep on writing. The contents of this book gained their vitality as they were delivered in lecture form in the college classroom.

am indebted to the graduate students of the Global Business School, Hanyang University. For the past five semesters, these students have actively participated in the classes of this novice professor so that he could have the precious experience of learning by teaching. I am thankful to Ye Jong Suk, Dean of the Business School, and professor Hong Sung-Tai, who enthusiastically encouraged me to teach at Hanyang University. Professor Jun Yong Wook was a mentor who I heavily relied on while I kept rewriting the manuscript. I am deeply indebted to him. Most of all I would like to give my sincere thanks to my readers. February, 2013 Lee Myungwoo

Part I. Management Begins with What: What Are You Going to Manage? Chapter 1. Essence Management Whether a company or an individual, if you do not know what your business is about, you cannot carry out its management properly. Knowing what your business is about refers to a clear understanding about the products or services you provide; furthermore, it includes your own reflection on what you are doing. In order to have a clear understanding of what your business is about, you need to have what is called â&#x20AC;&#x153;market sensing,â&#x20AC;? which is an ability to quickly read the changes of the market you belong to

and to efficiently adapt to them. You also need to understand the market and the customers by identifying and acknowledging who your competitor is. 

Are You Selling Dried Seafood or Fresh Fish?: The Concept of Your Business

In the summer of 1990, I was relocated to Germany from the United Kingdom and put in charge of the sales of computers and data communication products in the European market. Before that, I had been working in the British corporate body of Samsung Electronics, focusing on the sales of electronic products. At the moment, President Lee Kun-hee had been running Samsung Electronics for three years and under his leadership, the company was doing their best to grow their computer business as their primary business. The head office in Korea was very enthusiastic about this new business project so as to scout out a CEO from the computer business; however, in comparison with that, the foreign office was still in the preparation stage. As the manager of the foreign office, I had tremendous responsibilities and was very busy establishing a foreign corporate that handled everything in Europe and in securing distribution channels. That winter, President Lee embarked on a tour to foreign business offices and paid a visit to my office in Frankfurt, Germany as part of that. As soon as he saw me, he asked a pregnant question: “What did you do before you came here?” “I used to be in Britain and sold electronic products there.” “What on earth is this guy doing here who used to sell electronic products?” It was not a question to which I had an answer. The executive director of European market who accompanied President Lee tried to help me. He said, “He was renowned for his sales of electronic products. He was the best in that line so we called him to this important position.” “If he was good at selling electronic products, he should have kept on working

in that area. Why did you bring the electronic sales expert to the computer sales department where he’ll be useless?” President Lee thought that, although electronic products and computers seemed to have some similarities, they were just too distinct from each other. So he did not like the idea that people who had worked in the electronic products sales department was now in the computer department and working in the same way they had in the electronic products department. In fact, when he visited the United State corporate before he came to our office in Frankfurt, he found an ex-electronic product sales expert in charge of the computer sales business there. Upon realizing this, he instructed them to hire a computer expert in that position instead of the electronic product expert. Now, in Frankfort, President Lee placed the same kind of order as he had in the American corporate. He remarked critically, “Send him back to his previous position immediately and scout out the best expert in the computer area from outside!” However, it was not an order to be followed easily. A successor had already been hired in my previous position, so it was impossible for me to go back there. . The meeting was about to move on to the next issue when President Lee’s eyes met mine. “One last time, what do you think about my decision?” asked President Lee. If he had not asked that question to me, my life would have taken a totally different path. I opened my mouth, and tried to explain how I understand the way I came to the position, “You are right. There are lots of computer experts out there and if Samsung wants any of them, you will be able to employ one. But, if you put an outside person in this position, it will take time for him to learn and adapt himself to the organizational culture of Samsung. Moreover, possibly he will have trouble working with other employees who have been working here. Because of these reasons, even though I was

not the best choice, I was put into this position, I think.” Thinking this would be the last chance for me, I continued to speak, “Now I have been working here for six months and I have come to realize that, while the electronic product sales business is a “dried seafood” business, the computer sales is a “fresh fish” business. If you give me another chance, I would like to give my best to run a successful “fresh fish” business.” o Electronic product sales is a dried seafood business while computer sales is a fresh fish business? What? Fresh fish business? It may sound out of the blue. But there was a reason for me to compare the computer sales business to a fresh fish business. At the moment, the dawning computer market was changing at a speed incomparable to that of any other business. As soon as the European corporate was established, the sales goal for the PC 286 was assigned. However, when the stock arrived at our office after the six weeks of the production period and another six weeks of transition, we could not sell them. All our clients in Europe cancelled their orders for the PC 286 because they now wanted the newly introduced PC 386SXs. When we reported the situation to the head office in Korea, they said they had already known about it and that they would make and send new computers to us. However, when the 386SX arrived twelve weeks later, the market had changed again. Within the three-month period, instead of 386SX, the better model of 386DX became the standard model in the computer market. As the computer market was changing overnight, so the “freshness” of the product was the important factor at the market. I considered the computer business to be similar with that of fish in the sense that the freshness of the products was the key point for the successfulness of both businesses. In addition, when I compared the sales electronic products and computers to

that of dried seafood and fresh fish, I was slightly criticizing myself in that I had not really adjusted my sales strategies to the characteristics of the product or to the market in order to adapt myself to their rapid changes. Dried seafood has rather a long distribution period. If prices go down,

you

can keep it in storage and sell it later when prices get higher or during the peak season. On the other hand, fresh fish should sell immediately. If it does not, it is impossible to sell it

later . Therefore, you should give every effort to securing proper ways to

transport and store it. Having in mind these differences, I was trying to explain the differences between electronic products and computers in terms of the characteristics of these businesses when I compared them. In fact, President Lee had been emphasizing the importance of understanding the concept or the characteristics of one’s business. For example, once he said, “A lot of people among us work without knowing what they are doing. Only those who have clear understanding of what they are doing know what they have to do.” President Lee had been upset by the general atmosphere of the computer business which was trying to follow the exactly same way of the electronic product sales model without understanding the concepts and the characteristics of computer sales. It seemed that my analogy of “dried seafood and fresh fish” clicked. President Lee, who had been listening to me, opened his mouth and said, “I am glad that you have gotten that much of a feel for it.

I will let you continue your work here. Do your best.

In regard to an outside specialist, please hire someone to work under you. .”. A new challenge in my life was starting at that moment. Based on the common concept of “Computer = Fish,” the computer department of the head office and the European corporate began to change each one of the sales strategies and tactics.

Most of all, together we tried our best to decrease the lead time which is the time lag between the product order time and the arrival time of products into stores. We also changed the ways in which we manufactured and sold computers. We, for instance, increased the accuracy of demand forecasting, improved the liquidity of managing production, and reformed distribution management. For electronic products, the main transportation vehicle was ships. In order to decease the transportation time, we began in earnest to find alternative modes and finally decided to employ a combination of methods such as both sea and air. For example, air delivery was employed from Seoul to Vladivostok and then the trans-Siberian railway was used from Vladivostok to other European areas. Looking back now, although we were in very rudimentary stages and made a lot of mistakes because the proper system was not yet established, our efforts made a good foundation to construct the innovative supply chain of today. This shows that depending on what kind of concept you have about your business, your actual strategies can change. By the “concept of business,” I mean that you have a clear definition of the product or service you supply and that you deeply understand what you yourself are doing as well. Since then, more than twenty years have passed and a lot of changes have occurred. Now electronic products that were considered “dried seafood” have become fresh fish or even living fish, so only those companies that have the capacity to deal with living fish are surviving in the market. The domestic electronic companies were late coming into the international markets of TV and mobile phones but eventually they swept the world markets. These successes were possible mainly because the companies had a clear concept of their businesses and, based on these, they developed their own supply chain management (SCM), which their global competitors could not follow. No

matter what kind of products they dealt with, domestic companies invested a lot to gather information about net paid sales, to forecast demand, to decrease the production lead time, and even to decrease the product-development cycle. As a result, they were able to achieve speed management that the Japanese companies were envious of. In other words, now in the market can only companies survive that have a clear understanding of what their business is about and have the system to provide their â&#x20AC;&#x153;fresh fishâ&#x20AC;? for the world market at a proper time. What are you selling now? Is it dried seafood or fresh fish? I suggest that you think about whether or not you clearly understand what kind of business you are doing and if you have secured the core competences for it. Now the world is changing endlessly. You too have to renew the concept of your business in accordance with the ever changing world. You should be able to predict how industries, technologies, consumer demands, and external environments will change and to use your core competences as future growth power. The concept of business is the essence of what you are doing. It is also the ultimate goal of your business. o How you understand your business decides where you are Since President Lee Kun-hee emphasized the concept of business in his inauguration speech, it has become a famous topic in the business world. It is a good example of communication in the sense that by easy and short phrases he simplified and explained such difficult terms of management strategy as critical success factors and core competence to all the employees of his company. President Lee particularly emphasized that the CEOs should have proper concepts of their own businesses and that, based on their concepts of business, they set the directions and strategies accordingly. He also delivered the message that each and

every member of the company should clearly understand what they are doing, depending on their rank and job, and work discreetly according to the tempo and the importance of their work. In order to define the concept of business, all the executives and staff members of Samsung began to pay attention to the fundamental principles and goals of managing

businesses, core competences of management, product

characteristics, characteristics of distribution systems, related regulations and laws, technological development, and changes in consumer perceptions, and so on. I think Samsung’s status in today’s world market has a close connection with its employees’ sincere reflections on the concept of business. A company’s future depends on how the management defines their company’s business. Xerox defined the goal of their business as to “increase the efficiency of an office” not to “make a good copier” and they developed into a general office equipment company. Sony, which pursued the idea of selling “pleasure,” diversified their business fields into film, music, and games. In this way, how a company defines their business influences the direction of the company’s development. There were examples of companies overcoming a crisis by redefining the concept of their business. Harley-Davidson, for instance, went into crisis as other motorcycle companies emerged and cars became increasingly common. They redefined their business as to “provide a lifestyle” instead of “selling transportation” and in so doing they succeeded in differentiating themselves from other motorcycle companies. Having the proper understanding of the concept of business matters not just to the management but also to the staff. When staff members understand the essence of what they are doing, as the “dried seafood and fresh fish episode” showed about me, they find the core competence of their business and carry out their job properly.

The concept of business should change depending on companies, market environments, and the flow of time. Then the question we should ask now is: “How should we define the concept of our business?” In the following I will show several ways to deal with this question. 

The competitor of Coca-Cola is water?

In order to define the concept of your business, first you have to identify a broader market. When you do so, you will find a marketplace which is different from the existing market and which is invisible to other companies who are competing with you. In other words, having a broader market in mind, you are building a foundation to compete with others in different ways. Roberto Goizueta, former-president of CocaCola, did not confine their target market to the existing soda market. Goizueta said, “The competitors of Coca-Cola are not just other carbonated drinks but all kinds of drinks. Competing with all drinks, our market share is only 3% not 40%.” Coca-Cola extended the boundary of their market to the extent to which they included every kind of beverage, including water. As a result, they could overcome the pace of slow growth which was common in the carbonated-drinks industry and became the top general-drinks company. By redefining their market in a broader way, Coca-Cola extended their business into the markets of other types of beverages and created new sales profits. Now most of their sales profits are created in the fields of non-carbonated beverages. On the other hand, Amtrak, which used to be a thriving railroad company in the United States, defined their business rather narrowly as “railroad business.” As a result, in order to differentiate themselves from their competitor, airlines, they laid tracks avoiding airports as much as possible. What is the result? Now Amtrak is struggling due

to the development of the airline business. If Amtrak had defined their business broadly as transportation business rather than railroad business, they could have developed into a general transportation and logistics company. Depending on how you define the scale of your market, you will become a frog in a well or a whale in the ocean. ď&#x201A;§

The reason why a watch company enters into the fashion industry

Second, to define the concept of business anew, you have to challenge the previous definition of the business. When you bring in a different definition of a business from others by employing humanistic imagination, multi-dimensional approaches, or conceptual shifts, you will be able to create new value for customers. In fact, there are instances of companies and businesses that were able to revive by redefining the concept of their business. When they refocused their business, those who had not been their customers rushed in to buy and created a new market. In the early 1980s the Swiss watch industry was floundering. Since the mid1970s when Japanese watch companies introduced the Quartz watch, an electronic watch, whose time was accurate and whose price was cheap, the Swiss mechanical watch that used the winding-up method had gradually been neglected. For a long time, the Swiss watch companies had dominated the watch market worldwide; however, with the appearance of the formidable contender, they were losing ground. Companies went bankrupt one after another and master artisans were scattered around. At that moment, Nicolas Hayek, the founder of the swatch group, appeared like a relief pitcher. Until then watches were usually considered to be an article of utility. That is, once you bought a watch, you were supposed to use it all your life. Therefore, how accurate they were and how convenient to use them were the key factors. Challenging

this traditional notion of watch business, however, President Hayek redefined the watch as a fashion product. He insisted on making people put on different watches as they change their clothes depending on their daily conditions and style. Reflecting his concept, Swatch started daringly using primary colors such as red and blue for their watches when most watches had been achromatic colors. In addition, they introduced new designs every three or six months to keep up with the rapid changes in consumer tastes. It was possible for Swatch to introduce primary colors and multi-colored designs in the conservative watch market because they redefined the concept of their business. The redefining work came to be the driving force for them to rule over the world watch market as the top company. 

Common factor to

Asahi Maya the zoo and Disneyland Park

Finally, when you try to define the concept of your business, you also need to consider the viewpoint of those who are not your clients. The concept of business is concerned not just with the product or service that is dealt with but also with the value they deliver. In other words, I suggest that you should think about “What our customers who purchase our product or service really want?” or about “Why they use our product or service?” and “Why some people do not use ours?” as well. Once the cruise used to be a transportation method, but now it has become a type of sightseeing through which you make precious memories. By putting on customers’ shoes and asking both questions of “Why do I want to take a cruise?” and “Why do I not want to take a cruise?” they found a new value they could pursue. In the past, amusement parks were places just for kids. After they considered their business from the perspectives of non-customers, however, they successfully changed their value in ways to attract adult customers. Now they are popular among

adults as well as children. Asahi Maya the Zoo in Japan is a case in point. Asahi Maya the Zoo, which was in danger of closing because of the accumulated budget deficit in 1995, paid attention to the values their customers cherished and now is well-known as the top zoo in Japan. What do

zoo customers really want from a zoo? From the perspective of

children, who are the main customers, probably it is the fun or the satisfying of their curiosity which

they feel when watching real live animals that

they usually know

only from books. Then why do adults, besides the parents accompanying their children to visit the zoo, not pay a visit to the zoo? The reason is simple. It is because the zoo is not a fun place for them. Then why does the fun decreases as they grow up? It is because whenever they visit the zoo, they watch animals sitting or sleeping. The first time you visit and see animals in the zoo, the fact that you are watching them live is exciting; however, if you repeatedly watch them in the same situation, you will lose your interest in them. Realizing this, Asahi Maya started to think of ways to show “moving” animals and as a result they created exhibition spaces that resemble wild environments. For instance, their Penguin aquarium that is known as “Penguins Flying in the Air” is designed in the shape of transparent underwater passageway so spectators can watch penguins playing from above them.. In short, they were able to attract more new customers by defining the value they could give to their customers as pleasure. The concept of business is important to the individual business person as well as to the company. When they know what they are selling, they also can decide how to work. In Built to Last: Successful Habits of Visionary Companies, James Collins introduces an anecdote that shows how Disneyland employees define the concept of

their business. Let’s take a quick look at the scene where Disneyland’s new employees take orientation under the guidance of a skilled instructor: Instructor: McDonald’s makes hamburgers. What do you think our Disney makes? New Employee: We make happiness for people. Instructor: Exactly! You are right. Disney sells happiness to people. Who they are, which language they speak, what they do, where they come from, or which skin color they have, such things don’t matter. This scene shows that according to their concept of business, that is “To give happiness to people,” Disneyland’s employees think over ways to give happiness to those who visit their amusement park and carry out them. It is clear that they know where to go or what their goal is. What do you sell? The concept of business is the essence of your work and the ultimate goal. 

Do You Know How the World Is Going Around?: Market Sensing

Here is a tiny snail. Before a new highway was constructed and there was traffic on it, its two sensitive antennae were enough for it to survive. However, the environment has changed. Now it has to cross an eight-lane highway, on which heavy trucks are dashing. Will the tiny snail be able to cross the highway safely only depending on the two antennae? The International Consumer Electronics Show (CES) is held in Las Vegas every January. In the 2012 CES, over 150 thousand people from around the world participated in the event. Did this number of people all come to the show in order either to exhibit their products or to buy some? According to the statistics of the Consumer Electronics

Association (CEA) who organized the CES, a third of the participants were exhibitors, another third of them were buyers, and the last third were people who came to grasp the latest technology and market trends. Leading Korean companies also send groups of people for exhibition, counseling, and market research

to the CES every year.

Collecting and analyzing information about the exhibition trends, they use this as the basic line data to come up with their business strategies. Setting up future strategies necessitates the understanding of where the world is going, that is, what others are doing and what kind of new things are coming. Former chairman of the American Marketing Association and current Professor of Wharton School of the University of Pennsylvania George Day emphasized that “what distinguishes the winner companies from their competitors is their ability to catch the important changes in the market” and called this particular ability “market sensing.” In 2008 I was running an electronic enterprise of middle standing. One day I had dinner with a reporter from the New York Times. Before we met, there was an agreement between us that he would not ask me to write an article for the magazine. For a while, our conversation went well, but, as always it does if you meet someone after a long time and run out of common topics, our conversation tended to come to a stop. Because we tried to avoid talking about my business, we found ourselves have nothing to talk about. After a certain period of awkward silence, the reporter attempted to break it and said to me, “What is the company for which you work good at nowadays?” He was asking what the core competences of our company were. If you try to answer this kind of question by talking about the mid-size company’s technologies and patents, you hardly leave a deep impression. It took me some time to think about the question. Instead of a direct answer to him, I asked him, “Why do you think this restaurant runs

well?” He did not answer my question immediately. We were at a restaurant across from New York’s Central Park and it was so famous that you had to call to make a reservation one month ahead.

We were able to reserve a table because one of my

acquaintances arranged it for us. The reporter said that this was the first time he ever had been there. He lavished his praise about the food throughout the meal and he praised even the design of the plates. Watching him halt for words, I continued talking, “The vegetables in the salad we had moments ago were very fresh and the meat of the beef tartar was of high quality. I don’t think this restaurant themselves raised them. They just know well where to go and find the freshest and edible ingredients. In addition, they must have ideas of what kind of recipes and how many calories New Yorkers prefer to have. Moreover, it seems to me that their stylish plates and bowls make the food more delicious. Maybe all together these contribute to the success of this restaurant.” “I suppose so,” said he, nodding in agreement. “Our core competences are not that different from this restaurant’s,” I said, “Our company does not have any grand technologies of our own, but we know where in the world the latest technology comes from. We are good at researching and buying the technologies and core parts that we need to be competent in the market. We also have developed and run a special network in order to understand consumers’ tastes and changes in the product trends. On top of that, we seem to have the ability to have all of these contents in a desirable design. I suppose all these constitute our core competences.” Basically what I was saying is that, like the restaurant, our company’s core competence is the ability to read the way the world goes quicker than anyone else and to

apply it to our business, that is, our market sensing. Several days later, there appeared a rather long article about our company with my picture. When I gave my thanks to him for the unexpected article in which he introduced our company, he said, “If you had said to me every single thing

your company was doing well and the competence of a

certain product, it would not have impressed me and I would not have written this kind article for you. You told that your company had the ability to grasp the way the world goes or the trends of the market. Although I cannot be sure whether or not it is true right now, I am certain that you know what a reporter wants to hear from you. That too is a kind of market sensing ability.” o Can a snail cross an eight-lane boulevard? This anecdote with the New York Times reporter sounds like a small episode; however, it has an important point. The point is that both the reporter who has to be quick understanding the flow of the world and the manager who should adjust himself quickly to the movement of the market were recognizing the importance of market sensing. Let’s go back to the snail. The snail could survive in the woods only with its antennae but it is not sure whether or not it would be able to stay safe in the new environment, that is, on the road only using its antennae. It is the same in the business world. Today the market changes rapidly and dramatically. The traditional way of management, which focuses on strengthening internal competence, is not enough to deal with wild market change. Only when you develop and sell products that reflect consumers’ desires, as I told the kind of story that the New York Times reporter had wanted to hear, can you survive in the ever-changing market. To find out what the consumers want and to read the course of the market, that is the nub of market sensing. Let’s take the example of the mobile phone market, which has brought the

biggest change into our life for the past several years. Nokia, once the king of the mobile phone market, slipped without knowing to the bottom

and the Taiwanese

mobile phone company HTC emerged. Both occasions have close relations with market sensing. Of course, there are multiple reasons for Nokiaâ&#x20AC;&#x2122;s fall; however, one of the major reasons is that it failed to sense imminent big challenges because it relied solely on little antennae like the snail. In 2007, the launching of Apples iPhone opened the door for the smartphone era and induced many changes in the mobile phone market. But Nokia was content with the title of the top in the market and unable to properly deal with the rapidly changing market. In comparison, the mid-size company HTC sensed the possibility of Android OS quicker than other companies and was able to settle down as a smartphone company. It is not too much to say that the success or failure of market sensing led to the success or failure of business. To put it in a different way, market sensing implies the abilities to quickly read the market where your company or your product and service belong and how it changes and then respond to changes swiftly and efficiently. No matter how hard you try, if your efforts are separate from the market, you will not be able to gain any successful results in the business world. A lot of companies are still working without knowing of approaching threats, relying on their little antennae. Which one are you using to sense the changes of the world, the old familiar little antennae or newly equipped high gain antennae? If you prefer the old ways and methods just because you are accustomed to them, you will not be able to survive on the road where changes dash in without any signal. We need to think about whether or not we are living like a little snail. o Change Reader vs. Change User

In 1983, an American in his thirties visited Milan, Italy for business. There he visited small cafes that felt very friendly and comfortable, which he did not feel in American cafes. He felt in love with that atmosphere. At the moment, there were about 1500 espresso bars in Milan. The baristas made coffee for the customers, talking to them as if they were friends, and the customers also enjoyed their coffee as if they were resting in their homes. It was a cultural shock for him. When he got back to America, being sure that that kind of cafe would become a trend, he started a new business. This was how one of the best coffee chains in the world, Starbucks, came into the world. The anecdote about how Howard Schultz started Starbucks based on his experience when he took a business trip to Milan shows an important implication about market sensing. If we consider market sensing as to read the flow of the market, it means the ability to read trends. However, to read a trend quicker than anyone else is not all there is to market sensing. â&#x20AC;&#x153;Usingâ&#x20AC;? is more important than reading. Howard Schultz was not the only American who has been in Milan, was he? Even I myself had been in Milan several times and visited a number of espresso bars there, like Schultz, by 1983. I had also thought of the possibility that those types of coffee shops would be in other countries, but that was all. I had never thought of starting a business out of that thinking. It is important to read and anticipate the course of change of the market. Ultimately, however, what is more important in business is how to use what you have read and analyzed about the market. In other words, the nub of market sensing is to find what you can do in the market after predicting the change. ď&#x201A;§

Chung Ju-yung, Yoon Suk-keum, and Howard Schultz

In 1970s when it was decided to build a multi-purpose dam on the Han River, most

construction companies focused on how to win the contract or how to build a dam. However, the late Chung Ju-yung, the founder of Hyundai Global, was different from the others. He ordered an investigate on the area that was under water and useless at the moment but would be usable once a dam was built. They found the area which is the current Apgujeong-dong in that way. Everyone knew that a dam would change the water route. It was President Chung alone, however, who applied that knowledge to action, by preparing themselves to use the land, and gave birth to Apgujeong-dong today. One day in 1980, a man made a phone call to the Education Department, which is the Ministry of Education, Science and Technology today. The Education Department was losing track of things because of the military governmentâ&#x20AC;&#x2122;s measures to prohibit college studentsâ&#x20AC;&#x2122; private tutoring. The man inquired about whether or not the new measures would be applied to private tutoring through recorded tapes rather than to face-to-face tutoring. The caller was later known to be Yoon Suk-keum, the founder of Woongjin Group. He started recording lectures on tapes and selling the tapes. The common feature Chung Ju-yung and Yoon Suk-keum share is that both of them paid attention not to the change itself so much as to what would come after the change: Jung prepared for the outcome that would result from the building of dams, and Yoon prepared for the market that would be affected by the prohibition of private tutoring instead of worrying about the prohibition itself. Their examples teach us that what comes after a certain change is more important that the change itself.

To quickly

respond to a change means that you predict the circumstances after the change and create a new business according to the prediction. o How can you do well in market sensing? In order to be good at market sensing, it is required that you observe customer behavior,

be open-minded, and have a network. In the following I will explain these three elements in detail. 

Listen to your customers’ voices

To know the market, you should first know about the customer. Zara, the world’s second top fast fashion brand, puts in a great deal of effort to know about their customers. They use the observation method. The managers of each and every branch store of Zara observe their consumers’ behavior and send the information to the head office in real time. The head office analyzes the collected data and uses the results when they design new products or display them in stores. In other words, the continuous attention and observation of customer behavior turns into a map that guides the company into the minds of their customers. Best Buy, the top electronic distributor in the United States, also has a procedure to listen to the managers of their major branch stores when they have to make important decisions such as sales plans and major product planning because they are the ones who communicate and interact with customers. 

Try to be open-minded to perceive the unmet needs of potential customers

To do well in market sensing, you need to retain open-mindedness. If you prejudge the market out of the self-conceit that you are well-versed on it, you are likely to see and hear only what you want to and eventually you will have difficulty understanding the situation correctly. Therefore, it is necessary for you to have an eye to see what the market won’t show you and an ear to hear what the customer does not say. Particularly, if you are able to see a market which has not been recognized previously or to perceive

the needs of potential customers who hide themselves in

fringe markets, you will get a

lot. The year 2011 saw a new product, which burst onto and brought an upheaval in the domestic Ramen market. It was Paldo’s Kokomen. Within three months after its release, Kokomen had sold over 25 million packages. Before, it was assumed that ramen naturally had red broth and consumers had no complaints about it. However, the fact that Japanese ramen was popular among Koreans reflected the invisible needs for white soup base, and Kokomen was successful because it met those invisible consumer needs. The abilities to read the unmet needs of consumers and to reflect them in products and services have become the major competences in the twentieth century business environment. I want you to remember this: if you do not retain open-mindedness when you analyze collected information or perceived consumer needs, you cannot deliver correct results. I am speaking about so-called confirmation bias. Confirmation bias is a psychology term which refers to the tendency to accept the information that is in accordance with the self’s conviction and to ignore what is not in accordance with the self’s conviction. If you approach matters with confirmation bias, that is, if you tend to listen to and see what you like, you can never read hidden needs. For this reason, DuPont has employees from the production team, the business team, and the marketing team meet together and interview each other when they reflect their major customers’ feedback in order to minimize the mistake of only listening to what they want to hear among the voices of customers. 

Network matters

It is not easy to sense and observe the world’s change all alone. Therefore, I suggest that

you forge links with other people who have similar needs and establish a network to exchange information about market trends. Middlesize companies in particular tend to be slow collecting data in comparison with large companies. That is why they have to establish a network through which they cooperate with each other based on their respective strengths and to keep it active at all times. How is the world going around? If you do not know about the world, you cannot control it. 

How Was It Possible That a Plane Ticket

Was as Cheap as an Express Bus?:

Redefining the Competitor When I was working in the United States, once I urgently had to fly from Irvine, California to Phoenix, Texas, so I used Southwest Airlines. When I checked in, I was given a plastic ticket marked with the boarding gate without a designated seat. “A cheap airliner does work poorly indeed,” I thought to myself. It was necessary for me and my colleagues to go and get in line at the gate rather early in order to secure good seats for ourselves but we were unable to do so due to buying some drinks. When we got on board the flight, there were only inconvenient seats left. Moreover, they were scattered all around so we could not sit next to one another. I began to feel annoyed. Then there came an announcement of an unexpected event. Celebrating the end of the year, they gave presents to the customers who were carrying photos of their own family with them. That unexpected event changed my feelings, I felt pleasant in a blink. Southwest Airlines is famous for its fun management. There is a reason why they do not assign seats beforehand. The time spent by an air plane which arrives and drops off passengers at an airport and takes new passengers on board and takes off for a new destination is called a shifting hour. A US domestic airline’s shifting hour is

usually forty five minutes. Yet Southwest airlines was able to reduce the time to fifteen minutes by having passengers make a line in advance. That airlines spend less time in waiting at airports implies that they fly more often, which in turn means that they operate more efficiently than other airline companies. This is one of the reasons why Southwest could make the largest earnings in the airline industry even though their airfares were cheaper than those of other companies. Let’s go back to 1971 when Southwest started their low-fare airline business by launching their first flight between Dallas and San Antonio, Texas. At that time, the top airline set the fare around $100 for the same route and the cheapest one was $62. If you were the CEO of Southwest, how much would you set for the fare? Surprisingly, Southwest put only $15. “You can get more, just a few more dollars. Isn’t that too low?” the investors complained; however, the management was firm about their decision: “We are not competing with other airline companies. Our competitor are nothing more than Greyhound Lines!” Behind their particular low fare policy, they were concerned about who they would like to have as their competitor. Blurring the boundary that had existed in the travel market and that set the mark between airline travel and overland travel, Southwest identified their competitor as overland transportation companies instead of other airliners. They did not try simply to take away the passengers of the other airline companies by applying lower fares than the latter. Instead, they recognized small business owners and students who usually took express buses rather than planes because of the high airfares as their new potential customers and set low fares to meet their needs. And then, to secure their competitiveness, they employed various innovative measures. As above mentioned, they implemented free seating policy in order to reduce

shifting hour and they also got ideas from Formula One (F1), which was a totally different business. When a car enters the pit in the middle of the F1 race, all the engineers jump in and tune it up at the same time. Like this, they had all the necessary tasks such as in-flight cleaning, supply loading, and maintenance done at the same time, which helped reduce shifting hour tremendously. On top of that, they used a single airline model to increase operation efficiency and to decrease maintenance expenses. In these ways, they established a structure to create profits out of low fares. If Southwest had considered the other airliners as their competitors instead of express buses, they would have set fares just a little bit lower than the other airlines. This would have resulted in a price competition among the airline companies and eventually have brought the entire airline industry to difficulties. If things had happened in that way, the newly established airline Southwest themselves would have had to face difficulties too. The question of who you identify as your competitor is a very important question to ask when you establish strategies for your business. To decide on you competitor is to decide on which stage you would like to play on and at the same time it is also to decide on who you are going to deal with as your client. o Nike made Sonyâ&#x20AC;&#x2122;s ubiquitous strategy? While Southwest opened a horizon for cheap airlines by newly recognizing express buses as their competitor, there is a case in which a company penetrated the life style of their customers and defined their competitors anew and established their new strategies. When I started working for Sony in 2001, I had a question in my mind. In those days, many electronic companies thought of Sony as their most threatening and number one competitor. My question was that who Sony thought of as their competitor. When I

asked this question, the head office gave me a surprising answer. “Sony’s competitor is Nike.” At first, I interpreted this answer as the expression of their confidence that Sony was the global number one electronic company so that they had no competitor in the electronic industry. But later as I understood Sony’s new strategies which resulted from their perception about the competitive composition, I was jolted refreshingly. In those days when other electronic companies were focusing their thought on the competitive composition within the electronic industry, Sony perceived their competitive composition in terms of consumers’ purchasing power. Sony predicted that the more consumers bought Nike sneakers and go out for outdoor activities, the less consumers would stay home and enjoy entertainment. Sony was an absolute winner in the field of electronic products such as TV in those days. So they had the limited disposable income of their consumers and were more interested in increasing their wallet share rather than their market share in the electronic market. As a result, they categorized consumers into two groups. One was cocoon style and this term described those who would sit curled up at home like a cocoon. The other was outdoor style and those who enjoyed outdoor activities belonged to this group. Sony’s goal was to make those outdoor style people, like Nike consumers, open their pulses to purchase Sony products. This was Sony’s “Ubiquitous Value Network (UVN) strategy.” This strategy basically purposed to have customers enjoy such entertainment content as music, movies, and games outside their home. This strategy was born as Sony perceived Nike, not other electronic companies, as their competitor. UVN strategy was Sony’s proclamation that they would develop from a hardware manufacturing company into a company that would make links between

hardware and soft contents. Before that, Sonyâ&#x20AC;&#x2122;s major business was composed of AV business group such as TV and audio. Their product development that started with Trinitron and continued to Walkman was enough to make Sony the king of electronic products. However, the management at the time started re-thinking the essence of their business. They knew that the times were changing so quickly that they would not be able to remain the worldâ&#x20AC;&#x2122;s top company with only AV electronic products. Sony extended their business to the areas of computer, electronic robot pet, PDA, etc. based on their existing competence. They also went into the game business and made a success with PlayStation. They continued to carry out their UVN strategy which was to have people enjoy music, movies, and game contents on their mobile devices anywhere and anytime. Unfortunately, this strategy became a burden for them later. I think this happened not because the strategy was wrong but because the timing was wrong, which was related with the usage environment and inadequate infrastructure. One thing is clear, though. The fact that Sony attempted to create a new market by redefining their competitor implies a lot to other business people. Who you identify as your competitor decides where you are going to play. We can find a similar example in Hyundai Card Co., Ltd. In 2003 when Chung Tae-young started his new post as

president of Hyundai Cards, most card companies were

focusing on moneylending businesses such as cash advance and card loan. President Chung identified foreign credit card companies such as AmEx instead of domestic companies as competitors and plunged into the credit sale market. In 2004 Hyundai Cards made the splendid achievement of making 75% of their operating revenue through credit sales in affiliate stores. Although a lot of companies set their mid-term or long-term goal as to be in the

top few of the industry, they tend to lack deep reflection on market change or competitive composition. Some companies even have difficulty identifying their competitor. Without a concrete definition of the competitor and market, the goal of becoming the top in the industry or in the world would be likely to remain a hollow echo. When you agonize over who your real competitor is, you will be able to come up with a proper business strategy. To make the top company in the industry, you should be able to recognize the visible competitors and invisible potential ones as well. o When should we redefine our competitor? Setting up your companyâ&#x20AC;&#x2122;s future strategies requires a system to monitor your competitor. Yet what is more important is to decide who you are going to compete with. In other words, when you clearly identify your competitor, you can establish a winning strategy. In general, it is supposed that you constantly observe market changes and define your competitor accordingly; however, you should redefine anew your competitor in the following situations in particular. ď&#x201A;§

When technology changes at a rapid pace

When technological developments advance, especially when the conflation and combination of techniques occur, companies that seem to belong to completely different fields will become your competitors. As the car comes to use a lot of electronic products and to use an electric battery to supply power, electronic companies might advance into the car industry. For instance, Samsung Electronics Co. can become Hyundai Motor Companyâ&#x20AC;&#x2122;s competitor. Apple used to be a PC manufacturer, but it is a major player in the mobile phone market and now is preparing themselves to fight a battle with smart TV manufacturers. Google, which is usually known as the top internet search engine,

has recently developed driverless cars with automatic operating system. With their driverless cars, Google is straining companies that are preparing themselves for developing next generation cars. Industry leaders in particular should be aware of the advance of surprise rivals when technologies develop in a rapid pace. Clayton Christensen, professor of Harvard University, once warned that if big companies ignore those companies that develop low price products, those unthreatening companies at the moment will eventually make inroads into their markets, by rapidly responding to market changes. To borrow Christensen’s words, the big companies will become the victim of “disruptive innovation.” “Disruptive innovation” means, in other words, that leading companies can be knocked out at a single blow. What Professor Christensen basically argues is as follows. When technology advances, leading companies tend to focus on investing huge amounts of money in developing a cutting-edge product and on selling them at a high price. While they are doing so, their competitors are other companies that make expensive goods of high performance. However, without the knowledge of these big companies, those small companies that make simple and cheap goods will encroach upon the market and eventually emerge as powerful competitors. In a rapid growth period, Japanese companies overtook many leading American companies through disruptive innovations. Toyota and Sony, for instance, started from the bottom of the markets with simple and cheap products like compact cars and transistor radios respectively and made inroads into those markets step by step. Remember: if you fail to recognize competitors who begin from the bottom, you cannot guarantee continuing your current success.

ď&#x201A;§

When there are strict government regulations or upheavals in consumer lifestyle change

As far as government regulation is concerned, the birth of the third insurance which resulted from the amendment of the insurance business act in 2003 is a case in point. The amended act allowed both life insurance companies and property insurance companies to sell accident insurance, sickness insurance, and care insurance and, in doing so, it made the two types of insurance businesses compete with each other. It is also common for changes in consumer life style bring a new competitor into the market. The betterment of income level and the popularization of overseas trips led to a change in the vacation market. In the past, domestic resorts competed with one another to attract tourists, but now domestic resorts are competing with overseas resorts. The United States has seen a similar change as Korea. Traditionally such places as Acadia National Park and Big Pocono State Park used to be popular vacation spots. But as air travel became popularized, their popularity declined and, instead, Hawaii and Aspen rapidly emerged as popular vacation spots. If Acadia National Park and Pocono State Park had read the market change ahead of time and had prepared themselves for the advance of new competitors by pursuing high-quality service or differentiated service, the situation might have been different. ď&#x201A;§

When the companyâ&#x20AC;&#x2122;s vision changes

Philips got into a desperately dangerous situation in 2001. The sales that

year dropped

sharply, decreasing by 30% in comparison with that of 1996 when they were at their best. The business loss reached a record high. CEO Gerard Kleisterlee carried out an aggressive restructuring. The most fierce controversy arose when he tried to dispose of

the semiconductor business team in 2006. The semiconductor team had been representing the “Philips of Technology,” so there were tons of complaints and protests against his decision, arguing that “it is nothing more than cutting out the heart of Philips.” Nevertheless, Kleisterlee sold it in a decisive manner and instead took over medical device companies and lighting-related companies for new growth engines for his company. Now life-style companies instead of the previous electronic companies have become Philips’s competitors. In other words, those companies which have close relationships with the everyday life of consumers have become their new competitors. If your company’s vision changes, it means that the strategies your company will adopt and the market your company will challenge need to change. Naturally, this is one of the timings you should redefine your competitor.