An insightful conversation on innovation
[TALKING BUSINESS] Business management guru and CEO of KT stress importance of fostering creativity, generating ideas
‘The CEO must help everybody unleash ideas. Employees should not be afraid to speak their minds.’ - Lee Suk-chae, chief executive officer of KT
|Management expert Gary Hamel, left, and KT CEO Lee Suk-chae discuss their views on the importance of innovation at a restaurant in Gyeongun-dong, Seoul. By Kim Do-hoon|
It’s not often you get two leaders of innovation in the same room at once, let alone in a historic building-turned-restaurant in Gyeongun-dong, central Seoul.
But that’s just what happened when Gary Hamel and Lee Suk-chae sat down with the Korea JoongAng Daily last month to share their views on what innovation means for management in today’s corporate world, offering insight into how the business world is changing.
Hamel is a professor at the London Business School and was named as the world’s most influential business thinker by the Wall Street Journal in 2008. Lee Suk-chae is the CEO of KT, Korea’s largest telecommunications firm, and has been instrumental in the company’s ongoing transformation from a rigid, bureaucratic entity into a more innovative, competitive and flexible firm.
The location they chose for the interview highlights the need for innovation: The building was once the residence of descendants of Korea’s last queen. Today, the 70-year-old traditional house is an upscale Western restaurant called Mingadaheon and is listed as a city-designated cultural asset - showing how important it is to change with the times.
So what brought these two men together?
Hamel, whose helped popularize terms such as “core competencies,” “industry revolution” and “management innovation,” is the founder of Strategos, an international management consulting firm. He hooked up with KT last year to provide consulting services to help guide the firm’s transformation under Lee.
Hamel has helped many companies - including General Electric, Time Warner, Nokia, IBM, and Microsoft - change management practices and implement cutting-edge systems, but this marks the first time that he has worked directly with a Korean company.
It’s a good fit, given Lee’s moves to bring innovation to KT.
Since assuming the CEO role in 2009, Lee has been aggressive on this end, attempting to breathe new life into the firm by merging the company’s affiliates, restructuring management and developing a new corporate identity.
During the discussion, the two leaders talked about the shift toward a global economy based on innovation and creativity, the ways companies can differentiate themselves and the importance of accepting change.
Following are their thoughts on a variety of topics, edited for space and clarity.Taking a page from the Internet
Hamel: If you go back to the old-world, fixed-line telephone business, all of the intelligence resided in a central switch, and the telephones at the end were the stupid devices. So to add a new function, you had to reprogram the switch, thus the center-to-end architecture.
Then the Internet came, and the Internet is end-to-end architecture. Most of the intelligence is out on the periphery, at the edges of the Internet. So if you want to add a new application or service, you just download it, and you don’t have to ask anybody’s permission.
At most companies, their management architecture looks like that old telephone architecture, where the assumption is that all the strategic decisions, the big innovations, the big ideas come top-down.
But now we live in a world where if you look where the real innovation is happening, it’s happening out at the periphery. It’s happening with customers engaging in co-creation. That’s true for Facebook, Apple, Google and so on.
So to build a company that can create and add new value, we have to change the management model so that it looks more like the Internet. So we need a company that’s open, meritocratic, transparent, collaborative and flexible.
Lee: Yes, and the CEO alone cannot really transform the company. He should be joined by his senior staff, and his senior staff should be helped by junior staff. According to my observation, the younger generation has huge talent in creative thinking.
So while Hamel’s job is to educate and train employees on how to be innovative at a grass-roots level and how to change their way of thinking, my job is to train middle managers to have a more innovation-friendly attitude. So I tell them their duty is to make the best use of available resources, or their human resources. Providing opportunities
Hamel: Human beings are innately creative, not necessarily productively creative. If you look at what’s happening on the Web - visit YouTube, Flicker and these types of sites - and you’ll see that if you give people the opportunity, you’ll see a huge explosion of human creativity.
A lot of organizations talk about innovation. I ask front-line employees four questions. This is how I test whether innovation is rhetoric or reality. One is how have you been trained to be an innovator? It’s like playing golf: I can put you on an extraordinarily beautiful golf course with a lovely ocean around it. But if you’ve never swung a golf club before you will be awful. You ask people to innovate, but you have to teach them how to.
The second question is if you have an idea, will anybody listen? The third question is will anybody notice if you innovate? The last question is do the systems and processes support your work as an innovator, or are they in the way? Innovation should happen not despite the system but because of the system.
Lee: True. At most big companies, including some famous Korean companies, many employees are basically averse to taking risks. KT is especially outstanding in that [laughter]. Professor Hamel may release our people’s energy by getting them to think differently, but that does not guarantee that KT will have innovative products or services. I think for the time being, it is the CEO’s duty to support that project and take personal responsibility over it.
The big question is how to not miss the important idea. Middle managers are afraid to present their ideas to executives. They are simply scared to stand in front of senior officials. So our task is to find out how to let hundreds of thousands of ideas come to us. Of course the next question is do we have the time to review all of them? For the time being I should take personal responsibility for implementing innovation projects, otherwise there’s absolutely no chance [to be innovative].Unleashing ideas
Hamel: No single person in a company should have the power to kill an idea. Every employee - wherever they work in the company - should have the same opportunity as everyone else.
The decision should be completely apolitical. You cannot have innovation if a small number of people can kill an idea.
If you remember Maslow’s hierarchy of human needs, where at the bottom you have food and water and at the top you have self-actualization, I like to think of a hierarchy of human capabilities, where at the bottom I have obedience, diligence and intellect expertise, while capabilities at the top are initiatives, creativity and a passion for making a difference in the lives of customers.
Lee: I agree. The CEO must help everybody unleash ideas. Employees should not be afraid to speak their minds. We must gain confidence and trust from employees so they can talk about anything without fear of being blamed if something goes wrong.
I believe in Google’s philosophy: It’s better to have ideas from 100 people than a great idea from just one person. You never know where the next great idea will come from. Like, say, the worker at Nintendo years ago who first suggested that the company develop a video game console the size of a calculator [which led to the GameBoy]. That’s a big idea, and that’s innovation.
I believe nobody can understand everything. So it’s good to get diverse opinions, let everyone examine and fine-tune ideas. And then if our workers are confident it will work, I will put my personal prestige and power behind these projects. If they fail, I will take the responsibility. It’s not their responsibility.Accepting cannibalization
Hamel: Every company has a dying strategy. I think the challenge is, can you innovate fast enough so that you grow the new faster than the old dies away?
So when I think of IBM a couple of years ago, it made a huge, heroic decision to sell its personal computer business. The company created the personal computer business but recognized that it will no longer fuel growth.
In the past we viewed companies like farms. We had this little plot of land, we would tend it and nurture it. When the soil got bad, we used more fertilizer. But today companies have to be more like ranchers, where you have cattle and sheep and you move them from one pasture to another, and some of them go off to another area when new ones are born.
The secret is having an offensive mindset rather than a defensive mindset. Companies tend to hold onto businesses too long. But we shouldn’t be afraid that some things become mature. If you look at cannibalization, ultimately the new opportunity was much bigger than the old opportunity. If you look at the global mobile business, it’s going to be much bigger than the fixed business ever was. So get on the offensive, and have the courage to move the resources out of the old business in time.
Lee: In theory it’s easy to criticize a CEO or a company that’s afraid of cannibalization. In theory it’s easy, but in practice it’s much tougher. That is why so many great companies eventually die and young companies rise. I think it requires of lots of courage and boldness. You try to understand the future, whether the current business model can be sustained for a long time. If your answer is no, then you should be ready to accept cannibalization.
I think the main reason behind the fall of great companies is that because the current business is so wonderful, they’re afraid of departing that business. It’s the decision of the CEO - he should listen to many people’s ideas and open up his eyes.
By Kim Hyung-eun [email@example.com]