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LGE WAY

LGE WAY. - Creating GCGP Through Challenge and Innovation -.

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LGE WAY

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  1. LGE WAY - Creating GCGP Through Challenge and Innovation -

  2. “…For LG to achieve continued high performance in spite of environmental changes, we need to be strongly determined and set challenging stretch goals. Then, our continued execution of high caliber innovation will lead us to become a widely recognized global company.” (Chairman Bon-Moo Koo’s speech at the annual Executive Conference, Nov. 11, 2003) “ Now is the time for us to clearly define our own ‘LG WAY’ and push forward to become ‘No. 1 LG…’ ” (LGE Vice Chairman & CEO’s executive lecture at the annual LG HR Conference, Oct. 2, 2003)

  3. LGE WAY 1. Background We must maintain a strong focus and build upon our past performance, while accelerating the realization of ‘No. 1 LG.’ Stretch goals 6σ management No. 1 LG Management LGE WAY Leadership Strong field management Innovation Faster and stronger innovation Next level innovation “Creating GCGP through challenge and Innovation” • Top-to-bottom alignment • Performance-based culture • Strengthen execution Corporate culture • Strengthen LG identity • Share common language • Good to great company ‘Stronger and more Dynamic LG’ Great Company Great People No. 1 LG, No. 1 People 1/11

  4. LGE WAY 2. Positioning The ‘LGE Way’ is the foundation for building ‘No. 1 LG’ No. 1 LG Management Philosophy Creating Value for Customers Management Based on Esteem for Human Dignity Global Top 3 by 2010 (Global top 3 among electronics and telecommunications companies) Vision • Achieve ‘No. 1 LG’ in critical/core businesses • Actively develop new prospective businesses • Strengthen profit-driven operations Strategic Initiatives LGE WAY The values, mentality and behavior that all employees must share, and the management style that will lead us to a ‘No. 1 LG’ Great Company Great People 2/11 No. 1 LG, No. 1 People

  5. LGE WAY 3. Conceptual Framework LGE WAY is GCGP “ A great company makes great people. And great people make a great company ” GC (Great Company) GP (Great People) A company that creates continued outstanding performance through ceaseless challenge and innovation People who create outstanding performance by setting and achieving challenging stretch goals with a strong spirit for winning Management People Culture “ No One Can Remain No. 1 Forever ” ※ GCGP : Great Company Great People Great Company Great People No. 1 LG, No. 1 People 3/11

  6. LGE WAY 3.1 Scope ‘LGE WAY’ consists of two main axes (GC and GP), three components and five elements. Each of these parts are aligned with each other. Growth Strategy Management Management Style GC Leadership GCGP People Personnel GP Winning Culture Culture No. 1 LG, No. 1 People Great Company Great People 4/11

  7. LGE WAY 4.Components Components Concept Key Words Growth strategy must be continuously developed to achieve ‘No. 1 LG’ • Fast Innovation • Fast Growth Growth Strategy Management • Value creating Labor- • management relations • 6σ Management • Early Innovation Management • Knowledge Management LG management practices and style that need to be consistently refined and applied Management Style Field-oriented Management Leadership style that LG managers and leaders must possess • Lead by example • Coaching • Empowerment Leadership Trust Leadership People The model traits that LG seeks in its personnel (Strong people who fit the LG Culture) • Determination • Strong execution • Expert competency Personnel Right People Strong, winning corporate culture that leads to the achievement of ‘No. 1 LG’ • No Excuses • ‘We’ not ‘I’ • Fun Workplace Culture Corporate Culture Winning Company Great Company Great People No. 1 LG, No. 1 People 5/11

  8. LGE WAY 4.1 Growth Strategy Continuously maintain and expand growth to achieve ‘No. 1 LG’ Key Words Concept Secure a competitive advantage of more than 30% over our competitors by innovating and achieving challenging stretch goals • 30% More (Volume & Value) • => Increase sales, market share and real value • 30% Faster (Speed) • => Speed up new product development, • product shipping and decisionmaking • 3-Year Advance (Competency) • => Secure superiority in core competencies • such as cost innovation and technology Fast Innovation Innovation Philosophy Growth Strategy “ 5% may be impossible, but 30% is possible ” • Growth rate of quantities sold • ＜ Growth rate of per-item value Increase not only profit, but the size of the market through premium products • Be a Market Driving Company • =>Each year, develop and launch new product • categories • (e.g., Fully automated laundry machine -> TROMM) Fast Growth Orchard Paradigm 1 Box 20 apples 50,000 won 1 Box 50 apples 20,000 won • Gradually break limits that restrict growth • Commodity products => Premium products (Growth limited) Great Company Great People No. 1 LG, No. 1 People 6/11

  9. LGE WAY 4.2 Management Style Continuous maintenance and development consistent with LGE’s business practices and management style Management Style Top ManagementPhilosophy * ▣ “ …Our No. 1 labor-management relations have helped LGE overcome the recent financial crisis and saved us...” Value Creating Labor-Management ▣ “ Our labor-management relations will provide a firm foundation to achieve No. 1 LG.” • No. 1 Labor-management relations • Labor and management are one • : One consolidated entity to achieve even greater • performance • Mutual trust and respect ▣ “ … field-oriented management is required. Decisions should be made and direction should be given on site where an issue is raised. This will prevent us from repeating work…” Field-oriented Management 6σ Management ▣ “ … visit field sites as frequently as possible in order to motivate personnel and monitor the market … ” • ‘6σ is our company’s common language’ • Location inspections and immediate • decision making • 6σ Communication based on facts and figures ▣ “ ..6σ is an essential innovation tool for the 21st century..…” ▣ “ If 100 PPM is about cutting down weeds, 6σ is about uprooting them….” Early Innovation Management ▣ “…Focus on the innovation activity of setting business targets 3 years in advance and then making preparations early to meet those targets…” • Lead innovation to be first to secure • differentiated competitive strengths • : Set three year targets and prepare to achieve • : Prepare in advance for 70% of next year’s • performance targets and goals • -> Preparation during the preceding year • by doing TDRs in advance ▣ “… adopt Early Innovation Management throughout the company…” ▣ “ …Knowledge becomes valuable only when it is applied… ” Knowledge Management ▣ “ Resources are limited, but wisdom is infinite...” • Front-line knowledge generated from TDR • activities must be shared quickly *Quoted from speeches of Group Chairman/former LGE Chairman/ LGE Vice Chairman • Using TSC and CoP No. 1 LG, No. 1 People * TSC (Technology Specialist Council) Great Company Great People 7/11

  10. LGE WAY 4.3 Leadership Leadership style that LG managers and leaders must possess Key words Top Management Philosophy Concept Trust Leadership ▣ “…Management, that follows the ‘Right Path’ without compromising, builds the driving force that enables the company to win and maintain first place position …” ▣ “…Leaders should lead by example and accept the responsibility for all risk…” Lead by Example • Loyalty & ownership • Proactive innovation (Risk-taking) • Execute “right path” Management • (Uncompromising integrity) “Strong leadership based on mutual trust ” ▣ “…Don’t deliver unclear messages. Give exact and specific direction. This will build trust.” ▣ “…Distorting management or quality data is worse than stealing funds from the company.” ▣ “…Leaders learn for the purpose of imparting knowledge to others. Study frequently and coach your members” Coaching • Open communication • (Exact and specific directions / • Report facts) • Study in order to coach and develop • others (‘Leaders must learn and • impart toothers’) ▣ “…If you trust others, trust them to the end … ” ▣ “…You must have confidence in yourself...and empower. Trust and delegate…” Empowerment • Trust employees • Delegate authority and accountability • Monitor and give timely feedback Great Company Great People No. 1 LG, No. 1 People 8/11

  11. LGE WAY 4.4 Personnel Model traits that LG seeks in our personnel (Competent people who fit in the LG Culture) Key words Top Mgt Philosophy Concept Right People ▣ “ … We want the right people who have a persistent spirit for winning and fear no obstacles at all. … ” ▣ “ … We prefer strong and steady people…: those who put execution first rather than relying on manipulative tricks … ” Determination • Passionate • Tenacious winning spirit • Resolute “People with a strong spirit for winning, who create outstanding performance by setting and achieving challenging stretch goals” Strong Execution ▣ “ … ‘ Taking one action is more valuable than saying ten words’.. ‘Strong execution’ is what is needed… ” • Rice ball mentality • Act before speaking • : Act-Learn-Choose • Risk-taking EVP ▣ “ …Things should be expressed simply and in a compact way; and work should be done simply and smart … ” Expert Competency ▣ “Become people with high market value who, if leave the company, will be aggressively recruited by other companies for the next 5-10 years.” • Global business perspective • Expertise/know-how • Smart working style Great Company Great People No. 1 LG, No. 1 People 9/11

  12. LGE WAY 4.5 Culture Strong, winning corporate culture that leads to the achievement of ‘No. 1 LG’ Key words Top Management Philosophy Concept ▣ “ ‘No. 1 LG ” means to push ahead without yielding, achieve high performance, and beat the competition…” Winning Company No Excuses ▣ “ … We would rather die than lose. Never die in battle with competitors … ” • Willing adoption and participation • of company policies [It’s Better to die than to lose] “An organization with a strong winning spirit and the ability to execute according to that winning spirit” • Alternatives first, not excuses; find • a way (Before you say NO, create win- • win alternatives) ▣ “…remove any part of our culture that allows excuses…Present an alternative before saying ‘No’…” • Set & achieve challenging stretch goals ▣ “ …The group should address issues together. We cannot afford individual experiments for success.” ‘We’ not ‘I’ • We must be one • We must work as true team players • We must be focused and dedicated • to the same pursuit (Internal Alignment) ▣ “ …Usually people say, ‘I did it.’ we need to say, ‘We did it.’ From now on let us use “We”... ” ▣ “ … feeling that you are growing as the company grows…that you can be excited about your work...” Fun Workplace ▣ “…We should feel a sense of fulfillment and fun from the work we do, not the kind of ‘Fun just for fun’s sake” • Sense of fulfillment and fun • from work • Work/Life Balance • Respect creativity and autonomy ▣ “GC → GP → Great family (theory of faithful and loyal families)” Great Company Great People 10/11 No. 1 LG, No. 1 People

  13. LGE WAY 5. Action Plan In joint effort with the Innovation, HR, and Planning Groups roll out the LGE WAY in 3-stages Moving (Promote substantial change) Refreezing (Firmly establish) Unfreezing (Share/Disseminate) • LG Innovation Training • School • → Rearm personnel with an • advanced innovation philosophy • Train all employees in the ‘LGE WAY’ • → Two-day Melt-In program • to be completed in the • 1st half of the year • Cultivate change agents (Dec.) • → Executive Melt-In (Jan. 2004) • → Melt-In for each level (Jan. 2004) • Programs to facilitate • innovation • → Continual application of innovation tools to make them habitual • Concept definition • (Kick-off on Oct. 23) • Reported to the CEO (Nov. 11) • Reported in Top Management • Meetings (Nov. 13) • Announced at the new year’s • ceremony (Jan. 5, 2004) • Direct communication • from the CEO • → Cascaded sharing/dissemination • Change Management • → Address opposition and complaints • Improve cultural innovation • organization at the company level • → Obtained strong executional drive • Develop and adopt the ‘Culture Model’ • → Regular evaluation/feedback • (linked to executive evaluation) • Develop ‘Trust Leadership Index’ • → Evaluation tool for leader selection / development / evaluation • ‘Right People Index’ • → Use as recruitment / development / • evaluation tool • ‘Right People’ Conference • → Together with ‘LG People Award’ • Find and share successful change cases • → On/Off Line sharing • Regular monitoring/evaluation/feedback • → Tied to organizational ability to review / evaluation Strong Top- Down Roll-out Field - oriented Execution System Alignment Great Company Great People 11/11 No. 1 LG, No. 1 People

  14. Appendix 1. GCGP Structure ‘LGE WAY is GCGP’ (Jan. 1, 2004 )

  15. Attachment 2. LGㄸ Vision Vision : Global Top 3 by 2010 ’03 ’07 ’10 SONY(646) SS SS Matsushita 1,000억$ 이상 Matsushita Matsushita(645) LG SONY SONY SS (547) Toshiba (481) LG (800) NEC(423) Toshiba Toshiba - Philips (398) - NOKIA (333) NEC NEC LG(Top8)(320) NOKIA NOKIA

  16. Appendix 2. Core Competencies Core Competencies (Jan. 1, 2004) Product Leadership (Superior products) Ability to develop unique premium products by developing new specialized technologies • Two or more unique technologies per item • Premium products to account for 30% or more of total revenue Market Leadership (Dominant market share) Ability to create a ‘No. 1 LG brand’ in the global market with overwhelming market dominance • Increase the amount of No. 1 products in the Global market • Achieve more than 10% operating margins People Leadership (Superior HR) Competencies that create outstanding performance through continuous innovation • Firmly establish the innovation philosophy • Set and achieve challenging stretch goals • Create outstanding performance

  17. Appendix 4. Use the following to generate passion for greatness and focus the determination of employees to realize the ‘Global Top 3’ vision Slogan Song Cheer • GCGP Cheer • Great! / Company! • Great! / People! • Great ! / LG • (Repeated 3 times)!!! • Top 3 Cheer • Global Top 3 ! • Who can do it? • Global Top 3 ! • We can do it • (Repeated 3 times)!!! • LGE WAY is GCGP • -> Share image/concept of • the ‘LGE WAY’ • We can do it – ‘Global Top 3’ • -> Passion for greatness and a determination to achieve our vision • ‘Top 3’ Song

  18. LG Electronics Fast Innovation It is difficult to achieve our vision with our current thinking or goals. The key initiative in achieving the vision is to secure a 30% greater advantage over our competitors From To Threats Opportunities Leading players Leading players • Unstable world economy • - Rapid pursuit by late comers • Stronger competitive • mentality by leading players • Global Economic recovery • Strengthening critical, and • core businesses • Strong drive for innovation LGE Narrow the Gap LGE FAST INNOVATION LGE Expand the Gap Challenges • Become a major global player • Secure competitive advantage through • aggressive and quick management • - Achieve vision (Global Top 3 by 2010) Late comers Late comers Maintain a gap of more than 3 years over late comers, making it impossible for them to catch up Achieve 30% higher competitive advantage over leading competitors through high caliber innovation Great Company Great People 1/1

  19. LG Electronics “5% may be impossible but 30% is possible” “5% may be impossible but 30% is possible” • 30% More (Volume & Value) • 30% Faster (Speed) • 3-Year Advance (Competency) Express Delivery • Secure a competitive advantage of more than 30% over our competitors by achieving stretch goals • Secure 3 times the superiority of the core competencies within 3 years Quick Delivery Great Company Great People 1/1

  20. LG Electronics Fast Growth Orchard Paradigm “Improve fruit breeds to produce High-profit fruits ” Basic Concept Cultivation process Business implication R&D and Innovation Prepare the Soil Business restructuring Prune growth rate of quantities sold Growth rate value per-item DMS, 6σ, etc. Thin / Pesticide Premium products Harvest / Sell 1 Box 50 Apples 20,000 won 1 Box 20 Apples 50,000 won Great Company Great People 1/1

  21. LG Electronics Early Innovation Lead competitors in innovation. Be the first to obtain differentiated competitive power. Management Process Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. ▲ Review mid-/long-term goals - Business/technology strategy - Global management strategy ▲ Set business targets for the next year ▲ Finalize business plans ▲ Develop action plans to execute the innovation activities Invest in advance to achieve next year’s targets Set 3 year business targets and prepare in advance to execute these innovation activities TDR TDR TDR activity Great Company Great People 1/1

  22. Routine business activity LG Electronics TDR TDR activities maximize value creation while minimizing loss TDR Operating System TDR Objective Vision To achieve No. 1 LG… Before the innovation + Big Y Create value After the innovation Melt-In TDR TDR Little y3 Little y2 Little y1 0 TDR1 TDR2 TDR3 Knowledge management Consensus Participation by all TDR TDR • TDR action plan presentations (once annually) • Top management’s on-site 6σ meeting and • 6σ champion review (monthly) • Best TDR Convention (once every 6 months) Decrease loss - Loss Great Company Great People 1/1

  23. LG Electronics Resources are Limited but Wisdom is Infinite Where is the reason to do “Knowledge Management’ ? I’m measuring comfortably with triangulation. • Competing by manpower in the 20th century, but by wisdom in the 21st • Knowledge becomes valuable only when it is applied ‥‥ • Leaders learn for the purpose of imparting knowledge to members. • Study frequently and coach your members. Great Company Great People 1/1

  24. LG Electronics Finish It at One Time! Basic Concept RPS (Rice Ball Production System) Formal Line Outsourcing Separate New Tech ? x x x x Module x x Rice-Ball Ideology “Finish at one time!” RPS Line Innovation Process Reengineering 1/2 Process ! 6 s Rice Ball Great Company Great People 1/1

  25. LG Electronics Applying what you know is streength! It is Execution that gets results, not knowledge. Gap We must increase execution to reduce the ‘Knowing –Doing Gap’ Knowing is not strength, getting results through execution is Great Company Great People 1/1

  26. LG Electronics Fast Execution 2005 Mgt Motto “ Now we must produce results through Fast Execution “ (CEO) “ Knowing is not strength, doing is…” (CEO) Fast Execution = Strong, Quick Execution 30% Faster Speed 30% More Performance 30% Lower Cost Great Company Great People 1/1

  27. Will we just say ‘NO” and be stagnant or Challenge with an alternative suggestion ? LG Electronics No Excuses 2005 Mgt Motto • Never Say “NO”! Make a “Suggestion”! • Paradigm Shift Great Company Great People 1/1

  28. LG Electronics ‘We’ not ‘I’ 2005 Mgt Motto ‘We’ not I’ “Strong Teamwork Achieves the Goal” ”Okay” Great Company Great People 1/1

  29. LG Electronics • CEO Field Mgt. • Direct Communication • - 사업장 및 연구소/ 해외 수시 방문 • TDR 순회 • - Stretch Goal 제시/ 코칭/격려 ’ 70%는 현장에서 30%는 사무실에서 근무하겠다 ’ • 주말 영업현장 방문 • - 판매현황 점검 및 판매원 격려 • 임원 Melt-In(1월/350명) • - Commitment : 경영층의 역할 강조 Great Company Great People 1/1

  30. LG Electronics • Field Activity • ‘LGE WAY’ Buy-In(All-Employee Training) • - All employees in Company • Change Agent Training • - Change & Innovation Activity Agents • Cascade Approach • Leader Melt-In • - Company/Division/Subsidiary • Stronger Visual Identity • Field-based Execution • Strengthen Execution Great Company Great People 1/1

  31. LG Electronics The Image that LGE Wants… * LGE EVP “Great Company Great People” Slogan Global 인재와 기술 전문가로 빠른 성장 기회가 열려 있는 회사 강한 승부 근성으로, 끊임 없이 도전하고 성취해 내는 Right People들이 우대 받는 회사 성과에 대해 확실히 보상해 주는 회사 ‘Great Opportunity’ ‘Great Spirit’ ‘Great Reward’ EVP Statements * EVP ( Employee Value Proposition) ? 회사의 핵심 가치, 내외부 인재들이 중시하는 가치, 경쟁사 대비 강점 등을 고려하여 설정 Great Company Great People 1/1

  32. LG Electronics <첨부 1> 글로벌 인재로의 성장 기회 관련 사례 FSE 제도 해외 파견 근무(FSE 제도) 해외 파견 근무 제도 현황 여성 인력들의 해외 파견 근무 성공 사례 • 국내 기업 중 해외 파견 근무 기회가 가장 많은 회사 • 2004년 12월말 현재 약 1,150명이 해외 파견 근무 중( B전자 약 900명) • 매년 약 200명 해외 파견 • 대리급 이상 모든 구성원들 대상 Great Company Great People 1/5

  33. LG Electronics <첨부 2> 기술 전문가로의 성장 기회 사례 세계에서 인정 받는 기술력 ‘CES 2005’에서의 LG전자 활약 2년 연속 최다 혁신상 수상 유명 CEO Keynote에 주목 받은 LGE의 기술 • Intel의 배럿 회장, LG전자의 15인치 Wireless LCDTV 시연 수상 주요 제품 17인치 LCD 모니터 DVR 탐재 60인치 PDP TV 55인치 LCD TV 62인치 DLP 프로젝션 TV TV 냉장고 저소음 DLP 프로젝터 메가픽셀 카메라폰 슬라이드 다운 휴대전화기 * CES(Consumer Electronics Show) : 세계 최대 가전 제품 박람회 Great Company Great People 2/5

  34. LG Electronics <첨부 3> 기술 전문가로의 성장 기회 사례 R&D 인재의 임원 승진 기회 사업부장 이상 임원의 직군 분포* (2005년 ??명 대상, 명, %) 신규 임원 직군 분포 (2005년 신규 임원 ??명 대상, 명, %) (??) (??) 100 63 100 38 36 32 5 21 5 전체 R&D 마케팅 Support 전체 R&D 마케팅 생산 Support Great Company Great People 3/5

  35. LG Electronics <첨부 4> Right People 사례 CDMA연구소 개발1실 임주응 책임 Right People : 임주응 책임 “모두가 열심히 매달려 카메라폰 VX-6000 개발 3개월 단축” “ 할 수 있다는 강한 의지와 자신감으로 …” Passion for Winning (독한) “남보다 발빠르게 출시해 6개월만에 북미 CDMA 시장 1위로 올라서는 쾌거 달성” “단기간에 제품을 개발해야 하는 만큼 팀원들과의 팀웍이 가장 중요했고, 충분한 보상으로 팀원들을 격려” Proactive Execution (실행력이 강한) 지난해 북미 시장을 휩쓸며 선풍적인 LG바람을 불러 일으킨 주인공, 발탁 승진과 파격적인 인센티브 수혜 “북미 지역만 7년 가까이 책임지고 있는 베테랑” “개발자는 제품의 품질 뿐만 아니라 시장 현황에도 철저하게 대응” Professional Mastery (전문 역량을 갖춘) Great Company Great People 4/5

  36. LG Electronics <첨부 5> 성과에 따른 파격적 보상 관련 사례 허치슨 프로젝트 성공 스토리 성과 • 허치슨社에 300만대의 3G 단말기 계약/공급 • 허치슨 프로젝트 팀에 총 30억원 지급 • 특히 프로젝트를 이끈 리더급 주역들에게 개인별로 1억원씩 지급 금전적 보상 Great Company Great People 5/5

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