Hyundai
Card on the power of brand translation and the beauty of crisis
Long after CEO Ted Chung brought the credit-card
company back from a crisis, he continues to embrace the idea that constant
change is the best way to keep a company ready for anything.
Just a few years after Hyundai Card was established, Ted Chung
joined the company as CEO only to find that the business was in big trouble.
With the credit-card company poised to lose millions, Chung took the unusual
steps of boosting employee salaries and increasing spending, including for a
new $50 million advertising campaign. It paid off. He has since honed a
strongly held view on the power of design to keep his brand distinctive—one
that ranges from such unusual innovations as sponsoring tourist visits to his
ultramodern headquarters and the new, automated credit-card “factory” to
developing the company’s own unique font. In this interview with McKinsey’s Rik
Kirkland, Chung, who was recently named vice chairman of Hyundai Card and Hyundai
Capital, explains how crisis helped define his leadership and why he sees
continually challenging the status quo as the surest way to stay on top. An
extended and edited transcript of Chung’s remarks follows.
Managing during crisis
Nobody wants a crisis. But, actually, the
beauty of crisis, if you have to experience it, is that it speeds everything up
and makes anything possible. When I joined, in 2003, the company was just two
years old, and the crisis was coming because our whole industry had grown too
fast and extended too many credit lines to low-quality customers. Nobody loved
this company. We were just another commodity product.
So after securing 40 percent market share in
new-member acquisitions for the first two years, the previous executives may
have thought we were the champions. But shortly after I arrived, when I did the
math, I thought at first I had made some mistake. But I ran the numbers again,
and they were correct: we were set to lose $1.5 billion to $2 billion within 12
months.
I brought my blanket to the office and I slept
there overnight ten times, thinking about my next step. My biggest move was
that I decided not to make any cuts. Instead, I decided to spend more money to
try to dramatically reposition the company and put it on a different, more
profitable growth path. If I were losing $20 million or even $200 million, I
would cut everything. But when you lose $2 billion, that’s different.
The key question, I realized, was that we
needed to figure out what kind of credit-card company we wanted to be. After
all, Amex, Citibank, Discover, may all be credit cards, but they are not in the
same industry at all. My instinct, without any experience in the business, was
that we needed to be a lifestyle credit-card company, more like Amex—one with a
unique identity and the strongest brand loyalty. And that required a new
business model.
So the next part of my plan was to increase
everybody’s salary by 10 percent. Because when a company has a crisis,
employees start to think, “OK, I need to update my resume.” If you want to
overcome your crisis, then you need to retain your key employees. Once you lose
your people, that’s it.
I also changed more
than half of my executive team because some of them tried to tell me, “This is
how to run a credit-card business.” When people say things like “This is the
way to run a business. There’s no other way,” then that’s a problem. I called a
few headhunting companies and said to them, “I want every smart brain on the
street. I don’t care whether they have a credit-card background or not.”
A few months later, we invested in a $50
million campaign to launch our new credit card. We had the only credit-card
advertising at that point in Korea. Many people said I was crazy. But my
response was, “No. I’m spending maybe $100 million more, overall. What’s the
difference between $2 billion and $2.1 billion, when you die?”
When you have a crisis, you need two plans:
how to get out of it and what you plan to do after the crisis. Some people
spend too much time only on the crisis. After coming out of the crisis, we were
the only ones standing. When we launched our flagship card, M Card, we acquired
so many new members that every month our market share grew 0.5 percent. So I
developed a bad habit. Whenever I’m in trouble, I hope for another crisis!
Delivering ‘science in a Tiffany box’
Many engineers and many people will say that
“we have the best product, but the marketplace does not understand that.” And
they get really frustrated. Sometimes they even say it’s unfair. But I don’t
think so. Because they are missing one important step: translation. Every good
product should be translated into a good brand. So how do you translate your
best product into the marketplace? I call that skill “delivering science in a Tiffany
box.”
You have to have a good product. But that
alone is not enough. Good quality and good engineering must be translated if it
is to have any value in the marketplace at all. You have to make yourself
distinctive—and then keep that distinction. That’s the challenge we face every
day.
What Bauhaus teaches about corporate identity
People talk about seeing around corners. But
if you only talk to the same people—in finance or business—you can’t see around
corners. You just keep meeting everyone at the same corner. So I have two jobs.
I spend maybe 8:00 AM to 6:00 PM every day working in a business environment.
But at night, I try to see different people: restaurant owners, artists,
fashion designers, scholars—who all have no idea about my business.
To help me and my team see other perspectives,
we also organize “Insight Trips,” where we go to different places around the
world and line up interesting conversation partners to have discussions. We
hear someone talk about how to run a university and balance raising donations
with scholarship. Or a French business executive may tell us about how they
wrestle with being the most efficient company, while still running a luxury
company. All this tests and challenges us to go back and translate those
experiences into our company.
One of my insights is that design can be a
huge weapon to make your company look cool and build brand loyalty. For us, the
Bauhaus movement, on which we sponsored a big exhibition in New York at the
Museum of Modern Art, is our benchmark for how to think about the role of
design in expressing corporate identity, who you really are. Bauhaus started as
framed art and then extended to apply design to architecture—all kinds of
ordinary objects—and became almost a way of life. The lesson we drew is that
design has to be three dimensional and really express who you are.
An important element of translation is visual
impact. We are now living in an overflowing information age. And when you have
millions and millions of pieces of information coming at you, visual design is
a very powerful tool to stop you and catch your eye. It’s a powerful way to
talk to you.
What’s the real lesson
we have to get from Bauhaus? This is not just about making a nice-looking TV
ad, which uses a small frame to communicate with the marketplace. If you apply
the lessons of the Bauhaus movement, everything should be the
frame. Everything should be the way you communicate. For us, we even have
tourists in to visit our company. That’s another very popular tool to express
ourselves. We run a design library and other kinds of space. It’s all part of
expression. It’s not only what you are talking about but also the way you are
and the gestures you have. And the whole thing makes one image. So we expanded
to all the channels in the media so that everything makes one image. After our
Bauhaus experience, we adopted a slogan: “The age of advertising is over; the
age of expression is coming.”
To illustrate that, consider something as
basic as the layout of the best room for a meeting. Many people can have their
own definition for the best meeting room. But I always want the meeting to be
in a space like the kitchen in my house. I don’t know why, maybe because my son
talks to me best over the kitchen table. So the elements of the decor should be
small, not too big. And then everybody should be able to walk around and make
his own or her own coffee or drink, be able to move up and down and write
something on the wall—so you can see white walls everywhere. And then, you
know, the table should be narrow enough. I don’t really want to sit . . .
apart. You know?
Changing the rules of the game
A few years ago, we launched a diagnostic
project called “Day One,” where we imagined we were taken over by a
private-equity firm and therefore had to challenge on day one everything that
Ted and his team had done. Believe me, we discovered a lot of mistakes. But we
faced them and fixed them. Return on equity and profitability have jumped
since. Now, I happen to think it’s probably good to change the CEO every ten
years, but since I don’t want to step down yet, I hope that by doing this I
have created some additional job security for myself.
Even before we launched Day One, we had
changed a lot of things over the years, but always in a line with what we have
done in the past. But sometimes, you have to cut the line, throw the line out,
and then jump up and create huge blank room—room enough to talk about and make
very big things, big changes.
To me, innovation is a promise with my
partners, the senior-executive team. Some people have worked for this company
for ten years or more. And ten years ago, when this company was in trouble, we
said that we would change the rules of the game in this industry. Even now, we
keep talking about the new rules of the game, new possibilities for the
industry. That’s why whenever we see a sleepy industry, we are so happy.
We don’t want to be most the profitable company. We don’t want
to be the largest one. At the end of the day, the question we ask is: what was
the impact we left behind and what kind of meaning did we have over those ten
years. I think that’s also important to keep us together here.
http://www.mckinsey.com/Insights/Leading_in_the_21st_century/Hyundai_Card_on_the_power_of_brand_translation_and_the_beauty_of_crisis?cid=other-eml-alt-mip-mck-oth-1507
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