To celebrate its 30th Anniversary, SAP is presenting the Asian Leadership Series comprised of interviews with captains of industry speaking on key business issues for the 21st Century. Each interview highlights one of three themes -- vision, innovation or experience -- concepts that have driven SAP's success over the past three decades. Lee Kum Kee Hero Honda Tenaga Nasional Berhad Quanta Computer Singapore Airlines Legend Computer LG Chem

30 Years of SAP 1972 • SAP is founded as "Systems Analysis & Program Development" in Mannheim, Germany • Number of employees at year end: 9 • Total revenues: DM 620,000 • SAP R/1 solutions launched 1974 • Two local companies -- Rothhandle and Knoll -- select the newly developed SAP Financial Accounting (RF) System 1976 • SAP organizes as a limited liability corporation with the name of "Systems, Applications and Products in Data Processing" 1977 • SAP moves its headquarters from Mannheim to Walldorf 1979 • SAP R/2 solutions launched • Total revenues: DM 4 Million 1980 • 50 of the 100 largest industrial companies in Germany are SAP clients 1982 • SAP revenues increase to DM 24 million for the year and more than 250 companies in Germany, Austria and Switzerland are using SAP-developed programs 1985 • Headquarters in Walldorf expand by 10,000 square meters • Sales increased by another 45% • SAP system is used throughout Europe as well as South Africa, Kuwait, Trinidad, Canada and the United States • The first headquarters in the United States is established in Wayne, Pennsylvania 1988 • Subscribed capital stock increases from DM 5 Million to DM 60 Million, company goes public (Frankfurt and Stuttgart) • SAP gains its 1000th Customer, Dow Chemical 1989 • SAP stock is traded on the Zurich stock exchange • 1st SAPPHIRE Conference • 1st Stockholder Meeting • Established Asia Pacific presence with offices in Australia and Singapore. • Number of employees: Over 1000 • SAP enters Russian market and begins development of a Russian version of the R/2 system 1992 • SAP enters Hong Kong market • SAP R/3 solutions launched • Revenue increases to DM 831 million of which almost 50% derives from international operations 1993 • Customer base grows to 3,500 companies • SAP introduces an R/3 version for the Japanese market 1995 • Customer base grows to 6,000 • SAP share included in the German stock index (DAX) 1996 • SAP R/3 Release 3.1 is Internet-enabled 1997 • SAP begins developing industry-specific solutions 1998 • Company is listed on the New York Stock Exchange • Company launches new solutions for Business Information Warehouse, Business-to-Business Procurement and Supply Chain Management. 1999 • SAP delivers mySAP.com • SAP receives "Best Managed Companies" Award by Industry Week 2000 • Named "Most Successful Company Over the Long-term in the 90's" (Jury of 40 CEO's: Wiesbaden 3/10/2000) 2001 • SAP acquires Top Tier and forms SAP Portals • Revenues for SAP in 2001 top EUR 7.3 Billion 2002 • SAP acquires TopManage Software Solutions for its SMB offering • SAP customer base grows to 18,000 • SAP has over 27,800 employees • SAP celebrates its 30th Anniversary! Q1. What is the biggest challenge LG Chem faces in becoming a global leader? A1. The number one issue is our people's foreign language communication skills. We have introduced various in-house language courses for our employees to take, so that they can better communicate what they are thinking, what they want to say, when dealing with people overseas. We're also dispatching our people to China to educate them. They spend nine months studying and training there, then three months traveling around China in order to learn the culture better. Q2. What do you look for in your managers? A2. First, of course, a person must have management skills! Then I expect them to understand the importance of keeping an open mind. They must be able to listen carefully to their people and to communicate with them. I also look for people who have insight into our business, those with the ability to see what businesses will benefit the company in the future. Q3. Your Technical Service and Development Center plays an unusual role in R&D. Tell us about this. A3. As a solution provider, our engineers and technicians from this Center can work directly with customers, should they encounter R&D issues in developing new products. We may supply materials, research equipment and people, sometimes even helping to co-develop new products. Yet we voluntarily turn over any rights to such jointly developed products to the customer. The benefit for us comes when these customers buy more of our materials to make the new products.

In this interview, Ki-Ho No, president and CEO of LG Chem, Ltd., Korea's leading chemical producer, explains what the company is doing to turn its corporate vision into reality.

Leaner LG Chem Aims to be a Global Leader by 2005
Though it can count over a half-century of experience in the chemical industry, LG Chem got to celebrate its first birthday on April 1, 2001. That was the date when Korea's oldest and largest chemical enterprise--the much-diversified LG Chemical -- divided into three separate companies. As a result, the newly brewed Seoul-based LG Chem began operations as an independent corporation with a mandate to concentrate on three specific sectors: petrochemicals, industrial materials and information and electronic materials. With a workforce of some 8,000, a sharpened focus and new sense of purpose, LG Chem is now aiming to "become a global leader through advanced technologies and innovative solutions...," as stated in its corporate vision.

In order to achieve that goal, the company is fundamentally reorienting operations and the attitude of employees. It is also moving beyond its traditional base of business and is creating new products for the IT industry, while at the same time it's seeking out additional markets overseas. "We need to change our corporate culture and our way of thinking." says Ki-Ho No, president and CEO of LG Chem. "Until recently, we've been focused mainly on the regional market."

This July LG Chem announced it was investing US$11.6 million in establishing an engineering plastics compound (EPC) plant in Guang Dong, China. EPC is used to make components for the auto and electronic industries. The company also plans to build a second EPC plant in China that will see the company producing a total of 100,000 tons annually in the region by the end of the decade.

Meanwhile, LG Chem plans to more than triple its current production capacity of ABS resin in China to 500,000 tons annually by 2005, while PVC production capacity is slated to more than double to 640,000 tons in the same time frame -- making both these operations the largest in China. In five years the company estimates that manufacture of petrochemical products in China will surpass its production in Korea.

The aim of shifting manufacture of traditional products to China is not so much to take advantage of the cheaper labor costs there, but rather to become a leader in an expanding and potentially huge economy. Whereas products like EPC and PVC are facing an oversupply situation in the industrialized economies of Asia and the West, this is not the case in China, where demand remains healthy and future market expectations appear bright.

In addition, LG Chem is establishing a trading company in China to diversify its scope of business. Eventually it plans to create a holding company there to oversee its entire China operations.

"Companies setting up in China just to take advantage of the cheaper labor costs are making a mistake," warns No, 55, who oversaw the establishment of operations in China, beginning in 1997. "Labor costs are rising there. In our industry, certain Chinese engineers with good languages skills and the right overseas education can earn more than the equivalent people in Korea."

A Global-Minded CEO
Given his own experience overseas, No is only too aware of the value of foreign language ability and international experience. He was the chief director of operations in China, as well as the CEO of LG Dow Polycarbonate, a joint-venture with Dow Chemicals of the USA, before heading up LG Chem. Such experience helped when it came to transforming the way LG Chem was managed.

"Previously we had a top-down management system," explains No. But in order to get the best out of executive and employee alike and motivate them to compete in international markets, open and transparent management became a priority. "So we have put a committee in place to review every major decision," he says. "Members include my top executives, as well as the business unit leaders, the head of Human Relations and our plant managers."

An internal electronic bulletin board is also in operation, which lets any employee communicate with No. He also insists that all executives follow his lead and regularly visit corporate training sessions for employees, in order to speak directly to them and stress the importance of education and creating "a new mindset in the company." Employees are also encouraged to take foreign language classes that the company organizes.

Employee Self-Evaluation
To create more autonomy in decision making, staff were given the opportunity to create their own performance evaluation system. "Some were very happy with the system, others were not so," says No. "After listening to everyone, we've begun making changes to accommodate the unhappy people." Now, each team leader is allowed to decide whether a team should be appraised as a group, or as individuals, in order to accommodate the different roles teams may be tasked with carrying out.

Listening and communicating is a theme that No repeats over and over. During the transition from LG Chemical to a pared-down LG Chem, middle management, in particular, had to change their way of thinking and working. "We faced many issues," says No. "The most important tool for dealing with them was dialog."

If No needed proof that his corporate reorientation efforts are working, it came in this year's second quarter results. Profits jumped 74 percent to $119.2 million over the same period last year, while sales rose 10 percent to $1.1 billion. "Most notably, revenues from our new information and electronics business soared 114 percent to $90.8 million, compared to the same quarter last year," said No. This business includes chemicals and materials used in making such devices as liquid crystal displays, plasma displays and circuit boards, as well as the manufacture of toner for photocopiers and rechargeable lithium-ion and polymer batteries.

Currently, information and electronics materials accounts for just 4 percent of LG Chem's sales. But by 2005, that's expected to climb to 14 percent, as the company allocates 50 percent of its R&D investments to the operation.

With the company's reorientation well underway, the China ventures going full steam, and the new information and electronics materials business surging, No is upbeat about the mid-term outlook. "By the end of 2005 we aim to be among the top ten chemical companies in the world in terms of growth and profits," he says. "Top ten in terms of revenues will then follow as we pursue our vision of becoming a top global company in all respects."

Expectations High for ERP
LG Chem decided in late 2000 to phase out its disparate legacy systems and implement SAP's enterprise resource planning (ERP) software, as well as complementary information warehouse and executive information systems. Sales, production, financial and human resources ERP modules went live in July this year, after first operating in parallel with the counterpart legacy systems for a test period of one month. This made for a model implementation and is already being regarded in the industry as the example for other implementations to follow.

In a company that places such a premium on communications, it comes as little surprise to learn that LG Chem's biggest expectation for the new system is to be able to take advantage of integrated communication. "Not just between management and employees," says No. "But also between our customers and suppliers."

Previously, when customers queried sales people on how long it would take to supply a product order, Sales had to contact Inventory. If the goods were not immediately available in inventory, then the query would be passed on to Production. "Now our sales people just input the order on the computer, and all the relevant information is then automatically displayed," says No. "This can all be sent instantly to the customer by e-mail. So we're talking about answers in real-time, versus the several hours it took under the legacy system."

No is also looking for the system to provide more detailed information. The legacy accounting system, for example, would issue financial statements for business units and divisions. "But with ERP we can get financial statements for a single work team or a particular sales office," he points out. "We are also expecting to cut inventories and cut costs, and ERP is going to root out inefficiencies that exist in all our business processes."



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