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POSCO (POhang iron and Steel COmpany) manufactures and sells a line of steel products, including hot-rolled and cold-rolled products, plates, wire rods, silicon steel sheets, and stainless steel products. The company produces more than 28.9 million tons of crude steel. In Korea, POSCO produces all of its steel at Pohang Works, which has an annual crude steel and stainless steel production capacity of 12.87 million tons, and Gwangyang Works, which has an annual crude steel production capacity of 15.83 million tons. The company sells primarily to the Korean market, with Korean sales accounting for 68.9 percent of its total sales volume of steel products during the year ended December 31, 2003. POSCO's exports in 2003 accounted for 31.1 percent of its total sales volume of steel products. The company's major export market is Asia, with China accounting for 36.8 percent, Japan 18 percent and the rest of Asia 23.7 percent of its total export volumes in 2003. Other products include lower-value-added, semi-finished products, such as pig iron, billets, blooms and slabs. POSCO is among the top five steel companies in the world, and it is one of the fastest growing in both revenue and profit. In calendar 2004, the company's revenue was approximately US$19.8 billion and net profits were about US$3.8 billion. Interview conducted (through a translator) in Seoul, Korea, 12 April 2005
Bob Hayward: Mr. Lee, thank you for your time today. POSCO is very interesting to us at Gartner for a few reasons. One is the industry you are in. Steel production is considered a low-tech primary industry, but POSCO has earned a reputation for being extremely innovative with technology. Secondly, most Korean enterprises are not as mature in their IT processes as we see in more developed economies. But again, POSCO — even when measured against your peers across the world — is considered a leader in IT use, with some highly sophisticated applications. In your role as CEO of POSCO, what were some of the motivations and drivers behind investing so heavily in IT in recent years? Ku-Taek Lee: POSCO is committed to implementing Six Sigma quality and process improvement initiatives across the entire organization. We realized that we need a strong commitment to IT in order to support this enterprisewide initiative. Hayward: Why has POSCO embarked on such a massive Six Sigma program? Lee: There are several reasons. First of all, here in South Korea, Samsung Electronics, LG Electronics and other big companies have started using Six Sigma in recent years. We have observed their positive experiences, and this strengthened our resolve to also go down that path. Secondly, the global steel industry has historically been low-tech and not a great user of online or innovative technologies. But with increasing globalization, every steel company must innovate to prosper and compete in this new environment. POSCO was in a difficult situation — you might almost say a crisis — a few years ago as we faced this new global competitive threat. As a management team, we felt that Six Sigma was a good vehicle to change all employees' way of thinking, current working styles and mind-sets. And lastly, we saw Six Sigma as the key for continuing process innovation. POSCO was a nationalized firm, owned and managed by the South Korean government until just five years ago. As we became privatized and more globally oriented, we had to dramatically change everything within the entire enterprise — all processes and ways of operating. But you can't make these kinds of changes overnight, especially not employees' mind-sets and attitudes. We are using Six Sigma as a way to do this gradually and continuously — starting with selective process innovation, strengthened through ongoing employee training. Hayward: How does POSCO approach the difficult issue of process innovation? Lee: When we started on this path, many of our employees did not easily agree to change their current processes, because our business had done well for the last 30 years and we were a much-admired company within South Korea. But POSCO management put together an action plan to drive change and innovation. This plan consisted of several key elements. One was to form a dedicated team led from the top of the company to lead innovation and to develop new processes. Our CIO is a key member of this team — we believe CIO means “chief innovation officer.” We started, and continue, to provide extensive training on Six Sigma, process innovations and technology to all of our employees. And we are implementing change in a gradual way, cascading from our most critical processes outward, inward and across the organization.
Hayward: Where does POSCO go next with the use of IT?
We are not complacent and do not feel we are anywhere near finished with using IT to support our program of process innovation and Six Sigma implementation. We need to uncover more data and information from across all of our operations to measure and evaluate results and performance, to gain a much better understanding of our achievements. We are also expanding internationally. We need to take our experiences, systems and skills that we have in South Korea and replicate those in new operations based in other countries. POSCO intends to be a globalized world leader in our industry. IT plays a crucial role in making that happen. Hayward: Do you feel POSCO management recognizes the importance of IT? Lee: I believe so. It starts with me, at the top of the organization. I am an engineer by training and background, so I have some sense of technical matters. At every opportunity, both within and external to the company, I make a point of stressing how IT investment and associated process innovation have returned great value to POSCO — even more than we originally expected. I strongly urge my audience to appreciate this fact, and I ask them to seek out new opportunities for IT-linked innovations. I do this personally within South Korea as well, as I feel the entire country can gain from our experiences. I have a good friend who is a head legal prosecutor for the third-largest city in South Korea. I convinced him to apply Six Sigma and IT investment within his office, which has had dramatic results in reducing case backlog and improving the effectiveness of legal processes in that city. Hayward: Does POSCO have a system of IT governance that helps determine appropriate investments in IT? Lee: We treat IT investment no differently than other significant investments, such as in facilities, production or new steel-making equipment. We have a senior management team that meets regularly to discuss and agree on investments. The team consists of all senior managers, including the CIO, who reports directly to me. Often, I am actually the sponsor of IT investments and fully support the business case brought to the management team by the IT division. We do things perhaps a little differently at POSCO, in that our CIO has three main roles. He is expected to manage our IT systems and operations, but he is also the owner of process innovation and I have also asked him to head up our groups that handle matters related to standards, such as ISO 9001. In everything we do, we ensure that technology investments are just a part of a larger project of change management, owned by the business, that involves making suitable changes to business processes to leverage and fully utilize technology. Hayward: Our own research has shown that the active involvement of the CEO and other leading business executives in IT governance arrangements is a critical success factor for the most effective use of IT. Turning to matters related to your industry, what does POSCO see as its major opportunities and competitors? Lee: There are significant opportunities for steel manufacturers in the BRIC nations — Brazil, Russia, India and China. China especially has an incredible demand for steel. We compete with all the major steel manufacturers globally, especially those from Japan in this part of the world. Hayward: What do you see as a challenge for POSCO in terms of IT in the future? Lee: Technology is changing so fast. It is very hard for an organization like POSCO, which takes a long view on investments and assets, to manage this pace of change. We need help to make sense of a complex market with many products and vendors. We'd like to work with organizations like Gartner to help us understand technology trends and determine those that may offer POSCO some advantage.
Hayward: Mr. Lee, thank you for your time today. Lee: Thank you.  |
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