Kimberly-Clark is taking a global approach to innovation with the opening of its new Innovation Center Asia in Seoul, South Korea. Perini Journal visited recently to find out more.
Hugh O’Brian
Make no mistake about it: Kimberly-Clark’s recent opening of its new global Innovation Center Asia, based just outside Seoul, South Korea, is not a simple exercise in moving R&D to a low labor cost country. In fact, that is not the idea at all.
The objective is instead to create a world-class innovation network able to take the best of both worlds, East and West, which just happen to meet in Korea.
The plan is for the Innovation Center Asia (ICA) to serve Kimberly-Clark worldwide and act as a truly global innovation hub. A major focus will be to build strong competence in the bio sciences, extending K-C’s range from its historic excellence in materials science in areas such as fibers, nonwovens and absorbency. The ultimate aim, the company says, is to help K-C discover and develop emerging technologies, which can deliver solutions to foster future growth and take K-C to the next level of performance as a premier health and hygiene leader.
‘Why Korea?’ is a question that Jai Kyung, Director of Kimberly-Clark Innovation Corporation, says he has been asked by many people. His answers are so crystal clear and well delivered that his younger colleague Jaeho Kim, the company’s Research Manager of Global Science & Technology, jokes that Kyung can even make the key points in his sleep!
FOUR COUNTRIES AND TWELVE CRITERIA. “When we began this project,” a wide-awake Kyung explains, “our first instinct was that China or perhaps India was the place where we would end up. The pull and potential of China is almost impossible to resist, while the advanced IT capabilities and fast developing economy in India also made it a very clear candidate.”
However, as we all know, the early favorites in any competition are not always the winners at the finish line. The systematic selection process which K-C carried out looked at four countries as possible candidates: China, India, Singapore and Korea. Twelve key criteria under the general titles of Innovation Climate; Talent; Country Environment; and Costs/Incentives were thoroughly considered.
Innovation Climate included items such as innovation strength based on universities, institutes and the private sector; hurdles in developing regulated products; and the regional market size. Talent looked at the size of talent pool; ease of recruiting and retaining top talent; and Kimberly-Clark’s name value in attracting that talent. Country Environment criteria included the enforcement of intellectual property (IP) rights and agreements; strategic attractiveness of the location; and language and culture. Finally Costs and Incentives such as total wages and overall expenses, as well as possible government incentives, were taken into account.
KOREA EMERGES AS THE BEST CHOICE FOR K-C. As the year-long study progressed, however, it became evident that neither China nor India was exactly right for Kimberly-Clark. For several reasons, and somewhat surprisingly, Korea eventually began to look like the leading contender. By coincidence, Dr. Kyung and Dr. Kim, two of K-C’s senior innovation experts who were very involved in the process, are Korean by birth. Both, however, have lived in the USA for many years and both were based at K-C’s Roswell, Georgia, Innovation Center. They were as surprised as everyone else when Korea began to look like the leading site for the facility.
“As we were advancing with our study,” says Kyung, “I was in China and had a dinner scheduled with Stephen Shao, Managing Director, K-C North China. I was planning to tell him that it looked like we were not going to establish the Innovation Center Asia in China, but in Korea, and I was concerned that he might take it badly. However, before the dinner started he said to me, somewhat hesitantly, ‘I know you are strongly considering China but I have to say that I don’t think China is exactly right for Kimberly-Clark at this stage.’ Needless to say I was very pleased to hear this and it certainly made for a much more enjoyable dinner!”
CONCENTRATED CONVERGENCE IN COMPACT AREA. While both China and India were strong contenders, Kyung says that Korea was clearly the most attractive to K-C when it came time to decide. A key factor is the concentrated scientific talent pool and infrastructure in a relatively small area in Korea, mainly around Seoul, which is advantageous for technology convergence. And that’s the key idea with ICA: to take advantage of converging technologies to come up with totally new health and hygiene solutions.
A related reason is the fact that Korean consumers are sophisticated and well known for their high-speed, early-adopter culture. Seoul is an ultra-modern, fast-paced city (in spite of the frequent traffic jams) with some observers saying that Korea is the most wired, IT society in the world. At the same time, Korea remains a very traditional Asian country in many respects.
Kyung says “Korea has what we call the ‘hurry-hurry’ culture and we feel this will help us to gain new product insights very quickly. It also has a very flexible culture that can bridge the best of the East with a strong understanding of the West. On top of this, the central location in north Asia and proximity to massive markets in both Japan and China, were seen as an advantage.
”So the idea of convergence, not just of technologies, but also of Modern and Traditional societies; East and West cultures; and Fast-paced and Peaceful lifestyles seems magnified in Korea.
TOP TALENT HAS SAME PRICE EVERYWHERE. Finally, an extremely important point, says Kyung, is the strength and reputation of K-C’s joint venture company Yuhan-Kimberly, which is widely seen in public surveys as one of the most respected companies in Korea. Also, the fact that K-C’s sales revenue in Korea is almost ten times what it presently is in China and over twenty times more than India, also played a key role in the very important goal to attract the very best talent and brainpower to the ICA. “We are truly looking for the cream of the crop when it comes to talent,” says Kyung, “so the respect, reputation and profile that Yuhan-Kimberly has in Korea is priceless.”
Speaking of price, on the issue of costs and wages for this top talent, Kyung says that when you look at salaries for the best people they are pretty similar everywhere. “It is not as simple as comparing the average starting salary for science graduates. K-C is much more selective than that, we are looking several levels up in our aim to employ the highest achievers. Thus we found that at the top levels, salaries are fairly similar throughout Asia and therefore not as important a deciding factor in our situation as they might be in other businesses.”
GLOBAL INNOVATION FOR GLOBAL BRANDS. Support for the establishment of the Innovation Center Asia has come from the very highest levels of K-C management. One key backer of the ICA is Robert Abernathy, Group President of K-C’s Emerging and Developing Markets Business. Says Abernathy, “The Innovation Center Asia is a significant step for Kimberly-Clark because it adds global innovation capability to support the growth of our global brands”. Clearly the innovations and developments originating in ICA will be an important tool as K-C seeks to bring its global brands to more markets and people around the world.
ICA started operations on February 1 this year and the official Grand Opening ceremony was held on March 2nd in the presence of K-C and Yuhan-Kimberly executives, as well as many Korean government and trade dignitaries. The eventual plan is to spend as much as US$40 million on the facility and employ up to 80 persons in the first 5 years. As of April there were 16 staff and recruiting was actively proceeding. The Korean government has also helped attract the center to the country by supporting it with a grant of US$1.6 million.
The growth plan, comments Kyung, is to take things step by step. “We want to grow slowly but surely, in gradual steps rather than a big bang. This is not just a technical center but really an innovation center with the idea to focus about one third on material sciences, one third on bio sciences and the remainder on other sciences such as knowledge, insight, partnerships and management disciplines.” The aim is also to be highly integrated with K-C’s other technical and innovation centers in the USA, in Neenah, Wisconsin and Roswell, Georgia.
“We are very aggressively moving,” continues Kyung, “to become a more diversified health and hygiene company, so our technical base must be a very important part of that transition. While we have historically been very focused on material sciences like fiber science, nonwovens and absorbency, we have now made the strategic decision to very conscientiously build our knowledge and innovation base in bio sciences. Thus ICA will have a clear bio science focus, taking all the best global assets to better position us for dynamic growth in the health and hygiene sectors.” •
Yuhan-Kimberly: Market leader in Korea
K-C’s joint venture company in Korea, Yuhan-Kimberly, was one of the important reasons that the ICA was established in Korea. Yuhan-Kimberly was formed in 1970 as a joint venture between Kimberly-Clark and Yuhan Corporation. The JV is presently 70% owned by K-C and 30% by Yuhan.
The CEO and President of Yuhan-Kimberly is K.H. Moon, who is also the president of Kimberly-Clark’s North Asia Group encompassing not only Korea but China, Taiwan, Hong Kong, East Russia, Mongolia and Japan.
YK is clearly one of the most widely recognized and well respected companies in Korea. A recent survey by the Korean Management Association Consulting group ranked YK as Korea’s 4th most admired company. It was also selected as one of the best workplaces by the Asian Wall Street Journal and Hewitt Associates.
Its major businesses include childcare, feminine care, household care and adult care with some of the famous brands including Huggies, Kleenex and Scotties. It is clearly the market leader in these sectors. It has an extremely high market share in the baby diaper sector with more than 70% and very high market shares in sanitary napkins and tissue products, including bathroom, facial and kitchen towel. It has around 45% of the Korean tissue market share, based on value, ranging from around 53% for kitchen towel, to 46% for facial tissue and 40% for bath tissue.
YK’s net sales in 2006 amounted to 834 billion Korean won or about USD 900 million, with tissue accounting for about 25% of the turnover. Net income was 91 billion won (USD 99 million) in 2006.
The company is seen as a very progressive and socially responsible organization. One of its most high profile activities is the Keep Korea Green (KKG) program which has been running since 1984. KKG has worked in various fields such as planting trees, creating more awareness of forestry in schools, restoring forests in North Korea and working to prevent desertification of North Asia. •