The Frankfurt Declaration
Rule Breaker. “Through forward-looking and challenge-oriented management, I will grow Ilseong into a world-class, top-tier global corporation!” Chairman Choi Hyun-hee of the Ilseong Group raised his voice.
It had been three years since he inherited the management rights of the Ilseong Group following his father’s passing and began his direct leadership. He was actively engaging in frontline management with enthusiasm. Yet if one looked for anything that had actually changed, nothing came to mind. Ilseong looked exactly the same now as it had three years ago.
Chairman Choi Hyun-hee was putting in the effort, but the directives he issued did not deviate significantly from the direction set by the late former chairman. Following the old methods meant the results remained at the old level.
On March 15, this same Chairman Choi Hyun-hee summoned the entire Ilseong Group executive team, along with overseas branch managers and above, to Frankfurt. With Ilseong Group boasting 130,000 employees worldwide, the number of executives gathered in Frankfurt alone exceeded 200.
“However, there is a prerequisite for achieving this. We must break away from the inertia of existing methods and behaviors and implement new management practices suited to the global environment.”
The so-called Ilseong Group New Management Declaration continued. Originally scheduled as an event for June 1993, it had now appeared in the world two years and three months earlier, on March 15, 1991.
“To put it in extreme terms, change everything except your wife and children!”
The declaration that ranked second in the all-time list of Korean chaebol chairman quotes was not omitted.
The core of the Frankfurt New Management Declaration was innovation, and Chairman Choi Hyun-hee’s approach was top-down, proactive innovation. Following that, Ilseong Group’s new logo was also unveiled. The old Ilseong logo featured a red square containing a cross-shaped star. The newly announced logo was a slanted, flattened blue oval with the word “Ilseong” in white Gothic lettering.
Many among the executives and presidents who had applauded the new logo’s announcement saw their expressions change. Though they responded enthusiastically, anyone with sense could tell exactly who Chairman Choi Hyun-hee’s declaration was targeting: the presidents and executives who had opposed his instructions by citing past practices and customs.
More than half of the presidents had been appointed by the late chairman. Such people were typically insensitive to change and often opposed it.
“There is a clear example. Look at ID Group, which is expanding into the world. Some of you may dismiss Chairman Yoo Jae-won because of his age, but objectively examine the achievements he has accomplished in just three years. Starting with nothing, he has achieved rapid growth through innovative products that are competitive in the global market! He has even accomplished the remarkable feat of acquiring Microsoft, the undisputed leader in the computer operating system market.”
Chairman Choi Hyun-hee’s voice grew louder. The more he spoke, the more ashen the faces of the targeted executives became. Yet they could not refute him.
On February 28, while the Gulf War’s end was still the dominant news, a shocking breaking story rocked not only Korea but the entire world: the newly established ID Group was acquiring all of Microsoft’s assets for $1.25 billion. Microsoft had been the absolute powerhouse in the PC operating system market. Yet in just one year, that unshakable position had crumbled, leaving it in the position of being sold to ID Group.
The shock to Korea’s business community was immense. Among companies listed on U.S. stock exchanges, Microsoft had ranked in the top 10–15. Leading oil companies occupied the upper ranks, followed by traditional automakers and then the IT giants. Microsoft had been a company that rivaled IBM for the top spot in the IT sector. Now that company had collapsed overnight and been absorbed into ID Group.
That was when Chairman Choi Hyun-hee’s sense of crisis was ignited. The image of ID Group Chairman Yoo Jae-won smiling brightly after exchanging the acquisition contract, shaking hands with a somber-faced Microsoft Chairman Gates, was a stark contrast.
“Change all existing methods! However, remember that this new management is not the goal but the process.”
Chairman Choi Hyun-hee had received an instinctive warning that he could easily end up in Chairman Gates’s position if he was not careful, which prompted the sudden Frankfurt Declaration.
“But when we reap the sweet fruits of innovation through new management, I promise here and now that not only Ilseong’s executives and employees but also our partner companies will share in them equally.”
Chairman Choi Hyun-hee was doing his utmost to motivate everyone, even addressing the distribution issue that did not strictly need mentioning.
— Microsoft fades into the annals of history.
The acquisition of Microsoft concluded as swiftly as roasting beans over lightning. After spending over a month calculating and deliberating, Chairman Gates called Yoo Jae-won on February 27 and declared surrender. He only earnestly requested a slight premium added to the acquisition price.
Yoo Jae-won completed the acquisition of Microsoft at $1.25 billion—50% higher than the $800 million he had initially offered Chairman Gates. It was not an overpayment. The deal included not only Chairman Gates’s shares but also those of Vice Chairman Steve and the entire board in one comprehensive purchase. The investment banks’ shares had already been acquired earlier, so what remained was the floating stock held by individual investors.
— No backdoor listing! Microsoft delisted from the exchange!
Their shares would be purchased only until the end of March, after which Microsoft would exit the exchange. Since trading shares of an unlisted company is extremely difficult, individual investors were flooding the market with sell orders. Many had hoped that acquiring Microsoft would allow ID Technology to achieve a backdoor listing, but Yoo Jae-won’s declaration dashed those expectations. The stock price, which had risen to 60 cents per share on the day the Microsoft acquisition was announced, had now fallen to 20 cents.
Once the share buyback was complete, Yoo Jae-won would own 100% of Microsoft.
— ID Group to pursue name change for Microsoft upon completion of acquisition!
Once the acquisition was finalized, underperforming assets would be liquidated and the organization, which had been operated unethically and inefficiently, would be restructured. After that, the Microsoft name would be removed and replaced with another. Android was the leading candidate—the same Android that had become the new icon of PC operating systems through its bare-bones robot design. As the name suggested, the plan was to leverage Microsoft’s organization to continuously develop and advance the Android operating system while also handling global distribution.
The initial version of Android Alpha had been small enough to be created by Yoo Jae-won and about ten Silicon Valley developers. With the transfer of employment from Microsoft bringing in hundreds of developers, some wondered whether they would have nothing to do. That was a misunderstanding born of knowing only one side of the story. The usability and performance of an operating system improve the more developers are involved. Even highly efficient developers like Yoo Jae-won cannot handle everything alone. Separating teams for interface research and icon design, and developing in a modular fashion, would make the process far smoother.
Furthermore, computer performance was advancing daily, and the number of peripherals connected to computers was increasing. A large development team was necessary to ensure compatibility with diverse hardware. Moreover, Yoo Jae-won had no intention of limiting himself to PC operating systems. Android 1.0, codenamed Cupcake, was a Unix-based operating system. Unix had been designed to support multiple users simultaneously on large-scale computers, making it highly suitable for the coming internet era. In particular, nothing matched Unix as an operating system for server computers, which were essential for internet operations.
The problem was that Unix, developed at AT&T’s Bell Labs, carried an exorbitantly high price tag. At $250,000 per package, it was beyond the reach of individuals and most companies. Because it was so expensive, Unix-like operating systems proliferated. Yoo Jae-won intended to use the developers inherited from Microsoft to create server and data center versions of Android, as well as a supercomputer version. Therefore, the hundreds of transferred developers might eventually prove insufficient.
“Oh, they’re making the New Management Declaration early.”
Yoo Jae-won watched the news reporting Chairman Choi Hyun-hee’s Frankfurt Declaration on the television in his office. The report even included the part where Chairman Choi Hyun-hee mentioned him. Whether it was to instill a sense of crisis in the outdated-minded presidents or not, the coverage was extremely favorable.
Since Yoo Jae-won had curtly rejected Chairman Choi Hyun-hee’s meeting request last time, there had been no further contact from Ilseong. That did not mean business relations had been severed. Ilseong Group had purchased nearly 5,000 cumulative copies of ID Office to date. Buying 5,000 copies at once would have earned them a substantial discount, but they had purchased in small quantities repeatedly. As a result, there was no need to offer discounts, which translated into solid profits for ID Group.
“The phrase ‘change everything except your wife and children’ is good, but I wonder if it will actually work.”
The impact of the Frankfurt Declaration was significant. Yet if inertia could be changed by a single declaration, the word “inertia” would not exist. Chairman Choi Hyun-hee’s declaration was meaningful primarily in that it provided a clear justification for removing the late chairman’s loyalists. Furthermore, the policy being implemented under the banner of new management was the bizarre “7-4 system”—arriving at work by 7 a.m. and leaving by 4 p.m. Though similar to daylight saving time, in practice people arrived early but stayed late doing overtime because they felt self-conscious about leaving.
Above all, Chairman Choi Hyun-hee was someone who mentioned “crisis” whenever he had the chance. Even after Ilseong Group’s total sales exceeded 100 trillion won, he worried that market trends could shift at any moment, and when sales declined, he worried about the decline. Maintaining vigilance even during good times was a trait of capable executives and was cited as one of Ilseong’s growth factors, but he took it too far. If it had ended with mere exaggeration it would have been fine, but citing crisis as the reason, he had also reduced new investments and been stingy with distributions.
However, it would be unreasonable to assume that everything would unfold exactly as in his previous life. Many flows had already changed because of the currents Yoo Jae-won himself had created. No one could have predicted that the proud Pac-Man logo that once hung at the entrance of Microsoft’s Redmond headquarters would be replaced by the simple ID logo. Even Yoo Jae-won himself had not expected it. Things had gone so well that he had reached this point.
There was no reason Ilseong Group should perform worse than in his previous life. Perhaps, stimulated by Yoo Jae-won, Chairman Choi Hyun-hee might demonstrate even greater skill than before.
“Well, we’ll see later. In any case, we’re bound to clash with Ilseong eventually.”
Yoo Jae-won spoke without hesitation words that would have horrified Chairman Choi Hyun-hee if he had heard them. Checking his watch, he realized it was time to move on to his next schedule.
“Mr. Chairman, the branch manager from the switching bureau has arrived.”
As expected, Yoo Jae-won’s internal clock was remarkably accurate.