- On July 14, 2017
By Donna Fullerton and Jane Hyun
America’s multi-billion-dollar cosmetics industry thrives on consumers’ thirst for novelty—the next new service, formulation, or product—delivered through targeted messaging, packaging and promotion. While the United States is home to the largest cosmetics market in the world, there is perhaps no nation that prioritizes innovations in beauty and skincare as much as South Korea. From BB creams & egg hydration masks to snail cream, the innovations of K-Beauty are now taking the West by storm. At a recent K-Boom symposium hosted by Cosmetic Executive Women, it was reported that Sephora’s K-Beauty category grew more than 70% between 2015 and 2016.
The K-Beauty revolution is built on the willingness to blend cultural tradition and reframing raw materials found in local environments such as Jeju Island. With more than 25,000 beauty brands in the hyper-competitive South Korean market, being distinct takes tremendous creativity. This sense of excitement is evident no matter where K-Beauty arrives around the globe. All you have to do is walk through a pop-up store in Manhattan to experience the way K-Beauty engages the senses with fun, youthful, vibrant packaging and in-store displays. The formulations, and the delivery systems are designed to be distinctive, aesthetically appealing and communicate the efficacy consumers are looking for. Donna was first introduced to BB Cream when she conducted focus groups with users about their experience with this new skincare product. As women discussed the strengths of BB Cream, it was clear that they thought it was unique and, unlike so many skincare entries that promised the world, it actually worked! Women spoke about BB Cream in glowing terms describing it as the optimal blend of skin care and cosmetic attributes—an all-in-one product that combined hydration, sun protection and evening out skin tone. Women talked about the natural, dewy fresh, finished look it provided, which was even more amazing to them given the light texture and consistency of BB Cream. Their enthusiasm for this all-in-one product motivated Donna to give it a try. Not only did BB Cream simplify her beauty routine, the results were as advertised by the users she interviewed. Today, the enormous appeal of BB Cream can be seen on the shelves, as most major brands have a BB Cream entry in their product line.
The Emergence of AmorePacific: Case in Point
According to Ju Rhyu, a K-Beauty consultant, the K-Beauty producer with significant U.S. presence is AmorePacific, whose North American sales were approximately $48MM in 2016. What’s the key to AmorePacific’s success?
The AmorePacific brand epitomizes K-Beauty innovation. The organization is interesting in its attempt to stay true to its Korean pre-war roots. The brand is built on the home-grown legacy of Yun Dok-Jeong, a mother of six who in the 1940s produced beauty products in her kitchen using local ingredients. This notion of bespoke botanicals underscores an “all-natural” image. Fast-forward to 2007, when AmorePacific’s R&D laboratories produced the ultimate combination, uniting skincare, sunscreen, and foundation into a single product that could be sold in the form of a compact dubbed the Cushion, a product that has since been duplicated by numerous cosmetics companies. By integrating its cultural roots with state-of-the-art processes, AmorePacific has effectively broken through and established a significant presence in the US market.
As a child growing up in Korea, Jane remembers raiding her mother’s makeup bag and playing dress-up with a treasured cache of Amore products. After her family arrived in the United States, it was hard to find Korean beauty products in mainstream stores, and so she naturally adopted the American brands that were more readily available. At the time, her mother’s Amore products began to seem outdated and old-fashioned simply because they had belonged to Mom. Several decades later, AmorePacific has transformed itself into a global brand, and reinvests 3% of its revenue to R&D where their 500 chemists and scientists from around the globe formulate and test new ideas. Their global success—with $18.8 billion in market capitalization and 28.4% in sales growth in 2015—is a model for any organization that wants to transform its brand and become a worldwide powerhouse. As companies like AmorePacific continue to grow beyond their borders, it is imperative that they are innovative with their management practices, just as they invest in their R&D.
The Linkage Between Leadership and Innovation
When a company attempts to sell its products beyond its borders, it requires “flexing” on the part of the organization. It needs to leverage its existing assets while delivering tangible benefits to the target audience with which it hopes to grow. The pace of growth also requires leaders who are willing to take risks in order to create new products. To leverage this diverse thinking from their employees, the organization’s leadership needs to provide the resources for new ideas to be generated. And, once the idea is developed, it must have the right advocacy to bring it to market.
It will be critical for the organization to consider two questions:
- How much will they invest in preparing their global leaders to demonstrate the cultural adaptability required to succeed in new markets that have distinct cultural norms from their Headquarters?
- How will they adapt their global business approach to work with customers based in other parts of the world?
It will require increased cultural awareness about what the employees and customers want in these new markets and increased self-awareness about what they need to do differently to remain relevant. Creating an environment that rewards innovative thinking will require intentional effort to foster the right organizational culture. We look forward to watching the next chapter unfold.
Donna Fullerton is the founder of DMF Communications, which has conducted consumer research across diverse industries with a specialty in beauty for more than 25 years. A global leadership strategist and executive coach, Jane Hyun, is the founder and president of Hyun & Associates and co-author of Flex: The New Playbook for Managing Across Differences. Chapter: Leveraging Diverse Thinking from Your Teams to Drive Innovation