On January 8, 2008, more than 1,000 VIPs, including the Korean Minister of Commerce, Industry and Energy, gathered at the Grand Ballroom of the Hyatt Hotel in Seoul, to celebrate the launch of the Genesis luxury sedan by Hyundai Motors, Korea’s leading automaker.

The celebration began with a promotion video detailing Hyundai’s history and the superiority of the new Genesis model. Then, accompanied by an impressive performance by three tenors and a full orchestra, five Genesis cars were unveiled before the guests. The rollout was the first time Hyundai showed the result of its four-year investment of time and resources (500 trillion won or around US$400 million spent on research and investment) to develop its first luxury sedan.

Hyundai Kia Automotive Chairman Chung Mong-Koo said that the Genesis “represents Hyundai Motor’s determination to enter the world luxury automobile industry currently dominated by Europeans,” and that “the launch of the Genesis will pave the way for our leap into the global market.”

As its name implies – “origin, creation or beginning” – the Genesis is a luxury sedan that is predicted to open a new market for Korean cars. In order for it to be competitive with luxury cars worldwide, Hyundai developed an all new rear-wheel drive platform. The Genesis is offered not only with the V6 engine, but also with a new and exclusively developed 4.6 Liter V8 engine that produces 380 horsepower. Its advanced capabilities and features such as Smart Cruise Control (which adjusts vehicle speed to maintain distance between vehicles), Adaptive Front Light System (which allows headlamps to swivel automatically for better visibility while cornering), and the Driver Information System (which combines audio, video and navigation functions) are comparable to those of any foreign luxury sedans. Almost every aspect of the Genesis, including its technology, design, and features, shows how it has taken the Korean car to the next level.

Official international acknowledgement of the Genesis’ superiority was received at the Detroit Motor Show in the US in January 2009, when the Genesis became the first Korean car, and also the first Asian large luxury sedan to win the ‘The North American Car of the Year’ award. Previously, among Asian cars, Japan’s Nissan Altima, the Toyota Prius, and the Honda Civic had won in 2002, 2004, and 2006 respectively, but they were in the compact or family car categories. It was thus all the more surprising that Hyundai won the award the first year that it introduced a luxury car into the US market.

At the award ceremony that day, Lee Hyun Soon, vice chairman of research & development, Oh Suk-Geun, executive director of Hyundai’s Design Research Institute, and John Krafcik, CEO of Hyundai America, sat together, hardly daring to hope. “Due to the economic crisis, the situation in Detroit was not looking very bright and we were doubtful that they would award a Korean company, and so we were completely surprised when the award was announced. It is impossible to put into words the elation that we felt at that moment,” said Oh.

However, most of the people who had put in countless hours and effort and passion into developing the Genesis were unable to attend the unveiling of the Genesis and the Detroit Motor Show award ceremony. Instead they finished the rest of their mission behind the scenes. To go from never having developed a rear-wheel drive vehicle to winning the ‘Car of the Year’ award illustrated how far Hyundai motor cars had come.

Hyundai’s biggest reason for developing the Genesis was the need for a luxury model that could compete with imported cars in the Korean domestic market. Beginning in 2002, imports of luxury sedans began to rise more than 20% annually and showed every sign of increasing even more. At the time, it was becoming more and more common for the wealthy to drive mid-size BMW, Mercedes-Benz and Lexus sedans in Gangnam (the area where the Korean upper-class population is concentrated). Hyundai did not want to forego this class of customer, and therefore needed to quickly produce a competitive model. Domestic automakers were in agreement that they needed to enter the luxury car market in the footsteps of Toyota’s Lexus.

There was also another reason. “At the time, the cost of development and production was increasing substantially for Hyundai compared to before 2000, due to the strong labor union and increasingly higher quality of the products. Thus, the profit per unit for the small to midsize vehicles was getting smaller, which increased the need to produce luxury cars with higher profit per car,” said an executive in charge of Hyundai’s international operations. The plans for a new luxury Hyundai sedan began forming in 2003.

In December 2003, a pilot team of eight key researchers was formed to outline the development of Hyundai’s new luxury sedan, including design, testing, and product planning. The research team’s first step was to travel to the Los Angeles, California branch of Hyundai Motor America (HMA) to seek advice from its employees about a luxury car that could enter the US market. In Los Angeles models of the Mercedes-Benz E-Class, the BMW 5-series, Audi A6, and the Lexus GS/ES and local engineers were brought in to examine the necessary criteria for luxury cars. The team also asked a focus group of American consumers their views about a Hyundai luxury sedan priced at US$30,000 or more and if they would consider purchasing it.

“At the time, the reaction was not very positive. The American consumers said they probably would not buy a Hyundai car costing any more than US$25,000. Many were skeptical about Hyundai making a luxury car,” said one member of the pilot team.

During their 10 days in the United States, the pilot team concluded that in order for a luxury car to sell in the US, the vehicle would need to have rear-wheel drive. Although they knew that the price barrier would be formidable, they returned to Korea with the determination to make a luxury car that could sell for more than US$30,000.

After the pilot team returned to Korea, a dispute arose within Hyundai Motors between the research institute in charge of product development and the marketing team in charge of product concept and specifications.

Lee Jae-Wan, Vice-president of product marketing at the time, said “After conducting consumer market research, it was clear that the Genesis should not be a replica of existing Hyundai cars. The survey targeted people who had bought the Grandeur, Hyundai’s luxury sedan for the domestic market, which was a symbol of success in Korean society at the time. However, what was surprising about the survey was that many respondents said that for their next car, they would buy a foreign car over a Hyundai.”

Although the Kia (a sister brand of Hyundai) Opirus and the Hyundai Equus were both Hyundai-produced cars in a class above the Grandeur at the time, they both failed to draw Grandeur customers. The reason was very simple. Consumers with high brand loyalty to Hyundai did not even consider buying the Kia Opirus, while the Equus was too large for successful people in their 30s and 40s to drive comfortably. In Korean society, it was especially common for anyone in their 30s to be mistaken for a chauffeur when driving the large Equus model.

Although Hyundai executives agreed that the new car should be in a class above existing models and competitive with foreign cars, they were divided over the car type. The research institute proposed a car with excellent driving comfort like the Lexus, while the marketing headquarters preferred a sportier car such as the BMW or Audi.

For six months, there were heated arguments as each side tried to convince the other about style, driving systems and so forth. It took seven meetings between April and June 2004 to reach a consensus about the development concept. Hyundai opted for rear-wheel drive and an agreement was reached in terms of the basic conceptual direction. In the vehicles to be sold in the domestic market, emphasis was to be placed on both front and back seats, while emphasis would be on the driver’s seat for exported vehicles. The development goals for each category were established, and the product marketing department outlined the crucial criteria for the Genesis.

“When the Genesis was first being developed, the first goal was premium sound, the second was the driving performance equivalent to that of a German luxury sedan including six-speed automatic transmission, and the third was implementing a Driver Information System. In the end, all three goals were successfully carried out and became strong selling points for the Genesis,” said former Vice President Lee Jae Wan.

From the moment of conception to the day the car was put on the market, the Genesis development team held hundreds of meetings encompassing marketing, product planning, sales, management, test drives comparing it to other cars and case-by-case meeting reports. Initially, only frontline workers tested the prototypes but later even top-level executives and Americans from Hyundai Motor America test-drove the Genesis. Also, starting in 2006, evaluations for the cars to be sold were conducted jointly with the research institute, and the sales strategies were shared. The opinions of industry experts were thus collected this way, and direction of development quickly took shape.

“From the beginning of 2006, many were concerned about personality of the car during the tuning process. We focused especially on road ability, and analyzed every detail of the BMW 5 series and Mercedes Benz E-Class. There were a lot of disputes, as the specifications of the research institute and those of the management differed from each other. Since this process was repeated every day, the employees in the research institute and the product marketing division were sick of hearing even the ‘B’ of ‘BH’ (the names of the development project) at the time” said Oh Ki-Yong of the product team.

The Genesis employed a development system entirely different from pre-existing systems. The executive decisions about the development of the Genesis were entrusted to vice chairman Kim Sang-Kwon, who oversaw Hyundai’s research and development division. Having graduated with a degree in mechanical engineering from Seoul National University, he entered Hyundai Motors in 1970, served as the head of the Advanced Propulsion Research Institute, the Namyang Research Institute, and the Integrated Research and Development division, and led Hyundai Motor’s new car development. Thus, he knew the car development system inside and out.

Kim concluded that it would be impossible to produce an upgraded luxury car using the existing system. Previously, the development process of a new model had been conducted in a set formula: design, evaluation, manufacturing technology, and finally production. However, Kim instinctively felt that this development project would be more difficult than any other in the past, and would be difficult to proceed with the existing system. Thus, he decided to merge planning, design, evaluation, cost control and manufacturing technology together, and assigned a project manager to exclusively oversee the entire process. At the time, Japanese automakers such as Toyota were using this system to enhance efficiency, but Korean automakers did not even dream of using such a system.

To oversee the project, vice chairman Kim chose Lee Un-Koo, who was the head of chassis/suspension development. At the time, there was a lot of opposition to the new system of merging different departments for the development of the new car. However, Kim proceeded to hand over the reins of the entire development of the Genesis to Lee, and ordered a special task force to be formed.

The Genesis development task force was created in October 2004, and was comprised of 80 of the best members from each department at Hyundai Motors Research Institute. Having received a nearly impossible mission from vice chairman Kim Sang-Kwon, Vice President Lee Un-Koo outlined detailed goals for each area and distributed responsibility among his team members. The task force then reported its first product plan to Chairman Chung Mong-koo, but it seemed to outline a goal impossible to accomplish with Hyundai’s capabilities at the time. However, with the tremendous efforts of the development team, the final product ended up surpassing their initial goals. For example, in the beginning the weight goal for the Genesis was 1750 kg, but the final car ended up weighing 1,700 kg.

“While developing the Genesis, we came to realize what crucial impact the difference of 1~2 kg of a car’s weight has on its driving comfort and strength. It would not be an exaggeration to say that the major foundation of Hyundai’s lightweight technology was established during the development of the Genesis, as Hyundai expanded the effort to implement lightweight technology on all Hyundai cars afterwards. It is easy to produce lightweight cars with lighter and expensive materials, but difficult to do so with the original materials. We gathered tremendous know-how in this area from the Genesis experience,” said a development insider.

Over 140 near-weekly interdepartmental joint meetings were held before the Genesis was unveiled to the world. The Genesis was a difficult project in all aspects, as it involved a rear-wheel drive platform, which had never been developed in-house before, and needed to be at a level equal to or higher than a Mercedes or a BMW, while at the same time reducing vehicle cost and time of development. As Hyundai Motors had never before attempted a project with such a difficult goal, establishing effective communication between departments through interdepartmental joint meetings was particularly important. Every day was a challenge to quickly identify and overcome obstacles in order to extract optimal results.

“In the past, if a design was approved, it was usually implemented straight away, but with the Genesis, we went back to the drawing board again and again. It normally takes four months to draw up a design and modify it, but as we did not have that time, we made three to four times as many modifications in a reduced amount of time. The first year was terribly difficult, but gradually we began to have confidence that we could produce a top-class car,” said the Genesis Project Manager Kim Kwang-Soo.

Through their interdepartmental joint meetings, the Genesis task force repeated “the process of building the forest and weeding out the trees growing the wrong way.” They worked weekends, and each team engaged in friendly competition with the others. Vice President Lee Un-Koo, who led the task force, knew how to keep his team from becoming too weighed down by their huge task. As a first-class engineer who was familiar with the overall development process of a car inside and out, he knew better than anyone that efficiency was the most important aspect in terms of manpower and time. He was known for his swift decisions, and although they were not always entirely correct, he proved to exercise good judgment, which saved his workers from any inefficiency in time management.

“It was incredibly difficult to build a top-class car from scratch. We employed a different philosophy to each design process of the Genesis. One could say that we placed more importance on the “philosophy of caring” over quality enhancement. From the details of each component to all the materials and allocation, we poured our care into making a car that could truly inspire the consumer,” said Lee Un-Koo.

“As it was our first time making a V8 engine, we kept performing tests over and over again until we were finally confident with its durability and quality. In order to meet the development deadline, the entire engine test team spent Christmas Eve continuing the tests while eating hamburgers,” said Hyundai Powertrain Center director Park Sung-Hyun.

Hyundai’s first V8 engine subsequently received excellent reviews from experts around the world. In 2009, it received the honor of becoming the first Korean car’s engine to be named one of Ward’s ‘10 Best Engines.’

“The proportions of the German company’s original design were not bad. We changed the front and back, and focused on a more elegant and chiseled look. We tried to incorporate the common principle of luxury car design, which was not to stand out too much or too little,” said Oh Suk-Geun, executive director of the Design Center.

As the 2007 release date grew near, Hyundai began to aggressively address overseas marketing. After calling in Angus Mackenzie, editor-in-chief of the American car magazine Motor Trend, Hyundai executives gave him the details for the Genesis’ launch, and Motor Trend featured the Genesis as its cover story. Fifty reporters from North America, the Middle East, and China were also invited for test drives, and hundreds of positive reviews and articles were subsequently published in foreign car magazines such as Car and Driver, Road and Track, Automobile, and Edmunds.com.

The success of the Genesis model has yet to show fully in terms of sales, as the launch date of summer 2008 coincided with the beginning of the US financial crisis – an unfortunate time for launching a luxury car in the American market. However, many experts agree that the Genesis is remarkable as Hyundai’s first rear-wheel drive luxury sedan. Certainly, sales have accelerated since the Genesis was named “The North American Car of the Year.” Although the Genesis still has a way to go in terms of achieving true success in the luxury car market, it has truly demonstrated the potential of taking the Korean car to the next level.

The fourth lesson to be learned is the ripple effect of knowledge within a company. For example, Hyundai Motors was able to obtain new knowledge about lightweight technologies through the development of the Genesis, and quickly incorporated it in the development of other models. From this example, the management of other companies can learn the effectiveness of the ripple effect and how new knowledge accumulated from one project should be shared throughout the company. In this era, where competition for information can be fierce, the effective sharing and management of information within a company can provide a competitive edge.