LG Electronics Inc. is poised for a dramatic shift in its business model, moving from a hardware-based company to a customer-centric, platform-based service provider.
The move marks a shift from one-time sales to continuous revenue generation through content, subscriptions, and services.
Why It Matters: This strategic pivot is expected to significantly impact LG's business structure, focusing more on customer retention and recurring revenue.
It's a move indicative of broader trends in the technology industry as companies seek to harness the potential of digital ecosystems and more effectively monetize their user base.
The Key Points
- LG plans to leverage its proprietary webOS operating system, which powers more than 200 million smart TVs worldwide, to lead the transformation of its TV business.
- Beyond TVs, LG's home appliances are shifting to service-based portfolios, with plans to transform LG's ThinQ UP appliances into a "home as a service" platform.
- LG is expanding its focus on the burgeoning electric vehicle (EV) market, aiming to double its sales by 2030.
- The company has been phasing out its mobile phone and solar panel businesses over the past two years, reallocating resources to future high-growth areas such as digital healthcare.
The Big Picture: LG's strategic pivot comes as the company seeks to keep pace with rapidly evolving market dynamics.
As part of its transformation, LG aims to become more customer-centric by leveraging data analytics systems to understand customer needs better and improve its direct-to-consumer sales.
The company's strong 1H2023 results suggest that this approach may already bear fruit.
However, the success of this pivot will be a crucial determinant of LG's competitive positioning in the future technology landscape.
In addition, LG's commitment to environmental, social, and governance (ESG) goals, including carbon neutrality and sustainable supply chains, underscores the company's goal of aligning its business strategy with broader societal expectations.
