… innovations in the broadest sense of the world: technology, hardware and software engineering and design, marketing in general and branding in particular etc.
Praise from competing Taiwan attributing 30 years of Samsung’s well continued success in the “classic” high-tech component space of DRAMs to nothing else than the exceptional “talent management” practice, the cornerstone of the “New Management” introduced in 1993: The lesson to be learned from Samsung: Q&A with Inotera chairman Charles Kau [DIGITIMES, June 27, 2013], you can read the full interview in the end of this post
Q: The failure of Taiwan’s DRAM industry has somehow deepened local makers’ hostility against Samsung Electronics. What is your comment on Samsung?
My own insert here: “[1:10] The efforts and determination with ongoing enourmous investment have made Samsung the world’s leader in memory chip production since early days of 64K DRAM. [1:22]” from Samsung Electronics – Semiconductor Promotional Video 1997 [DatasheetArchiveLtd YouTube channel] below in order to show that the company’s high-tech lead was achieved before “New Management” (DRAM history info is from Samsung), although it was possible to continue only because of that, should be added here as well:
Dec. 1983: Samsung developed 64Kb DRAM in 1983 and went into production in the newly opened fab in Giheung plant. Along with the facility opening, production of 64Kb DRAM was a defining moment for Samsung in its growth as a major semiconductor manufacturer. Dec 1992: With rising sales for its world-class chips, Samsung stepped up to take the title as the world’s top DRAM manufacturer, a title it continues to hold today. Aug. 1994: Samsung introduced the industry’s first 256Mb DRAM well ahead of the competition.
Sidenote #1: With this 256Mb DRAM chip Samsung was able to surge ahead of the Japanese in the same way as those were able to beat Intel, actually forcing Intel out of the DRAM business. See: It’s a Strategic Inflection Point [‘USD 99 Allwinner’, Dec 1, 2012]. If Samsung “New Management” had not been introduced in 1993 Samsung quite probably had been overtaken by the eager Taiwaneese DRAM manufacturers, in the same way as it happenned to Intel, and then to Japanese manufacturers. If you read the full interview in the end of this post you will understand the kind of “failure” of the whole Taiwanese DRAM industry in its entirety.
A: Many think that Samsung’s achievements rely on support from Korea’s government. But that is only half right. Indeed, Samsung did receive a large amount of government aid prior to 2000, but it has continued to strive after 2000 optimizing its management efforts under company chairman Lee Kun-hee.
Lee has stressed on cultivating its own pool of talent, considering it the most valuable asset of the company. But in Taiwan, most businesses have been focusing on how to reduce production costs and have ignored the value of talent.
Instead of devising measures to fight or compete against Korea companies, Taiwan companies should figure out how Samsung can become as powerful as it is today. After all, we should respect Samsung for its long-term efforts to cultivate its talent, and the way it treats talent – the people who have created the value of Samsung.
Thy typical Western view is not as mature as the Taiwanese one, with statements like “Samsung is a fast follower” in Samsung’s Secret Sauce: A Bloomberg Exclusive [Bloomberg YouTube channel, March 28, 2013], although recognizing Lee Kun-hee’s role
Hudson Square Research Analyst Daniel Ernst and Bloomberg Businessweek’s Sam Grobart take a look at what makes Samsung so successful. They speak on Bloomberg Television’s “Market Makers.”
In fact there were 20 years (see later) of relentless talent management and design innovation, two core elements of Samsung’s global success: watch the Samsung PREMIERE 2013 GALAXY & ATIV Highlights June 20 event video as the latest “demonstration” of the “results” [SamsungTomorrow YouTube channel, June 24, 2013]
This is the highlight video of Samsung PREMIERE 2013 London.
GALAXY NX, The First Interchangeable-Lens Camera with 3G/4G LTE & Wi-Fi Connectivity:
- With the 3G/4G LTE technology, the GALAXY NX allows photographers to stay constantly connected with their world and to express their experiences immediately.
- Superior image quality is available whenever and wherever with the GALAXY NX and array of interchangeable lenses. The 20.3MP APS-C Sensor produces images which are bright and detailed, even in low light conditions, while the DRIMe IV Image Signal Processor delivers the speed and accuracy which today’s photographers demand.
- With Android 4.2 Jelly Bean, the functionality of a smartphone is utilized to improve the photographic experience.
Versatile and easy to use, the GALAXY NX combines cutting edge optical performance with connectivity capabilities and galaxy of applications based on Android eco-system, all in one stylish package. The result is a new type of connected device which allows users to turn their experiences into a story that can be instantly shared with anyone they choose, from wherever they might be, in amazing color and outstanding detail.
ATIV Q, A truly convertible Intel Haswell tablet device with the ability to change modes and the power to enjoy both Windows and Android
- Sports an innovative hinge design that allows the user to transform the tablet into 4 functional modes. Float and adjust the display to a comfortable viewing angle Or flip the display to place in the stand mode to watch movies with ease.
- Allows users to experience both Windows 8 and Android 4.2.2 on the same 13.3-inch QHD＋(3200 x 1800) device . Users will not only get access to Android apps via Google Play but also be able to transfer files, to share folders and files from Windows 8 to Android, truly marrying the mobile and PC experiences.
ATIV Tab 3, The world’s thinnest Windows 8 tablet with the ability to run all Windows app and programs:
- The frame is incredibly thin and light at only 8.2 millimeters thick (as popular smartphones) and 550g in weight. It features up to 10 hours of battery life.
- Shares the premium design of the GALAXY series. Has improved S-Pen functionality, including high level pen display and S-Pen compatibility with MS Office.
GALAXY S4 zoom, A revolutionary new device that can fulfill the role of both an industry leading smartphone and a high-end compact camera:
- Combining 10x Optical Zoom, 16 Mega Pixel CMOS Sensor, OIS and Xenon Flash with the very latest Samsung GALAXY S4 technology.
GALAXY S4 mini, A powerful yet compact version of Samsung’s bestselling smartphone, GALAXY S4:
- With a 4.3” qHD Super AMOLED display, 107g light weight and compact design, the GALAXY S4 mini is easy to carry and operate with one hand.
- Also boasts powerful performance, equipped with a 1.7GHz dual core processor that allows users to quickly and easily perform data intensive tasks.
GALAXY S4 Active, The perfect companion designed to enhance life experiences of the active user who wants to stay connected while exploring environments from the most rugged mountain trails to the roughest rivers.
- Has qualified protection from dust and water (IP67), so you never have to leave the device at home during a long day at the beach or dusty hike. It is also equipped with a water-resistant earphone jack.
SideSync, A technology which enables users to switch from working on their PC to an Android-based Samsung smartphone with simplicity and ease:
- Simply use your PC keyboard to respond to a text on a mobile phone; view larger maps, photos and multimedia displayed on both devices to make editing files even easier.
- Or use your PC to back up and charge your mobile device so you can get back to the task at hand with less interruptions to work and everyday life.
ATIV One 5 Style, The first all-in-one launched since the expansion of the ATIV brand, representing ultimate convenience in at-home computing.
- Features Samsung SideSync technology, which enables users to effortlessly share content between the PC (here the Windows 8 all-in-one) and their mobile phone.
- Debutes a new feature called HomeSync Lite, which transforms the PCs hard drive into a personal cloud server. HomeSync Lite allows users to back-up their personal files, photos and videos from portable devices to PCs and access it remotely via a mobile device anytime, anywhere. Multiple family members can privately manage individual accounts via the One 5 Style, truly making it a hub for the entire family.
Sidenote #2: Samsung Unifies Best-in-Class Windows PCs Under Newly Expanded ATIV Brand [Samsung Mobile Press release, April 25, 2013] i.e. “… expanding the ATIV brand to include its leading Windows® -based PCs. ATIV, previously the brand for the company’s Smart PC Windows-based hybrid devices, now represents the convergence of PC and mobile technologies and unites all of Samsung’s Windows PCs and devices under one cohesive brand. In tune with the needs and wants of today’s evolving consumers, the Samsung ATIV line offers a variety of market leading Windows PC devices designed to extend the mobile experience from your handset to laptop and vice versa, making work more seamless and life more convenient.” ATIV actually is coming from “CreATIV –> OriginATIV –> InnovATIV” (with the last letter “e” omitted as it is not pronounced either).
Then watch these technology videos in order to understand Samsung stance in areas which will be most critical for its ATIV effort (as its GALAXY effort is already a huge success):
- Samsung ATIV Q Hands On – Windows 8/Android Convertible Ultrabook [minipcpro YouTube channel, June 20, 2013]
Samsung ATIV Q Hands On – http://www.mobilegeeks.com – We are going hands on with the new Samsung ATIV Q Hybrid-Ultrabook with a 13.3-inch qHD+ (3200×1800) display running Windows 8 and Android
- [Samsung ATIV] SideSync Introduction [SamsungNotebook YouTube channel, May 9, 2013]
See how SideSync, Samsung’s latest innovation, connects your mobile and PC!
- Introducing Samsung HomeSync Lite [SamsungNotebook YouTube channel, July 1, 2013]
Meet Samsung HomeSync Lite, the new PC solution that allows you to back-up content using your PC storage and access it away from home with other devices. You can have your own cloud on your PC, connecting to many of your Samsung digital devices, accessing various formats of the files, on up to 5 different accounts! Enjoy your personal cloud on your PC.
- [MWC2013] Samsung HomeSync Presentation [SamsungTomorrow YouTube channel, Feb 26, 2013]
At MWC 2013 in Spain Samsung has introduced its innovative personal home cloud platform, Samsung HomeSync, which enables users to save, share and control contents across multiple smart devices in the living room.
Next watch the details of the June 20 representative event in order to discover every aspect of Samsung innovations there: Samsung PREMIERE 2013 London (Full Version)
[SamsungTomorrow YouTube channel, recorded June 20, published June 24, 2013]
STARTING AT [31:30] OF THE RECORDED VIDEO !!!
And here is a recent background article about those 20 years mentioned earlier:
Talent, design lead Samsung’s success [The Korea Times, June 20, 2013]
Kevin Lane Keller from Tuck School of Business, Dartmouth College, the United States, delivers a keynote speech during a forum organized to highlight the success of Samsung Group over the past two decades since chairman Lee Kun-hee declared his “New Management” philosophy in 1993, at The K-Hotel in southern Seoul, Thursday. / Courtesy of Samsung Group
Experts advise technology giant to focus more on marketing
Talent management and design innovation are two core elements that have spurred Samsung’s successful transformation into a global player over the past two decades, according to global business experts, Thursday.
They pointed out that Samsung’s future depends upon how it will improve marketing strategies and combine a new breed of software and hardware.
Such analysis came at an International Forum billed as “Twenty years of Samsung’s New Management” organized by The Korean Academic Society of Business Administration at The K-Hotel, southern Seoul.
Under the slogan “New Management,” Samsung Electronics Chairman Lee Kun-hee declared his goal in Frankfurt, Germany, in 1993, of shifting toward quality-focused growth not quantity-highlighted expansion. Lee then ordered employees to change everything but their wives and children.
“Samsung was a true transformer over the last 20 years in a very positive way. Its business transformation is a model for all modern multinationals and the transformation well illustrates the competitive advantage that form a strong link between business strategy and people strategy,” said Patrick M. Wright, bicentennial chair of the Darla Moore School of Business at the University of South Carolina, during the forum.
He cited talent assessment and review programs as one crucial part behind Samsung’s success.
“Samsung’s transformation has had people at the center. The human resources function at Samsung has played a critical role in enabling this transformation. The human resources system has developed to enable the transformation of the New Management that has constantly evolved to meet new challenges and achieve new objectives,” Wright said.
The scholar said that New Management was supported by strategy execution by top Samsung management.
“New human capital pools require new and different ways of attracting, developing, motivating and retaining those people. This requires human resources functions to design, develop and deliver human resources system and processes.”
“Samsung lets the core talent set the business goal rather than simply implementing the given goal. This creates more buy-ins, and makes the objectives more directly relevant to the situation,” the global human resources expert analyzed.
Amid the industry’s massive shift toward software, Samsung’s human resources head Won Ki-chan told The Korea Times that it has 36,000 software resources, globally, and added the firm is going to hire more, although the Samsung executive declined to elaborate further.
New Management also awakened the corporate for the importance of fine-tuned marketing strategies, said a marketing expert in the United States.
Kevin Lane Keller from Tuck School of Business, Dartmouth College, the United States, has given six marketing imperatives for better understanding of Samsung’s success story.
“Samsung puts a lot to design. Actually, it has a strong design philosophy. Samsung has developed creative ad campaigns, strong in-store programs and high-profile sponsorships,” said Keller, who is an international leader in the study of brands, branding and strategic brand management.
Emphasizing its consistency to launch new products to the time-to-markets, Keller said Samsung Electronics has been consistent in maximizing long-term growth by entering new markets. “This is the importance of innovation and relevance,” he said.
“Samsung has taken a big picture view of marketing effects and knew what’s working. It’s been achieving greater accountability for marketing investments in brands. Samsung was launching very clever marketing campaigns. Advertizing was another factor that lifted Samsung over the two decades.”
In 1993, Samsung was just a small supplier that sold cheap home appliances and handsets. Now, it is the world’s biggest technology firm by revenue, and a leading brand consultancy, InterBrand, ranked it as the ninth global brand in 2012.
Challenges
Keller advised Samsung to improve marketing, further, in a highly-competitive consumer electronics market.
“Be a leader, tap even more into emotions and manage brand architecture carefully,” he said.
“Yes, this is a challenge. But Samsung overcame Sony and Apple and now has achieved firm leadership. Leadership isn’t something that shouldn’t be earned in a single day. But Samsung must keep being innovative and relevant,” he stressed.
According to the professor, Samsung must be confident in communications and bold in action, while the company needs to cultivate yearning to purchase and pride of ownership.
“My final advice is that Samsung needs to recognize the pros and cons of flagship products. Keep it simple and clear.”
Hiroshi Katayama, professor at Waseda University in Japan, has pointed out that the future of Samsung’s next decades will be dependent upon how it advances its supply chain management system and how the company will develop and implement effective transfer methods in between sites, business functions, business divisions and industries.
Kenn Allen, president at the Civil Society Consulting Group, has urged Samsung to show more willingness toward corporate citizenship-related programs, internationally, so long as to be recognized as a true global leader.
“Primary investment for corporate citizenship programs is in Korea, thus limiting global impact internally and externally. Corporate volunteering needs to be valued more,” Allen said.
Then another article on the same subject: Talent, High-Speed Decision-Making Lead Samsung’s Success [Korea IT Times, June 24, 2013]
SEOUL, KOREA – Talent-oriented management and high-speed decision-making have led Samsung Group’s remarkable success, a global business expert said.
At an international forum titled the “Twenty years of Samsung’s New Management” held at the K-Hotel in Yangjae-dong, Seoul on June 20, Hiroshi Katayama, a professor of Waseda University in Japan, said, “The characteristics of Samsung’s quality management are speed management, timing management, pursuing perfection, talent-oriented management, seeking synergy effects and exact insight of business nature.
“Samsung succeeded in removing unnecessary business process and being equipped with globally standardized development system, producing a rapid decision-making system.”
He also pointed out at the forum organized by the Korean Academic Society of Business Administration that the future of Samsung’s next decades will be dependent upon how it advances its supply chain management system and how the company will develop and implement effective transfer methods in between sites, business functions, business divisions and industries.
Under the slogan “New Management,” Samsung Electronics Chairman Lee Kun-hee declared his goal in Frankfurt, Germany, in 1993, of shifting toward quality-focused growth not quantity-highlighted expansion. Lee then ordered employees to change everything but their wives and children.
Meanwhile, Prof. Kevin Lane Keller of the Tuck School of Business, Dartmouth College, the United States, has given six marketing imperatives for better understanding of Samsung’s success story.
Keller, who is an international leader in the study of brands, branding and strategic brand management, said, “Samsung puts an emphasis on design. Actually, it has a strong design philosophy. Samsung has developed creative advertisement campaigns, strong in-store programs and high-profile sponsorships.”
Stressing its consistency to launch new products to the time-to-markets, Keller said Samsung Electronics has been consistent in maximizing long-term growth by entering new markets.
He said, “Samsung has taken a big picture view of marketing effects and knew what’s working. It has been achieving greater accountability for marketing investments in brands. Samsung was launching very clever marketing campaigns. Advertizing was another factor that lifted Samsung over the two decades.”
Keller advised Samsung to improve marketing further in a highly-competitive consumer electronics market, noting “Become a leader, tap even more into emotions and manage brand architecture carefully.”
The professor also said, “Samsung must be confident in communications and bold in action, while the company needs to cultivate yearning to purchase and pride of ownership. Samsung needs to recognize the pros and cons of flagship products. Keep it simple and clear.”
Prof. Song Jae-yong of Seoul National University said, “Samsung is giant, but it is a rapid organization. It is well diversified by field and boasts of top-class global competitiveness in each sector. Its most powerful strongpoint is its managerial system that has optimized merits of the Japanese and American-style managerial systems.”
Commenting that Samsung is equipped with the fastest response system in the world by securing global ERP and SCM management systems through massive investment, Song said, “Samsung is possible to develop new products at a faster pace than its global competitors as it has secured both finished products such as smartphone and TV and relevant parts, including semiconductor and display.”
At the forum, Patrick M. Wright, bicentennial chair of the Darla Moore School of Business at the University of South Carolina, also said, “Samsung was a true transformer over the last 20 years in a very positive way. Its business transformation is a model for all modern multinationals and the transformation well illustrates the competitive advantage that form a strong link between business strategy and people strategy.”
Noting that talent assessment and review programs are important reasons behind Samsung’s success, Wright said, “Samsung’s transformation has had people at the center. The human resources function at Samsung has played a critical role in enabling this transformation. The human resources system has developed to enable the transformation of the New Management that has constantly evolved to meet new challenges and achieve new objectives.”
Saying that New Management was supported by strategy execution by top Samsung management, the scholar said, “New human capital pools require new and different ways of attracting, developing, motivating and retaining those people. This requires human resources functions to design, develop and deliver human resources system and processes.”
In the meantime, Prof. Kim Seong-soo of Seoul National University, said, “Samsung’s personnel management system has become a foundation to lead new management philosophy and basic strategies. To effectively cope with rapidly changing managerial environment, Samsung has secured talents to lead the future management preemptively and changed market strategies frequently by using the accumulated human resources.”
Lee Kun-hee, Jae-yong make business trip to Japan, China
Samsung Electronics Chairman Lee Kun-hee and his son Jae-yong, vice chairman of the electronics maker, flew to Japan and China, respectively, on June 20.
The junior Lee left the Gimpo International Airport around 9:00 a.m. for Beijing, along with Kim Suk, CEO of Samsung Securities, and Lee Sang-hoon, head of the managerial support office of Samsung Electronics.
His business trip is designed to check Samsung’s local corporations and business offshoots in China ahead of President Park Geun-hye’s official visit to China from June 27-30.
President Park Geun-hye will meet Chinese President Xi Jinping on the first day of her visit to China. The summit is expected to play a crucial role in inter-Korean relations, which are showing signs of improving as the two are set to hold a minister-level meeting for the first time in six years. Beijing has a big say in Pyongyang as its main benefactor.
The vice chairman is also scheduled to visit the U.S. before returning home.
Meanwhile, Chairman Lee left the Gimpo International Airport around 10:00 a.m. for Japan. His overseas trip this time seems to seek a new business strategy beyond the New Management.
Finally what 2 years ago The Paradox of Samsung’s Rise article by Khanna.T, Song. J and Lee.K in the Harvard Business Review [July-August, 2011, pp. 142-147] found after seven years of tracing Samsung’s progress:
Samsung’s unlikely success in mixing Western best practices with an essentially Japanese business system holds powerful lessons for today’s emerging giants.
As today’s emerging giants face the challenge of moving beyond their home markets, they have much to learn from the pathbreaking experience of South Korea’s Samsung Group, arguably the most successful globalizer of the previous generation.
Twenty years ago, few people would have predicted that Samsung could transform itself from a low-cost original equipment manufacturer to a world leader in R&D, marketing, and design, with a brand more valuable than Pepsi, Nike, or American Express. Fewer still would have predicted the success of the oath it has taken. For two decades now, Samsung has been grafting Western business practices onto its essentially Japanese system, combining its traditional low-cost manufacturing prowess with an ability to bring high-quality, high-margin brands products swiftly to market.
The two sets of business practices could not have seemed more incompatible. Into an organization focused on continuous process improvement, Samsung introduced a focus on innovation. Into a homogeneous workforce, Samsung introduced outsiders who could not speak the language and were unfamiliar with the company’s culture. Into a Confucian tradition of reverence for elders, Samsung introduced merit pay and promotion, putting some young people in positions of authority over their elders. It has been a path marked by both disorienting disequilibrium and intense exhilaration.
Like Samsung, today’s emerging giants-Haier in China, Infosys in India, and Koc in turkey, for instance-face a paradox: Their continued success requires turning away from what made them successful. The tightly integrated business systems that have worked in their home markets are unlikely to secure their future in global markets. To move to the next level, they, too, must reinvent themselves in ways that may seen contradictory. And when they reach new plateaus, they will need to do so again.
For seven years, we have traced Samsung’s progress as it has steadily navigated their paradox to transcend initial success in its home markets and move onto the world stage. It is a story we believe holds many important lessons for the current generation of emerging giants seeking to do the same.
The rise of a World Leader
My own insert here: History of Samsung [cnetuk YouTube channel, Feb 20, 2012]
Founded in 1938, the Samsung Group is the largest corporate entity in South Korea, with $227.3 billion in revenue in 2010 and 315 thousand employees worldwide. Best known for its flagship, Samsung Electronics (SEC)-producer of semiconductors, cell phones, TVs, and LCD panels-the group’s highly diversified businesses span a wide range of industries, including financial services, machinery, shipbuilding, and chemicals.
By 1987, when Lee Kun-Hee succeeded his father as only the second chairman in the company’s history, Samsung was the leader in Korea in most of its markets. But its overseas position as a low-cost producer was becoming untenable in the face of intensifying competition from Japanese electronics makers, which were setting up manufacturing plants in Southeast Asia, and rising domestic wages in South Korea’s newly liberalizing economy.
In the early 1990s, Lee spotted an opportunity in the reluctance of Japanese companies-the analog markets leaders-to adopt digital technology, with consumers were flocking to in cameras, audio equipment, and other electronic products. This opened the door for Samsung to surpass its rivals if it developed the agility, innovativeness, and creativity to succeed in the new digital market.
For those qualities Lee looked to the West. In 1993, he launched the New Management initiative to import Western best practices related to strategy formulation, talent management, and compensation into Samsung’s existing business model. The aim was to markedly improve marketing, R&D, and design while retaining core strengths in manufacturing, continuous improvement, and plant operations. Execution of this mix-and-match strategy took three broad forms:
A formal process to identify, adapt, and implement the most appropriate Western best practices.
Steady efforts to make Samsung’s culture more open to change by bringing outsiders in and sending insiders abroad.
Intervention by Lee to protect longterm investments from short-term financial pressures.
In this way, slowly and steadily but not always smoothly, Samsung has built its hybrid management system as a series of experiments, first in SEC and eventually throughout the Samsung Group.
The results have been impressive: By 2004, SEC was delivering startling profitability numbers-$10.3 billion (almost 19%) on $55.2 billion in revenue-making it the world’s second most profitable manufacturer, behind Toyota. Since then, even in the wake of the recent global economic crisis, SEC’s profits have been higher than those of the five largest Japanese electronics firms (Song, Panasonic, Hitachi, and Sharp) combined. The company achieved record profits of about $14.4 billion on $138 billion in revenue in 2010, compared with $11.7 billion for Intel, $0.86 billion for Panasonic, and a net loss of $3.2 billion for Sony. From obscurity in the 1990s, the Samsung brand rose to number 19 on the 2010 Interbrand global making, with a value of $19.4 billion. But it wasn’t easy.
A Tightly Fitting System
Samsung’s Japanese roots are strong: when the company was founded, South Korea was a Japanese colony. Samsung’s first chairman, Lee’s father, was educated in Japan, and the company built its corporate muscle in industries-consumer electronics, memory chips, and LCD panels-that Japan once dominated. Accordingly, Samsung rose to prominence in its home market under the Japanese model of unrelated diversification and vertical integration in pursuit of synergies. Diversification suited South Korea’s weak external capital markets because it allowed the company to rely on internally generated cash from one operation to fund the others.
The Japanese hierarchical labor model also suited the Korean context. The institutions underpinning South Korea’s managerial labor markets were underdeveloped, making mobility across corporations rare. The absence of a well-developed stock market and of sufficient competition for talent, combined with a strong Confucian tradition of respect for elders, led to a seniority-based competitions and promotion system. To compete outsider its home markets, Lee knew, Samsung would need to move beyond its well-integrated system to engage with non-Koreans in non-Korean contexts. That means introducing practices inconsistent with the status quo.
Lee did not underestimate how unsettling that would be. Accordingly, he took great care to change only what needed to be changed and to ensure that Samsung adopted the most appropriate practices in a way people could understand and embrace. The company established new organizations to seek out and adapt best practices from abroad. Lee advocated directly for the practices he deemed most critical and solicited employees’ input in the development of each. Results were carefully measured. If resistance was too strong, the company delayed adoption, modified the practices, or-as was the case with stock options-abandoned it.
In this way, Samsung injected some highly incompatible business practices into its business model. Beginning in 1997, for instance, the company slowly introduced into its seniority-based pay structure a merit-based compensation system modeled after the best practices of General Electric, Hewlett-Packard, and Texas Instruments. The amount an excellent performer could be given relative to a poor performer in the same job increased each year, up to a differential of 50%. Similarly, Samsung took steps to allow high performers to advance more rapidly through its seniority-based promotion system by steadily shortening the minimum number of years they were required to stay at a particular level.
Other processes could be adapted and adopted more globally. GE’s six Sigma, for example, fit well with Samsung’s continuous improvement and specialists were involved in the system, whereas at Samsung the entire rank and file participated. Samsung similarly adopted a socialized profit-sharing program, modeled after HP’s, in which all employees, not just top and general managers, are eligible for a bonus based on a percentage of the salary.
This careful approach to importing Western business practices reduced disruption but also slowed progress. So, in a company where the chairman’s authority coexisted with a need for consensus in the managerial ranks, Lee sought to increase receptively to ideas from elsewhere. This he did from outside and by sending insiders abroad.
Bring outsiders in
It is perhaps an indication of the insularity of Samsung’s culture that for decades, the only outsiders the company recruited were ethnic Koreans, as far back as 1983, when it entered the memory chip business, the company had hired ethnic Korean engineers and executives away from Intel, IBM, and Bell Labs. These people had played crucial roles in Samsung’s ascent in less than a decade to global leadership in the chip industry. But when Lee tried to extend the approach to Samsung’s senior executive ranks-what the company refers to as S-level talent-the newcomers met with a formidable wall of resistance.
And little wonder. Because promotions at Samsung had always come from within, the newcomers were perceived to be taking advancement away from incumbents. Not surprisingly, incumbent managers closed ranks, setting the newcomers up to fail by withholding important information, exaggerating their mistakes, and excluding them socially.
To be fair, this reaction was in part justified: At first, some of Samsung’s recruits had a poor grasp of what was expected of them, and sometimes they were actually more junior than the company had intended. What’s more, success is contextual- to some degree S-level hires had performed well in their previous jobs because of their familiarity with the system. The tightly knit nature of Samsung’s culture was a separate issue that needed special attention.
Take the case of Eric Kim, who in 1999 was recruited to be SEC’s chief marketing office. Nowadays, most senior SEC executives recognize Kim as the person who initiated the “Samsung DigitAll: Everyone’s Invited” marketing campaign and established the strategy that turned Samsung into a truly global brand. SEC CEO Yun Jong-Yong threw his weight behind Kim from the start, declaring to his other senior executives, “Some of you may want to put him on top of a tree and then shake him down. If anybody tires that, they will be severely reprimanded.”
Nevertheless, through it all, Kim had a hard time getting support from other senior people. “Though Yun fully supported m and asked other senior executives to help me, they were reluctant to do so in my first two years at SEC,” he told us in 2004 interview. “Now they help me on my task-related issues, but I still feel that I am emotionally isolated from them.” In conversations we had in 2004 with senior executives at SEC, several were still downplaying Kin’s contribution to the dramatic improvement of SEC’s brand. Three months after those conversations, when Kim’s contact ended, he left SEC to become the chief marketing officer at Intel. Improving the quality of the S-level recruits-and their reception inside the company-was no small task, and Lee thought expansively about how to address it. Beginning in the early 1990s, Samsung sent international recruiting officers (IROS) abroad to familiarize themselves with foreign talent.
And in 2002, Lee made 30% of the annual performance appraisal of Samsung affiliates’ CEO dependent on hiring and retaining S-level talent. Thus motivated, Yun, for instance, took steps to ease newcomers into the organization by having them serve in an advisory capacity in their first months to get to know something of their colleagues, the culture, and the business before taking up their posts. He also instituted a formal mentoring program in which he met at least quarterly with each S-level recruit to give and receive feedback.
My own insert here: Samsung Global Strategy Group [hamho92 YouTube channel, Sept 12, 2012]
This is to showcase who we are at the Samsung Global Strategy Group, based in Seoul Korea. For more information on who we are, what we do, and what our mission is in the Samsung Group, please visithttp://sgsg.samsung.com
Samsung’s efforts to recruit and retain non-Korean MBAs and PHDs were hindered by cultural, social, and political tensions, all of which were magnified by the language barrier. To help assimilate these recruits, Lee in 1997 ordered group headquarters to set up a unique internal management consulting unit, the Global Strategy Group (GSG), which reports directly to the CEO. Its members-non-Korean graduates of top Western business and economic programs who have worked for such leading global companies as Mckinsey, Goldman Sachs, and Intel-spend fully two years in GSG and are required to learn rudimentary Korean before taking up their posts. Even so, many of them have eventually been assigned to overseas subsidiaries, usually in their home countries.
Culture fit is a hard nut to crack. Of the 208 non-Korean hired into GSG since it was created, 135 were still working for Samsung as of December 2010. The most successful are those who have taken the greatest pains to fit into the Korean culture.
Still, the rate of acceptance has been steadily rising. Before GSG, no non-Korean MBAs worked at SEC for more than three years, but fully 32% of the non-Korean MBAs recruited to SEC the year GSG was established were still with the company three years later. Over the next 10 years, that figure rose to 67%. The effect of these employees on the organizations has been something like that of a steady trickle of water on stone. As more people from GSG are assigned to SEC, their Korean colleagues have had to change their work styles and mind-sets to accommodate Westernized practices, slowly and steadily making the environment more friendly to ideas from abroad. Today, SEC goes out of its way to ask GSG for more newly hired employees.
Sending insiders out
In the late 19th century, the Japanese imperial government sent its elite officers overseas to study successful Western practices and institutions. They brought back, among other innovations, the British postal system, the French judicial system, the American system of primary education, and the German military organization, adding innovative features of their own acts similarly, sending high potentials to Japan for advanced degrees in engineering; to the United States for further education in marketing and management; and to Singapore, Hong Kong, and New York for training in high fiancé. On returning home, these employees fill key positions and, in implementing what they have learned, become important change agents.
Squarely in this position is Samsung’s regional specialist program, arguably the company’s most important globalization effort. Each year for more than two decades, Samsung has sent some 200 talented young employees through an intensive 12-week language-training course followed by one full year abroad. For the first six months, their only job is to become fluent in the language and culture and to build networks by making friends and exploring the country. In the second six months, they carry out one independent project of their choice. Initially sent mainly to developed countries, in the past 10 years they have gone more often to emerging regions, especially China and, most recently, Africa.
Like their colleagues who have trained abroad, the specialists come back to major posts at headquarters or in the business units at home and abroad. In those roles they disseminate information about how successful foreign companies operate, and they advocate for and experiment with best practices.
It would be hard to overestimate the value of the connections regional specialists forge. One of the first specialists, for example, went to Thailand in 1990, where he became fluent in the language and established relationships with prominent local figures. He stayed on to earn an MBA at the Sasin Graduate Institut of Business Administration at Chulalongkorn University, the same school that many of Thailand’s prime minister and high-ranking government officials and corporate CEOs have attended. From his immersion he gained a comprehensive understanding of the country’s regulation and tax systems. He close ties enable him to introduce SES’s TV, audio, and video products to Thailand’s elite and to recruit a vice president of Hitachi to Samsung at a time when Hitachi was a market leader and Samsung was virtually unknown.
He is hardly alone. Another regional specialist, who went to Indonesia in 1991, used his language fluency and personal networks to establish a sales subsidiary whose sales doubled annually for three consecutive years. A third, sent to Bangalore in 2009, devoted his project to aiding a rural community there and then applied the intimate knowledge he had gained to the development of home electronics that Samsung could sell in the region.
Regional studies are markedly out of fashion these days in business schools, as discipline-based research in economics, political science, sociology, and the like has taken precedence. This has had the inadvertent effect of diminishing geographic intelligence-a global institution void, we argue, that Samsung is a leader in filling. In fact, Samsung’s experience suggests that it may be time for Western companies and business schools to place more emphasis on developing strong regional connections and expertise.
What only the Chairman can do
Samsung’s globalization efforts have taken substantial investments of time, money, and executive will. Some S-level hires took the IROs 10 years to recruit. SEC spends about $ 100 thousand over and above annual compensation to train and support the opportunity costs and turnover risks the company incurs by taking elite employees away from key positions for 15 months. These investments-which require fundamental trade-offs between the short and the long term and between cultural fit and domain expertise-have been made in good times and in bad, often over the objections of Samsung’s top managers. That would not have been possible without Lee’s unambiguous and consistent involvement.
Five years after the launch of the S-level recruitment program, support for it from Samsung Group affiliates’ CEO was distinctly lukewarm and would probably have remained so had Lee no tied so much of their compensation to its success. The Global Strategy Group, known within the company as the “chairman’s project”, would probably not have survived the Asian financial crisis-so deep it helped usher the Daewoo Group into bankruptcy-had Lee not funded it even in the face of Samsung’s own record-breaking losses.
David Steel, executive vice president of SEC and the highest-ranking person to come out of the GSG noted that the commitment of top management and the support of the managerial ranks are both necessary for the success of a program like this. Much of the chairman’s influence is transmitted symbolically. But the substance and symbolism of that support that are no small thing.
My own insert: How Samsung Design Evolved [SamsungTomorrow YouTube channel, Aug 29, 2012]
Mr Donghoon Chang, Senior Vice President of Design Group at Samsung, talks about philosophy, progress and future of Samsung design.
Lee’s long-term focused has been essential to his most recent initiative: the development of Samsung’s design expertise, a capacity the chairman believes will be critical for the company’s continued growth. Just as many never imagined that Samsung could become a dominant global player, many question its design aspirations but Lee set the agenda back in 1996. That year Samsung established and funded the Samsung Art& Design institute in collaboration with Parson the New School for Design in New York.
My own insert here: Professional Assessment on Samsung’s Design [SamsungTomorrow YouTube channel, Aug 29, 2012]
Professionals in the industrial design have assessments on Samsung’s design.
A substantial number of graduates of the intensive three-year training course have joined Samsung as designers. Following that lead, SEC has established design research institutes in the United States, the United Kingdom, Italy, Japan, China and India. Each year SEC sends 15 designers abroad to prominent design schools for one to three years to learn cu