The Samsung Way, Transformational Management Strategies from the World Leader in Innovation

305 Pages·2016·4.22 MB·English

by  Jaeyong Song and Kyungmook Lee

The
SamSung
Way
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The
SamSung
Way
TransformaTional managemenT
sTraTegies from The World
leader in innovaTion and design
JAEYONG SONG AND KYUNGMOOK LEE
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C o n t e n t s
Preface ..................................................................................................................................... vii
Acknowledgments ................................................................................................................xi
PARt one T wenT y years To The Top........................................1
Chapter 1 Why the Samsung Way? ..................................................................... 3
Chapter 2 H ow Did Samsung Become a
World-Class Corporation? ..............................................................23
PARt tWo eVoLUTIon oF The saMsUnG way ........................57
Chapter 3 L eadership and Governance
Te Core of the Samsung Way .........................................................61
Chapter 4 Te Evolution of Samsung’s Management System .................77
PARt tHRee how DID saMsUnG sUcceeD? ..............................127
Chapter 5 S amsung’s First Success Factor
Competency in Creation of Speed ............................................... 131
Chapter 6 S amsung’s Second Success Factor
Synergy Trough Convergence ..................................................... 151
Chapter 7 S amsung’s Tird Success Factor
Evolutionary Innovation ................................................................ 173
PARt FoUR s aMsUnG-sT yLe paraDox ManaGeMenT
anD The FUTUre oF The saMsUnG way .......... 201
Chapter 8 Internal Co-opetition and Paradox Management ............... 203
Chapter 9 Te Future of the Samsung Way ................................................ 223
Notes ...................................................................................................................................... 257
Index ...................................................................................................................................... 267
v
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P R e FA C e
In the early 1990s, Samsung Group’s products were at the top of many indus-
tries in Korea, but they were in the second or third tier in global markets. By
then, the efects of major changes at home and abroad were seriously afecting
the conglomerate. Democratization in the 1980s had ignited a labor move-
ment that had led to soaring wages and the end of Korea’s run as a low-cost
production base. Moreover, Japanese manufacturers, Samsung’s main rivals,
had moved ofshore to avoid the sharp appreciation in the yen that followed
the 1985 Plaza Agreement. When their leading technology and brands in
electronics were combined with low labor costs in Southeast Asia and China,
Samsung’s struggles in global markets were clearly visible. Finally, forecasts
that the electronics industry would shif from analog to digital technology in
the twenty-frst century were amplifying long-term concerns.
In response to these major changes resulting from democratization, glo-
balization, and digitization, Samsung Chairman Lee Kun-Hee unveiled his
New Management initiative in 1993. Te strategic blueprint completely trans-
formed Samsung, allowing it to overcome the threat of competition and pave
the way for its taking advantage of new opportunities. It included the lofy
goal of improving Samsung’s products and services to the point of excellence
and making Samsung one of the leading global companies of the twenty-frst
century. In the days of analog, Samsung had lagged behind Japanese elec-
tronics companies, but Chairman Lee dreamed of Samsung’s outdoing them
in the digital age through aggressive, preemptive investments. Te efort to
achieve these audacious goals was summed up in Chairman Lee’s directive
to his senior executives: “Change everything except your wife and children.”
Now, 20 years later, Samsung is one of the world’s leading companies,
holding the number one spot in key electronics businesses like mobile
phones, televisions, memory chips, display panels, and rechargeable batteries.
All elements of the company’s operations, including corporate strategy, man-
agement systems, and core competencies, were realigned in accordance with
vii
viii preFace
the goals of the New Management initiative. As a result, Samsung now occu-
pies the leading position in the global electronics industry. Te company’s
transformation over the past 20 years and its rise to the forefront of the global
corporate stage has set a compelling precedent for both Korean and foreign
companies.
While a number of books have been written about Samsung’s rise to the
top and Chairman Lee Kun-Hee’s role in its transformation, most of these
books were written for the entertainment of the general public. Professional
analysis and applications of theory from a management scholar’s perspective
on Samsung’s strategy and its main strengths have been lacking. Moreover,
several scholarly books on the subject lack in-depth, systematic analysis. Data
about Samsung have also been difcult to acquire, and access to interviews
has been challenging; thus, newspaper articles and publicly available data have
ofen been the only materials available to management scholars. As a result,
both foreign and Korean managers who wish to understand and benchmark
Samsung’s management system for their own companies have been unable to
fnd information to aid them in their endeavors.
Under these circumstances, we have had the good fortune to be asked
by the Samsung Economic Research Institute (SERI), a think tank of the
Samsung Group, to conduct in-depth research into the sources of Samsung’s
competitiveness and to learn about its future plans. With SERI’s cooperation,
since 2004, we have interviewed more than 80 of Samsung’s key executives,
including CEOs, with most of them coming from Samsung Electronics. SERI
also provided data about Samsung for examination and analysis. From 2008
to 2011, while serving as Samsung’s academic advisors, we obtained a wide
variety of information about the company. In 2011, as a result of this research,
we published an article in the Harvard Business Review (HBR), in collabora-
tion with Professor Tarun Khanna at Harvard Business School, on the factors
infuencing Samsung’s success. Tis was the frst case analysis of a Korean
company to be published in HBR. Overall, during the past 10 years, begin-
ning in 2004, in the process of conducting research and analysis, we have
broadened our understanding of Samsung as a company, serving as academic
advisors, educating executives, and writing research papers and case studies.
preFace ix
Tis book is the result of 10 years of careful research, during which the
authors focused on Samsung’s transformation and takeof during the past 20
years since the New Management initiative. Among Samsung’s many subsid-
iaries, we concentrated our eforts on the company’s world-class electronics
subsidiaries, particularly Samsung Electronics. Tis book presents Samsung’s
three major management paradoxes, along with an in-depth analysis of
Samsung’s distinctive competencies, and particularly the management system
that Samsung built in the process of resolving these paradoxes and developing
the Samsung Way. A broad picture of Samsung’s future tasks is also included.
We believe that this book will be helpful for executives and employees
who want to understand and benchmark Samsung’s management system and
its rise to the top. In particular, both corporations in advanced countries and
latecomers in developing nations that want to catch up with front-runners can
learn from Samsung’s example. In addition, our analysis of Samsung’s para-
dox management strategies and systems will provide many points of learning
for management scholars and students.
We also believe that employees at Samsung, especially foreign employees,
can understand or reevaluate Samsung’s transformation, core competencies,
key success factors, and management systems and mechanisms since the New
Management initiative by reading this book. Our analyses and opinions may
not necessarily be defnitive, and they may difer from those of Samsung’s
employees. Yet since they are the views of outside experts, we believe that
they merit attention and consideration. We hope that this book can help lay
a cornerstone for further development of Samsung’s strategies, management
systems, and capabilities.
Te book was written with interview support from Samsung’s executives
and employees, yet it is based on independent judgment and analysis. All of
the content included herein represents the personal view of the authors, and
does not represent Samsung’s ofcial stance.
Samsung’s future depends on its employees. We sincerely hope that the
company can overcome its external and internal challenges wisely, and fur-
ther evolve and develop the Samsung Way by taking its unique paradox man-
agement system to the next level. We hope that the fndings in this book can