Samsung Innovation Strategy

Keywords: samsung innovation case study, innovative business analysis

Jobs (2003), CEO of Apple, said that in order to generate really interesting ideas and preliminary technologies that can continue to innovate for years, it needs a lot of disciplines. Sam Palmisano, CEO of IBM, suggested that there has been a change in the nature of innovation. Creating great innovation is not established from individuals experimenting in a laboratory. It’s not an individual. It’s individuals. It’s multidisciplinary. It’s global. It’s collaborative (REIS 2008). Collaboration and openness are the keys of future management practice, which fosters company to be innovative. Innovative organisation is not just accidentally born, but with the well-designed management and supportive culture, innovative company can be created. This essay will describe components of innovative organisation, which help to cultivate innovative environment by using Samsung as the case study.

Samsung Group

The success of Samsung has been widely acknowledged in the last decade. Samsung, the world’s largest television producer and second largest mobile phone manufacturer, is also the largest firm of flash memory maker. Furthermore, Samsung was ranked by Fast Company Magazine to be third most innovative company in the consumer electronics (Borden 2010). The company grew from a local industrial leader into a worldwide consumer electronics brand, with up to 261,000 employees, 14 public listed companies, 470 offices and facilities in 67 countries (Samsung 2010a). In the research of Business weeks in collaboration with the innovation practice of The Boston Consulting Group, Samsung was ranked as 11th world’s most innovative companies (Businessweek 2010). It is one of the two Korean companies in the Top 20 companies. While Sony, the Japan’s biggest consumer electronics, was ranked as 10th, only one position above Samsung. This has brought questions among management gurus how this growing company could drive innovation to create success within a short time and remain innovative despite the difficulties of internationalisation. In addition, it could overcome many well-built rivals from Japan and Europe.

Shared vision and top management commitment are the important component leading to create innovative atmosphere. Ideaction (2010), innovation development consultancy firm, stated that, in creating such organization, if leaders are not committed in their actions, innovation couldn’t be systematic in a company. Top executive’s role modelling is one of the main differences between innovative and non-innovative organizations. Moreover, employees should realise a company’s goals to align with their innovative effort. Samsung’s new management beliefs applied in the late 1990’s is “we will devote our human resources and technology to create superior products and services, thereby contributing to a better global society.” This shows the company’s strong willpower to contribute to the worldwide people’s prosperity in the 21st century (Samsung 2010b). This message encourages every employee in the firm to innovate with the clear goal of being global superior producer.

Appropriate structure

The innovative organization tends to have characteristics of organic structures with open and dynamics systems (Zannad and Rouet 2003). At first, the reduction of organizational layer and downsizing are concerned as cost control. An increase in use of information technologies, such as email, internal blog, shared data repository, also leads to the need of eliminating middle management. The possible consequences for this are faster responsiveness to market, higher competitiveness, more flexibility, and reducing processes between divisions. This leads to flatter organisation that is not only the change of organisational structure but also the change of decision-making process (Cho 1999). In order to avoid delays and support for rapid innovation, decisions should be delegated to the innovation team. The approval of top management is only needed at the checkpoints or gates of the innovation process (Wentz 2008). Furthermore, Innovation is not suitable with multi-level hierarchy as the new idea and radical innovation must pass through many approvals with high possibility of ideas being rejected. Moreover, this will discourage strong leaders, who try to overcome its cumbersome, but the slow-response organisation will eventually obstruct their abilities (Chandler et al 1999, p.142). For example, in 1989, Samsung had 3-7 steps for project approval. This took up 24 days for the proposal to go through 7 approvals to arrive final decision step from the president (Example in Figure 1). On the contrary, proposal in 1995 needed maximum of 3 approvals decided on the same day (Example in Figure 2). This change of the important process leads to speed of running business. Furthermore, the proposal form in 1995 is in English, this signified an attempt for globalisation (Cho 1999).

 

Key individuals

With the goal of creating innovation in the company, Samsung needs the world-class human resources from both technical and business backgrounds. Its branding strategy is not only to create a brand that people trust and admire, but also to be a company that they desire to join. To foster this breakthrough R&D, Samsung set up worldwide objectives to catch the attention of the smartest people from around the world, and retain them. These people will be trained and implanted Korean and Samsung culture through one week of intensive Korean daily conversation class, one week of Orientation about company’s history, philosophy, and culture, and develop general management skills delivered by senior Samsung executives (Samsung 2010d). The recruitment of world’s smartest innovators, inventors and designers are fundamental to the company’s success in creating the future technology. Dr.Hwang said

“Today, one smart person affects the survival of 10,000 people. The need for core human resources has never been more urgent and cannot be achieved without the help of the world’s universities,” (SEA 2006)

Besides having the best people for the development of innovative capabilities, Samsung has a tool to identify the key players, such as Project leader, promoters, idea champions, or gatekeeper, in the organization. Experiential education programs that are enjoyable, innovative and effective have performed this identification task. For example in the Samsung Semiconductor unit, 90 managers were organised into groups and assigned to build up new equipment through the use of Lego blocks. The tool was just simple Lego blocks, but the equipment created in this experiment had to be functional. This activity, which required both creativity and teamwork, provided managers comprehension of the role each member played in team. Who is promoter, supporter, idea generator, and critical thinker are identified (Bargsley 2002).

Effective teamworking

Currently, team-working increasingly reflects a deeper recognition that this method of working offers greater economic benefits. Cross-functional teams is an effective tool to bring in different knowledge sets needed for solving production problems, creating new businesses, or develop new strategies. Work as a team needs more participation, higher commitment, sharing knowledge and self-management. This is more organic and flexible approach that helps to initiate innovation implanting across organisational and national boundaries. For example, Automakers from USA and Japan collectively worked on the development of new car model (West and Markiewicz 2004). Committing to consumer trends, Samsung set up a group of about 30 businessmen called CNB (Create New Businesses) who had to discover long-term social and technological fashions and imagine new products, which fulfil promising demands. Samsung has harvested the fruits from its team-working and strong commitment to innovation, transforming low-quality producer to become a brand that create stylish mobile phone (Yian 2005). In 2010, its sales of mobile phones were ranked as number one in the US market (Paczkowski 2010).

Long-term commitment to education

Invest in people is another key initiative needed to emphasise in the development of innovative organisation. Army without essential weapons cannot deliver its full potential. Those needed weapons are knowledge, which has to be developed by best practice training. Companies, such as Hewlett Packard, and Samsung, have committed in training and development programs to help spread innovation capability all over the organisation (Todhunter 2007). Besides internal training programs, offering scholarship, postgraduate study opportunities and international work placement for its staff in 120 offices across 57 countries provide Samsung linkage with renowned universities, also bringing in knowledge and collaboration to the organisation. The by-product from doing so is incentives that help to attract and retain of the best and brightest inventor and businessperson from the global industry (SEA 2006).

Extensive communication

Communication is one of the factors causing failure in investing in ideas that go wrong since the beginning. These are those ideas that do not align with the company’s need. Communication within company about its strategy and customer demands is needed for the clear innovation pathways of researchers (Todhunter 2007). Idea generated from either internal or external organisation must go through many steps of modification before adopting into a company. These steps become troubles for the huge companies. In the case of Samsung, idea management has been introduced to manage ideas from thinkers and distribute them all over the company. They will be evaluated by colleagues, supervisors, or assigned review staffs who add views, opinions and knowledge (Baloh et al 2008). In addition to internal communication, networking between firms is also key component in the creation of innovation. The network organisation is a group of several independent companies, which perform different tasks and contract one another. For example, one firm in the network focus on research and product design, another manufactures it, and a third does distribution. This approach gains a wide acceptance as it has strong rationale including rapid change of business environment, the cumbersome of large-size companies, importance of speed and flexibility. Moreover, partners’ collaboration helps to blend and complement different core competency in creating better innovation. Samsung has utilised this concept by building a team, called TechnoValley, undertaking only planning and marketing of product. Other partners in the network took care of technology, production, distribution, and promotion (Cho 1999).

High involvement in innovation

In “Built to Last”, Collins and Porras advise us that building a visionary company requires 1 percent vision and 99 percent alignment (O’Donovan 2006). In order to build a sustainable innovation culture, staffs have to practice innovation in everything they do. Practicing to tackle small challenge will make them ready for a bigger challenge. Samsung manager plays an important role in supporting this culture of practicing innovation by encouraging the innovation process and not pushing employees to short circuit the solution process (Samsung 2010c).

External forces

External forces shapes Samsung to become technology leaders. Previously, closed innovation was the model that Samsung Electronics followed. They invested in the best people and centralised their R&D unit. Today, Samsung cannot depend only on internal innovations, which may create the advanced operating system for mobile phone but not attractive one. Samsung open innovation centre established to create striking design and user-friendly interface of Samsung mobile phone. It successfully engaged customers and suppliers in the innovation process at the early stage. Being based in Korea with large group of young technology-concerned consumers provides Samsung an innovative edge in consumer electronics including mobile phones. The replacement rate for mobile phones in Korea is estimated at 6-18 months, thanks to young Koreans who swiftly adapt new technology (Yian 2005). Therefore, these trendy people have participated in testing and giving feedback, which provide significant information about customers’ desire (Baloh et al 2008). Korea, therefore, becomes an invaluable testing location for innovations prior to the companies unveil them on the world stage.

Creative climate

Public reward for those who distinguish themselves as mains actor in innovation culture and who promote the value of innovation is the powerful tool to expand innovative thinking throughout the enterprise. There are many examples of escalating the visibility of innovation success, such as the company innovation award, inventor hall of fame. This illustrates the commitment a company have on its innovation and inspire employees by making them proud of their success (Todhunter 2007). Idea management through the use of IT have increased the rate of product and process improvement, as contributions of ideas are traceable. It open up the communication all over the company and promote culture of sharing and creativity. Ideas are developed and talked widely not only in vertical but in horizontal fashion leading to innovative atmosphere. After the introduction of knowledge management solution in Samsung Electronics, there was a change in organizational climate. Employees have been become confident to be more suggestive, trustful, responsive to change, and eager to innovate. Forum and blog postings are the place for knowledge sharing where an automatic rewarding system is executed. The profitability of the products launched, have been chosen as the innovation performance indicators (Baloh et al 2008).

Learning organisation

An empirical study showed that sharing knowledge and skill of employees brings about innovative performance (Alwis and Hartmann 2008). Samsung has identified two main challenges in the creation of learning organisation that are knowledge discovery and knowledge sharing. In the past, problems occurred due to lack of knowledge management, for example, lost of valuable knowledge from poor management, or repeating the same failures. To tackle such problems, organizational mechanisms and technological solutions to facilitate the innovation process in Samsung have been introduced. Firstly, Samsung Brainstorming Hours has been arranged to capture and spread ideas in any step of innovation process from idea generation to conversion and commercialisation. This is not applied only in the new product development process, but also solving complex problems or business improvement. Two hours weekly meeting for cross-functional team in the room with tall windows, wireless connection, big-screen TV, snacks and drinks is designed to foster innovation process. This comfortable surroundings helps innovation workers to socialise with each other and share ideas. Secondly, company-wide simple but powerful blog has been introduced to encourage knowledge sharing and discovery. The blog helps employees understand and discuss ideas so as to extend previous knowledge continuously. Thirdly, knowledge warehouses have been built to have codifiable critical knowledge stored and accessible throughout Samsung Company. The “Lessons Learned System with Alert function” has been used to manage this knowledge and share it. For storing lesson learned, project managers has been trained about how and what knowledge to collect and given the project management manuals including many useful procedures such as how to write a closing report, how to create and store a project model, how to perform an After Action Review. In order to control overwhelming information, Alerts system notifies employees of newly stored knowledge that might be of interest and useful to their work (Baloh et al 2008).

Conclusion

Samsung has successfully transformed from local low quality manufacturer to a brand that produce admirable and stylish consumer electronics. Company performance has proven that Samsung has come to the right direction in last decade. The achievement of becoming innovative organisation started from the declaration to be the global leader in the industry in late 1990s. After the re-configuration and adopting team-working practice, Samsung organisation has been altered to be flexible and organic, leading to ability to develop innovative capability. In addition to the recruitment of the best people into the organization, Samsung has an experimental education tool to identify the key individuals, such as project leader, promoters, or gatekeeper, so as to blend different roles in creating innovation. These people are working under the well-designed knowledge management system and trustful and suggestive communication with the support of supervisors, fostering creative climate. Rewards system for innovative contributor, organisational mechanism and technological solutions has brought about the knowledge discovery and sharing throughout the company, creating learning organisation that sustains Samsung innovation competency.