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Back To Basics- Samsung

Back To Basics- Samsung

Until 20 years ago, South Korea’s Samsung Electronics manufactured inexpensive, imitative electronics for other companies. Its leaders valued speed, scale, and reliability above all. Its marketers set prices and introduced features according to what original-equipment manufacturers wanted. Its engineers built products to meet prescribed price and performance requirements. At the end of the process designers would “skin” the product—make it look nice. The few designers working for the company were dispersed in engineering and new-product units, and individual designers followed the methods they preferred. In a company that emphasized efficiency and engineering rigor, the designers had little status or influence.

Then, in 1996, Lee Kun-Hee, the chairman of Samsung Group, grew frustrated by the company’s lack of innovation and concluded that in order to become a top brand, Samsung needed expertise in design, which he believed would become “the ultimate battleground for global competition in the 21st century.” He set out to create a design-focused culture that would support world-class innovation.

By any measure, his goal was achieved. Samsung now has more than 1,600 designers. Its innovation process begins with research conducted by multidisciplinary teams of designers, engineers, marketers, ethnographers, musicians, and writers who search for users’ unmet needs and identify cultural, technological, and economic trends. The company has built an impressive record on design, garnering more awards than any other company in recent years. The bold designs of its televisions often defy conventional style. With its Galaxy Note series, Samsung introduced a new category of smartphone—the phablet—which has been widely copied by competitors. Design is now so much a part of its corporate DNA that top leaders rely on designers to help visualize the future of the entire company.

It has been a bumpy journey. Despite strong support from top management, the company’s designers continue to face constant challenges stemming from its efficiency-focused management practices, which are deep-rooted. Shifting to an innovation-focused culture without losing an engineering edge is not a simple matter. It involves managing a number of very real tensions. Engineers and designers sometimes don’t see eye-to-eye. Suppliers must be brought on board. Managers invested in the status quo must be persuaded to buy in to idealized visions of the future. A risk-averse culture must learn to accommodate experimentation and occasional failure.

Samsung’s success in making this shift can be traced back to a single early decision—to build design competency in-house rather than import it. As we’ll describe, Samsung chose to create a committed, resourceful corps of designers who figured out that they could manage the tensions and overcome internal resistance by deploying the same tools that they use in pursuing innovation—empathy, visualization, and experimentation in the marketplace. The corps has helped institute policies and structures that embed design thinking in all corporate functions and provide a framework for reevaluating products in the face of dramatic technological change.

Building an In-House Competency

One of the world’s biggest technology companies and the leading subsidiary of Samsung Group, Samsung Electronics has been much in the news ever since it branched into consumer electronics and decided to go head-to-head with Apple (whose patent-infringement lawsuits against the company are ongoing). Competition from Apple and others has been intense; in the third quarter of 2014 the company’s profits dropped 60% from the same quarter of the previous year. By the first quarter of 2015 profits were recovering but were still below prior-year levels. Nevertheless, the big picture is one of impressive innovation and marketplace success. Samsung’s mobile division is the sole survivor of the radical market revolution led by the iPhone (the mobile divisions of former competitors such as Nokia, Motorola, and Ericsson no longer exist), and smartphone sales drove record earnings for the company in 2013. Moreover, Samsung has been the leader in the global TV market since 2006, generating a series of hit models such as Bordeaux, Touch of Color, One Design, and Curved Smart.

These design leaps all began with Lee’s 1996 resolve—triggered in part by a consultant’s report on Samsung’s innovation deficiencies—to instigate a design “revolution” in the company. (This wasn’t the first major leap for Samsung. In 1993 Lee had launched an initiative to integrate Western practices on strategy, HR, merit pay, and design into the conglomerate, but he had been unsatisfied with subsequent progress.) To fuel its design revolution, the company could have sought first-rate expertise from outside. That certainly would have been the fastest approach, and a number of senior managers pushed to have an internationally known Korean designer take over the design function. But other executives persuaded Lee to nurture internal designers who would focus on the company’s long-term interests rather than just their own projects.