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What is Samsung's Secret to Success?

"Samsung went from a no-name company in the global market of the early 1990s to a world-class corporation in the second millennium," explains Dr. Jaeyong Song, lead author of the just released book The Samsung Way.

In 2013 Samsung Electronics, the flagship company of the Samsung Group, had revenues of $34 billion.  This revenue surpasses HP, Siemens and Apple.

How did Samsung achieve this? “Samsung went from a no-name company in the global market of the early 1990s to a world-class corporation in the second millennium,” explains Dr. Jaeyong Song, lead author of the just released book  The Samsung Way.

Other achievements include raking second only behind IBM, in patent registration since 2006.

And in brand recognition, Samsung is the highest-ranking non-American company.

Dr. Song talks about the underpinnings of this transformation so that other manufacturers might replicate the success.

How did Samsung transform itself from a mediocre OEM manufacturer to a world-class performer in just 20 years?

The most important factor in Samsung's success was the New Management Initiative Chairman Lee proposed in 1993. At the time, Chairman Lee was very concerned about Samsung’s lack of competitiveness in the global marketplace. The emerging trends in the 1990s, such as globalization, Korea’s democratization, and digitization encouraged Chairman Lee to take a bold transformation initiative.

Most importantly, Chairman Lee viewed the emerging digital revolution as a golden opportunity to get ahead of Japanese electronics giants such as Sony. These Japanese companies were winners in the existing analog technologies and were thus reluctant to adopt disruptive digital technologies quickly.

The New Management Initiative had the ambitious goal of making Samsung one of the leading global companies of the twenty-first century. In order to achieve this goal Chairman Lee spearheaded a complete corporate transformation of Samsung. Chairman Lee proposed a famous New Management slogan, “Change everything except your wife and children.”

Initially, most Samsung employees did not understand why Samsung had to change so radically. So they only wanted to change their wives. But Chairman Lee was persistent enough to push forward massive change management throughout the 1990s, re-aligning every aspect of Samsung’s management system to its new quality-driven goal. In particular, Chairman Lee pushed Samsung to invest preemptively in R&D, brand marketing, and design capabilities for emerging digital products.

The outcomes of the New Management initiative were astounding. Since 2004, the operating profits of Samsung Electronics have consistently been higher than the sum of the annual operating profits of Japan’s five major electronics companies, including Sony and Panasonic.

More on the Samsung Way on IndustryWeek.

IndustryWeek is an NED companion site within Penton’s Manufacturing & Supply Chain Group.

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