Global Learning Case: Samsung: Building a Great Brand
Ten years ago, Samsung Electronics Company sold a bunch of low-end
electronics under various brand names such as Wiseview, Tantus, and
Yepp. New management decided to ditch these names and brand all of
its products Samsung. At the same time, it invested heavily in
design and product quality and in 10 years, it now makes
top-of-the-line cell phones and digital TVs that showcase its
technological advancements. These are products to which consumers
form strong bonds because they use them so much. Between 2000 and
2005, Samsung grew its brand equity by 186 percent, the
second-biggest gain in value (behind Google), passing Sony who once
had the premier brand reputation in electronics. Good looks, ease
of use, useful features—these are the keys to building a great
brand reputation. The ultimate driver of brand reputation is a
quality product development process.1
In 1993, then Samsung Chairman Lee Kun Hee visited the United
States and saw for himself that Samsung products were also-rans,
lost in the crowd, overshadowed by Sony’s standout design. He
correctly concluded that great design and innovation were the ways
to build Samsung into a great global brand.
Did he hire hundreds more great marketers to build a great brand?
No. He hired hundreds more young hip designers, many trained in
premier U.S. higher-education schools of design (the number of
designers employed by Samsung increased from about 100 to more than
450 in the next decade, with an average age of 33). Designers were
sent all over the world to great museums, art galleries, ancient
ruins, and illustrious modern architecture. They now also spend
sabbaticals with design consultancies, fashion houses, furniture
designers, and other centers of design excellence abroad. Samsung
designers come back with their minds loaded with great design
ideas; they lead the product development, not marketers. It is hard
to argue with this process of inspiring great design innovation:
hire creative, well-trained young designers who are willing to take
risks and light up their minds.
But the Samsung product development process also involves a very
grounded “usability laboratory” in downtown Seoul to study how
consumers get products out of boxes, read or do not read
instruction guides, and follow icons and instructions on cell-phone
screens. Understanding the user interface is key to Samsung, and
has been key to its success.
But Samsung also has design centers in San Francisco, London, Tokyo
and Shanghai. And to support great design is a research and
development center just outside Seoul, South Korea. Here the
top-gun engineers and designers hunker down and solve the toughest
product specification and design problems, working 24/7 in a
five-story building equipped with sleeping dormitories, a sauna, a
gym, billiards, and ping-pong tables. No layers of bureaucracy
trying to justify their not-very-productive existence; no endless
committees; no staged review gauntlets, stop-go-dawdle reviews, or
somewhat fawning ritual presentations to distracted senior
executives: “Everybody knows that bureaucracy means death to new
ideas, yet most companies still insist on forcing innovative
products and ventures through a gauntlet of presentations and
reviews and refinements.”2 No nay-saying lawyers. No delaying
actions by feuding factions or senior executives pulling rank and
exercising political brinkmanship at this R & D center. No
“that is not the way we do things around here.”
The 24/7 approach to problem solving is pretty intense but
compelling in its logic. Other companies such as Steelcase, the
Mayo Clinic, P&G, and Motorola are developing and using similar
innovation labs. It involves concurrent engineering and fast
prototyping, and deviates quite considerably from yesterday’s
best-practice process of product development presented in Module 6.
For Samsung, 80 percent of quality, cost, and delivery time is
determined in the initial stages of product development and Samsung
is obsessed
1 The history of Samsung’s development of its innovative design
processes is drawn from: Cliff Edwards, Moon Ihlwan, and Pete
Engardio, “The Samsung Way,” BusinessWeek, June 16, 2003, pp.
56–64; David Rocks and Moon Ihlwan, “Samsung Design,” BusinessWeek,
Dec. 6, 2004, pp. 88–96; “Brand new,” The Economist, Jan. 13, 2005,
pp. 10–11; Peter Lewis, “The Perpetual Crisis Machine,” Fortune,
Sept. 19, 2005, pp. 59–76; Moon Ihlwan, “Camp Samsung,”
BusinessWeek, July 3, 2006, pp. 46–48.
2 Steve Hamm, “Speed Demons,” BusinessWeek, March 27, 2006, pp.
67–76.
with reducing complexity at this stage. Samsung practices what
Confucius and Albert Einstein preached, respectively: “Life is
really simple but we insist on making it complicated,” and
“Everything should be made as simple as possible, but not
simpler.”3
What the best product development companies do is create simple
products, get feedback from customers, make the product better, and
do all of this as fast as they can, or at least, ever faster. You
are dead if you do not create simple products; you are dead if you
do not get feedback from customers; and you are dead if you do not
do all of this quickly. There are a lot of ways of getting “dead”
in product development, which is why so many new or improved
products fail. The recipe for success in product development is no
mystery — it is just very hard to execute.
The drive for improvement is ferocious at Samsung. Samsung cut
average product development time down from an average of 14 months
to five months. Samsung completely changes its product lines every
nine months, Motorola every 12 to 18 months, as if to say,
“Motorola and Nokia [who fell behind in mobile phone design in
2005], eat my dust.” Samsung can have the next generation of a
product on the market before the competition has its last
generation of product out because, as is seen with Motorola, two
Samsung product development cycles occur within one Motorola
product development cycle. Change management is king at Samsung.
The result is that Samsung Electronics has lower manufacturing
costs, quicker time to market, an industry-leading profit margin of
21 percent, and from 2002 to 2006 the most industrial design
excellence awards of any company, 19 (Apple was second with
15).
And from nothing, the Samsung brand is now worth more than the Sony
brand. Philips, Europe’s oldest electronics brand, is also having
to learn (again) from another Asian upstart, and is now rebranding
itself around the idea of “sense and simplicity.” And how does
Samsung view itself now? Its CEO, Jong-Yong Yun, says that Samsung
is a good company but that “we still have a lot of things to do
before we are a great company.” The drive to improve, to learn, to
implement faster and better is as ferocious as ever. Samsung has
great process innovators with both process thinking and political
skills, who get things done well in a hurry. Is all this process
improvement drive in Samsung paying off? Is this the path to
shareholder value? Samsung stock has increased in value tenfold
since 2000, so owners would probably agree. Remember from Module 1
that the drive to improve, to learn, and to implement faster
processes—particularly next- generation product development
processes—drives the whole market.
Question
1. What was the critical activity in the process of Samsung’s
transformation into a world-beating developer of new cell phone
handset designs and other product line designs?
The critical activity in the process of Samsung’s transformation into a world-beating developer of new cell phone handset designs and other product line designs were by empowering forcefully in the product’s overall design and quality, which would stage its technological improvements. This company believes greatly that the ways to construct itself into a global brand is by design and innovation. According to Samsung the keys to building a brand reputation are good looks, ease of use, and useful features. A big part of being able to become a larger brand that consumers would like to come back to and buy more products from is by doing studies and understanding the customer interface. Samsung cut down on product development time by almost more than 65% and they also completely change its product line about every nine months, which compared to other businesses is having a next generation product on the market before the competition has its last generation of product out on its shelves.
Global Learning Case: Samsung: Building a Great Brand Ten years ago, Samsung Electronics Company sold a bunch of low-end...
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