Sample Essay Samsung Electronics Company Paper
Category : Company Case Studies
Innovation has been widely recognized as the major goal of economic activities and one of the most significant aspects through which organizations sustain competitive advantage in globally competitive marketplaces. Organizations create novelty through better and attractive products and services due to the demands of the consumers from them. However, innovation is not necessarily science and technology, but value. It is not something which takes place within the organization but rather a change outside and must be market focused.
For one, not all innovation entails technology. Innovation in terms of changes in process, strategies and organizational structures are becoming more important of today’s organizations along with new product development. The case of Samsung illustrates how the company succeeded through changing its strategy from low cost to a technology leader. It has proved to be successful not only in product innovation but also in involving the employees in the process of innovation. The following section will discuss the relevance of innovation in organization and will seek to explain the role of marketers in affecting such process. Also the approaches to innovation are discussed based on the experience of Samsung.
Innovation in Organizations
In the neoclassical economics, innovation is equated with independent technological and less frequently organizational changes which are considered to be changing the position of production functions by replacing the labour factor with capital. Changes alter the productions functions including output and cots changes. The neoclassical understanding of innovation represents a ‘both and why’ way of thinking. At one level, innovation is understood as a variable in economic laws as a form of Natural Law theology which generates efficient outcomes. At another level, that of industry, innovation is understood as a choice that organizations make to secure temporary monopoly and maximize their profit goals (Fonseca, 2002, p. 12).
A very different way of thinking is found at the evolutionary economics. According to Schumpeter (1934), innovation must be understood in terms of both the entrepreneur who performed a role and innovation which is an outcome of the entrepreneurial activity in organizations. For him, the entrepreneur played a critical role in the process of development. He further addresses the issue of innovation implemented in a systematic way. That is, an innovation could be a new output that the organization placed in its environment, a new input it has received from its environment or a new way of arranging its internal relations including the psychological attributes of the individuals (Fonseca, 2002, p.13)Thus, innovation is not just the creating or inventing products and services. Innovation is an outcome, a new product or service and a process of organizational and managerial decisions.
Innovation can be enabled by technology but it is not a prerequisite. For some industries, innovation may depend on technology. However, quicker production process, accurate targeting, cots reduction and improved brand awareness are results of innovation without or minimal investment in technology. While technology can be used to enable innovation, these are actually minority. Less than 20 percent of innovation involves technology investments because the majority is focused on improving processes, strategies and organizational structures tot deliver new products and services. None of these are implicitly connected to technology (Jones, 2002, p.5).
Innovations at Samsung Electronics
Companies over the past twenty years have sought to drive innovation and continuous improvement throughout their organizations. Firms all over the world adopt different techniques and approaches to improve their performance in innovating and to benefit from new ideas. For many, innovation is about making changes in the products and services to align them with the needs of the customers. Real innovation is more fundamental rather than incremental innovation since it concerns new ideas and not updated versions of old products. It stimulates new thoughts, processes, creates new organizational structures and enables new strategies to be realized (Jones, 2002, p. 12).
This form of innovation is reflected by the Samsung Electronics which ahs moved from being a market follower to a market leader. Its success has been attributed not only to the innovations in technology but also to the restructuring of the organizational structure and culture. There are six factors that help in making the Samsung Group maintain and improve its competitiveness in the global market: (1) nurturing talents and putting them at the most significant positions (2) company’s culture (3) investment in R&D (4) constant operation innovation and structure adjustment (5) operation at fast speed (6) leadership of CEO.
Samsung Electronics Co. (SEC) is one of the several companies existing within the Samsung Corporation. In comparison to its chaebol counterparts Hyundai, Daewoo, Lucky-Goldstar and SK, Samsung has made significant world leading shift form a follower to a leader in the introduction of innovative new products. From the start, the objective of the company was to enter a large scale production of key products with the initial route through the manufacture of imitation products. Many of which are based on its Japanese competitors (Jones, 2002, p.124). It gradually moved forward move forward and introduce new technologies. To date, Samsung has been recognized as a global name in electronics and communications products. It aims to maintain its position by embarking in further developments and innovation of its key products.
Samsung Electronics is well known in home, mobile, office networks and other core component businesses. It has used a variety of approaches to improve its competitive positioning in the global market. Strategically, Samsung wants to be a global brand that is a household name wherever its products are available. Its strategic objective is to create qualitative and quantitative growth and deliver competitive value to the customers while maintaining profitability (Evans & Lindsay, p.139).
During the following seven years, Samsung has moved from the quality emulator to a technology rich leader. All of its products are innovating and class leading. From the world’s first 256M DRAM chip in 1994 to the world’s lightest CDMA phone, the fastest CPU and the first 30-inch LCD in 1997, Samsung has continually innovated with the first mass produced digital TV in 1998 and the fastest 1G CPU in 1999. It has also remained to be the leading manufacturer of microwaves and has the largest market share of other product areas including LCDs and digital TVs. Samsung was also known for its mobile phones, notebooks and monitors (Jones, 2002, p.125).
The ‘Samsung Digitall – everyone’s invited’ slogan manifest the commitment of the company to digital technology as its core competency needs to expand the number of world leading products. In 2001, Samsung’s product range included integrated TVs, MP3 players and mobile phones with integral TV and MP3. Samsung has continued to use and promote innovation as the key enabler of growth and driver of technology evolution (Jones, 2002, p.125). In Samsung, the products are designed by teams from various specialties. Many of the new designs are acquired outside the company and committed to customer research and testing. Because of this strategy, Samsung have been recognized for the production of innovative product designs.
In 2004, it has received five citations from the Industrial Design Excellence Award (IDEA)-more than any European and American competitors- and 33 total top design awards in the United States, Europe and Asia. These designs have fostered increasing value and market share. Undeniably, Samsung has made progress during the previous years. Its future will depend on the ability to continually anticipate the changing demands of the customers and maintain the advantage over its competitors.
To accomplish this, Samsung integrated the Six Sigma to its entire business process to perfect its approach to products and processes. It has pursued a goal of developing its resources to promote the development and design of products. The Six Sigma includes the Design for Six Sigma for designing new products. These initiatives have led to the recent growth of the company. It has become one of the top global electronic manufacturing companies with bets operating profit rations and superior fiscal soundness. Its debt ratio is also lower than any other company.
The facilitator of the innovation is important for companies that are making significant changes from some strategic alignment because people within the organization need to change attitudes and learn new skills and behaviors. Education, execution and communication approaches are created from scratch and the facilitator may need to be involved for the change process. The chief innovator is the one who is responsible in managing the entire process of innovation. They are the ones who makes decisions regarding the necessary trade offs. However, chief innovators of not do everything themselves but clear bottlenecks if necessary and gets involve in the strategic and tactical approaches of the company (Andrew & Sirkin, p.157).
The CEO or chairman of the company often plays the role of the chief innovator especially when the company is undergoing changes from a business strategy. As the case may be, the CEO is often the only person who makes significant decisions to change the alignment of the company’s present focus towards innovation. One of the chief innovators at Samsung was Doh-Seok Choi, president and chief financial officer of the company. Several years ago, Samsung was known to be a me-too producer of low and medium quality electronic products. Samsung was not considered to be a brand but was seen as a mere Asian template. The move from the cost cutting strategy to innovation ahs led the intense involvement of President Choi to play the role of a chief innovator (Andrew & Sirkin, p.158). Companies that do not have a chief innovator or whose chief innovator lack knowledge of the innovation process are less likely to succeed. At Samsung, the languages of the employees are unified. The chairman sets the strategy and all the employees in the company understand it.
Organizational structure is also related to innovation simply because it provides the formal and internal context through which the innovation will proceed. Formal structures determine who has the authority to make decisions regarding the innovation and the degree of autonomy and flexibility that individual managers have to initiate ideas. Structure also affects the direction and the amount of information exchanged between participants in the innovation process. Organizations wanting to be successful must also direct and control the [process. Informal controls can be effective methods of motivating and directing the solution of unstructured problems (Russell, 1990).
The Samsung group already has an industrious and able management teams but the Confucian organizational culture dominates the authoritarian management style that stifle creativity and innovation. Chairman Lee then wanted to change the style by allocating more authority, encouraging more risk taking, rewarding innovation and transforming the organization. In effect, he wanted the hierarchy upside down which abandons the inward looking approach to the management. Recognizing that the change must begin at the top, Lee began delegating the authority to his subordinates. The chairman also emphasized the major strength of the company lies on the people. He ordered every CEO in the company to hire the best people in the world so brought in some people who are paid more than their CEOs. He believed that having the right person in the organization can change everyone in those areas. Hiring the right people is important but it is more important to put the right potential people at the right places (Andrew & Sirkin, p.198).
The Role of Empowerment and Learning Organization
Samsung recognized that ‘cheap and fast’ production needs to be changed and that it has to equip itself with new if it is to succeed in the long term. As the core of this, it has to make innovations in its work processes and its way of thinking. The company needed to become customer and market oriented and develop and accumulate new technologies. Further, Samsung proclaimed that it could become number one in the world if it strove for innovation in everything and well become known as the leader of change and innovation.
While innovation needs to be someone’s’ operational responsibility, it must also be everyone’s job. At Samsung, all employees, not just product designers and engineers, think of innovation being their central role. The willingness to change and keep changing and to innovate was embedded in the minds of the employees. They are made to believe that everyone can make contributions to innovation not juts those developing products (Andrew & Sirkin, 2007, p. 160). The company pushed innovation into all aspects of its business and made it everyone’s job. Each employee is called upon to become a team player, a pioneer and an innovator.
Dedicated innovation leaders and innovation focused groups play a crucial role in the company’s goals but it is also important that they understand and believe in the innovation process to be able to contribute to its achievement. This is beyond providing ways for non managers and employees and line employees to make suggestions for improvements. More so, it is about the development of a language of innovations that everyone can speak. This is something which Samsung had done by aligning all its activities around the innovation (Andrew & Sirkin, 2007, p.19). The ‘New Management’ policy it has implemented in 1993 marked the complete overhaul of the company and turnaround on how it approached its business globally. It started to implement a full scale quality drive and best world strategy. The policy was implemented by encouraging the employees to make changes in themselves to strive to care for others and behave ethically. To date, the performance at Samsung is based on qualitative outcomes rather than quantitative.
Samsung was determined to eliminate outmoded practices and encouraged employees to affect changes starting to themselves. The reform efforts of the company were systematic and penetrated each aspect of the organization. For instance, new work hours were adopted to give the employees more quality time with their families. The workplace innovations are further enhanced with the introduction of the Six Sigma. The program is characterized by an extensive employee suggestion system that provides monetary rewards for useful ideas at the individual and the group levels (up to US$1000 for individuals and US$10,000 for groups). In 1998-2000, there was an average of 5.5 suggestions per employee implemented (Jones, 2002, p.126).
Another approach to innovation was to promote a learning organization. The most recent and widely accepted notion of learning organization today is one which is characterized by an organizational culture that fosters the improvement of the employees, their productivity and the overall operation and performance of the business through continuous learning (Gilley & Maycunich, 2000, p. 5). Theoretically, they maintain a significant capacity for the renewal and the competitive readiness of the organization learning. Continuous learning and change is valued through learning organizations. The main concern is about the market share, productivity and profitability and it is understood that learning is a key element in acquiring these business results. However, the orientation of the learning organization is simply learning (Gilley & Maycunich, 2000, p.15)
The creation of capabilities that are previously not established is the idea of learning. Moreover, the principle assumption of the learning organization is that the improvement of the learning capacity of the individual is congruent to that of the organization’s performance. According to Bae and Kim (2004) Samsung’s Six Sigma Academy was established to educate the employees and build up the team of quality specialists with problem solving abilities (p. 187).
Under the quality certification system there are four degrees of quality specialists: master black belt (MBB), black belt (BB), green belt (GB) and white belt (WB). This quality certificate is an important factor in determining promotion. For instance, an employee must acquire a GB to be promoted as an assistant manager. If the employee acquires a BB or MBB more promotion points are collected. As a result, the employees have achieved white belts. The number of employees with GB has risen from 710 in 1998 to 1228 in 1999 and 1565 in 2000 (Bae & Kim, 2004, p. 188).
Samsung spent 3.6 percent of payroll costs on education and training, a very high percentage as compared to firms such as Xerox, NUMMI, Saturn, IBM and Motorola. It does not only make investments in education and training but also create incentives to motivate individual and organizational learning. Under the evaluation system, each employee is given the opportunity to set the learning objectives and learning themes with the consent of the supervisor (Bae & Kim, 2004, p.188). Periodic interviews are carried out to assess the progress and discuss the steps to accelerate the learning before a final evaluation is given by the end of the year. The evaluation will determine the learning points and promotion of the employees.
Today, innovation leaders are striving to take the next step in the evolution which is increasingly fast, diverse and complex. Thus, innovation capabilities will continue to push boundaries and challenge the firms to reinvent themselves.
- Increasing focus on the needs of the customers will enable the company to acquire psychological and behavioral inputs to the innovation process. Use innovation to differentiate products and services from competitors.
- Continuous research and development projects must be conducted to create new products. Collaboration with the marketing would enable the projects to become more focused and achievable. Additionally, new products and services could be planned fro greater synergy between the technological capabilities and needs of the core markets.
- Strengthen core competencies and exploit new opportunities.
The competitiveness of the global marketplace has required organizations to become innovative not only in the products and services they create but as well as in their strategies and approaches. Indeed, Samsung’s success manifests the substantial returns from innovating within the organization. This involved the styles of the senior marketers to effect the innovation by encouraging participation and involvement of the employees. Samsung recognized that the innovation lies in its most important asset – the people. As such, it made innovations in the workplace to empower the employees. This includes training the employees and providing incentives for them. The company has been and continues to strive to become the world leader in the electronics and communication industry by innovating in each and every aspect of its busine