A Blog by Jonathan Low


Feb 25, 2015

To Understand Samsung's Challenges, Understand the Corporate Culture

Samsung's partnership with Google appeared for a time to be a possible successor to the famed Wintel alliance forged by Microsoft (Windows) and Intel.

Sales of Android phones led the world and some believed it threatened to overcome Apple's high-end strategy.

But that was then. Apple, as we know, has gone on to operational and financial domination, secure in its position as the iconic brand for global smartphone users while Samsung fends off Xiaomi and other lower priced models to whom it is losing share.

What happened? As the following article points out, Samsung, like other tech firms before it (Xerox PARC, Motorola or Nokia, anyone?) has had access to some of the best design and technology concepts of its era. But the corporate culture demands deferral to a tried and true model of line extensions and predictable returns.

Given Korea's difficult economic and military history, a penchant for prudence is understandable, it's just not advisable. Especially in this market with these types of products.

Traditional management practices can get you pretty far. But in this environment, probably not far enough. JL

Mark Wilson reports in Fast Company:

Samsung’s collectivist corporate structure won’t gamble $10 million to bring a bold, unproven product to market when the status quo grind of iterating old products and just tossing some new advertisable features into a sea of SKUs has a more predictable return.
Kevin Lee calls it "Steve Jobs Syndrome." As the former head of product strategy and user experience design at Samsung Design America, Lee watched as the $100 billion Korean tech giant wrote check after check to countless Western design firms to develop future products for the Korean company. The designers would dig in their heels, refusing to budge on their grand idea or see how it might fit into Samsung’s vast production line. And Samsung management would either discard the idea entirely, or water it down so much that the product became another meaningless SKU in the hundreds of products Samsung sells today.

"I’ve seen amazing concepts and prototypes. It was like, ‘Wow, if only we had that in the market, the rest of the market would go bankrupt,’" Lee says. But during his 18-month tenure with the company, Samsung failed to launch the next big thing. It wasn’t a lack of good ideas, or Samsung’s stinginess in hiring good designers, he argues. It was a combination of problems—cultural, managerial, and structural—that prevented concepts from making it to market as real Samsung products. Most of all, though, he blames the Western designer’s mentality—the Silicon Valley archetype of stubborn genius that today’s innovators hold so dear. He blames Steve Jobs Syndrome.

The Culture Is The Product

To understand the perils of Steve Jobs Syndrome, it helps to understand the culture from which Samsung emerged, and the business model in which it's grounded.

"In a sweeping sort of way, the Korean culture in itself is hierarchical, Confucius-based, and group-minded rather than individualistic," explains Ivey Business School professor Lynn Imai. The culture feeds into a consensus-driven work environment, which is apparent inside Samsung headquarters. Managers report to managers, who report to more managers.
New designs have to make their way through this structure, and managers have to be able to justify their profitability. Samsung's revenue model relies on the high volume and low margins of countless SKUs that are more or less variations on the same product, whether it's a smartphone or a vacuum cleaner. Samsung doesn’t sell just one point-and-shoot camera. They have a dozen at various price points carefully calculated by the cost of their raw components and features, each more or less asking its customer, "Am I the right camera for you? No? Then try my little brother."

"That Apple kind of innovation, entrepreneurial culture goes against all of that," Imai says. Silicon Valley is a land of unflinching heroes with big design ideas: Steve Jobs, Elon Musk, Mark Zuckerberg. Jobs famously threw a fit when he returned to Apple in 1997. As Walter Isaacson wrote in his biography of Steve Jobs:
After a few weeks of product review sessions, he’d finally had enough. "Stop!" he shouted. "This is crazy." He grabbed a Magic Marker, padded in his bare feet to a whiteboard, and drew a two-by-two grid. "Here’s what we need," he declared. Atop the two columns, he wrote "Consumer" and "Pro." He labeled the two rows "Desktop" and "Portable." Their job, he told his team members, was to focus on four great products, one for each quadrant. All other products should be canceled. There was a stunned silence.
To this day, Apple’s product line has grown a bit more bloated again, but it’s still the modern Western benchmark of how you build a company: Have the hubris to make a handful of exquisitely designed products that offer not just enticing features but holistic experiences. And everyone will want them.
It’s the mentality that allows Apple to more or less match Samsung’s revenue, despite selling far fewer products (Samsung never replied to our queries about just how many unique SKUs they produce worldwide). In Q4 of 2014, both companies had roughly $45 billion in revenue. But Apple had almost double the profit ($7.5 billion), thanks largely to the high margins and minimal overhead of its svelte and sought-after product line.

The Cowboy Way

The Apple method is not exclusive to Apple. It has worked very well for hardware sold by Silicon Valley peers like Jawbone, Tesla, Fitbit, Nest, and Amazon. The Silicon Valley-based industrial designers behind many of those hit products have worked for Samsung, too. But it isn't always a snug fit. "There’s a cultural insensitivity [among the Silicon Valley design firms]," Lee says. "Respect for each other is completely absent. And to me, that’s the ingredient that will make anyone successful. There’s not a single person in the world who knows everything. With awesome designers, the same stance I always see is that they’re such egotistical SOBs."

One common misstep Lee encountered was that Valley companies would design products with impossible specs—like wearables that required battery technology that didn't exist. Design studios would get caught up in a vision for the next TV or smartphone, but forget that it's Samsung that has the most cutting-edge information about the limitations and capabilities of these technologies. (Heck, Samsung screens end up in Apple’s iPhones.) Designers hired by Samsung often have access to the company's advanced research and development, but they’ll still dream up experiences that are impossible for Samsung to create.

The frustration is a two-way street. Design firms I spoke to complained that working with Samsung, and some other big companies modeled on similar collectivist ideals and mega product lines, was daunting and lacked any real opportunity for collaboration.
Gadi Amit, founder of NewDealDesign, has worked with Samsung and other Korean companies for 20 years. And he’s stopped answering their product briefs. The atmosphere he described was anything but inviting. "Binary," he calls it, with a "palpable presence of authority in the room."
Professor Imai has a more nuanced take. "In the U.S., there’s an assumption that the client becomes educated from the person providing the consulting or service, there’s a value added something the person is providing to the client, and the relationship is, ‘I can teach you the best way to do something,'" she explains. "In Korea, if your client is a high-powered company or government, the relationship is totally switched. It’s harder to get things done just because the person providing the service is sort of at the whim over what the client wants. It’s as if the client has more power."
In this environment, the Valley’s beloved design agency model—a model based very much upon the idea that a designer knows the best way to build something—is destined to fail.
"What I found to be frustrating was, I felt like I was giving crown jewels to people who wouldn't [produce them]. That’s my frustration, the fact we didn’t ship anything, even though it was gorgeous, tangible work," Amit says. Ultimately, his firm could match Samsung’s paychecks by working with more receptive companies in the Valley, without going through the wringer of Samsung’s management.
Steve Jobs Syndrome doesn't work until it does. When argodesign founder Mark Rolston was chief creative officer at Frog, he developed a somewhat successful strategy for dealing with bureaucratic companies.

"It’s embarrassing to say...but we called it the Cowboy Method," he says. "We never said that out loud, but in reality, we’d pull a cowboy. We realized, these Korean or Japanese organizations had hired an American company to produce a design because they specifically wanted that Western attitude in the design. But when we pitched them in the headquarters, we’d be polite, go and bow, be understanding of their need for consensus. And that’s where we were failing."
Rolston said playing nice and being culturally sensitive didn't work at getting a concept produced. "So we just threw care to the wind and said, ‘This is the best idea, take it or leave it. You’re paying for what we have to say. Do it, or find some other way to get it done without us.’"

"It was risky. The first time we did it—we handed Sharp a project plan, and they said ‘Could we get this or that as well?’—we realized that sort of thing would be compromising quality for quantity. We say no. And we’re sitting there in that moment. They’re all quiet, talking amongst themselves in Japanese. And you think they’re going to say, ‘Go home.’ But then they say, ‘Okay.’"
Despite being the exact sort of Steve Jobs Syndrome Lee complains about, Rolston and Frog succeeded a few times using this technique. However, he admits that it was an inherently polarizing approach, and in many cases, would probably get his firm fired from an Asian account. "But at least an idea wouldn’t die a thousand pricks," Rolston says. "That to me was the relief."

Something Has To Give

Recently, Samsung released a television by the sought-after designer Yves Béhar and his firm, Fuseproject. Looking at the model, a relatively standard TV placed on a block, I wonder, was that really the best idea that one of the greatest industrial designers of our era would have pitched to Samsung? Or was it his death by a thousand pricks? (Béhar declined to speak for this story.)

Lee recognizes Samsung’s organizational shortcomings. Its managerial structure has made the company risk-averse. And its tightly integrated, low-margin assembly line approach to design frames any one-off, paradigm-questioning product a Béhar, Amit, or Rolston might produce as an outlying risk. Samsung’s collectivist corporate structure won’t gamble $10 million to bring a bold, unproven product to market—especially one that hinges on some holistic Apple-like experience—when the status quo grind of iterating old products and just tossing some new advertisable features into a sea of SKUs has a more predictable return. And that phenomenon is undoubtedly holding the company back.
But Lee doesn’t see Samsung changing its corporate strategy any time soon, even with its new global head of design, Lee Don-tae (who hails from the same studio as Apple design god Jonathan Ive). So he thinks it’s up to some of those independent design studios—the ones that are cashing Samsung checks whether or not their concepts make it to market—to take their lumps in the interest of moving the dialogue forward.
"No one’s going to fire me for saying it: You are part of the problem, suckers," Lee, who is now head of design at Visa, says. "I’m not saying you need to love kimchi or anything Korean, but try to figure out, not just ‘How can I not back down on an idea?’ but ‘How can I work around this and find an alternative?’ If you’re a designer, that’s your job, to be creative in boundaries or limitations."


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