Samsung: Innovation in Organizations Case Study

I. Innovation is a necessary element for the sustainability of technology-based organizations. Innovation however, is believed to be an ongoing process. The five main challenges of innovation faced by organizations are generation of ideas, the environment, protecting the idea, execution of the idea to create a substantial outcome, and persuasion, or changing the image of the product among the potential buyers.

Generation of new ideas is the most essential part of sustaining innovation within organizations. When there are no new ideas, there can hardly be innovation. However, here idea does not just imply a thought striking a simpleton.

Rather, it is the solution to a problem; a problem that the organization strives to solve. In case of Samsung, it is observed that Jong Yong Yun as the new CEO changed many of the operations of the company. Earlier, Samsung was primarily a company that aped the technology of more successful companies like Sony or Mitsubishi and created their own products. These products were deliberately priced low in order to cater to customers who, due to lower budget, would end up purchasing their products.

However, once Yun took over the company, he realized that the best possible way to make the company stop from making loses is to turn its innovation strategy. Earlier, Samsung did not innovate. Rather it aped technology and design of premiere brands. He pushed the company to develop its own products. He stressed on innovating new products rather than replicating products of Sony or other companies.

The stress on innovation and generation of new ideas for the sake of development of new and futuristic products that are called the “wow products” became the insignia for the new strategy that Yun had for the company. The stress on product development was shifted from aping of established technology to development of attractive designs and advanced technology. Two strategies that were adopted by Samsung in order to help in idea generation are –

1. Samsung shifted its focus from aping the products of higher end, premiere brands like Sony, and concentrated in generation of new products, especially those with advanced technology and innovative designs.
2. Yun hired young and fresh engineers and managers in order to change the orientation of the company.

The environment of generation of the idea is essential, as this would help the employees work and produce a conducive surrounding for flow of ideas. In a highly bureaucratic organization, flow of idea is constrained by various rules, regulations, and hierarchical norms. The environment of the organization was changed in order to create a sustained environment for generation of ideas. The two strategies employed by Samsung to create a proper environment for idea generation are:

1. Yun discarded the bureaucratic structure of the organization and changed the structure to a merit based system in order to motivate these new young managers and engineers.
2. The culture of the organization was changed from one that was essentially of old nature where seniority and hierarchy gained preferences. This allowed managers to go through fewer hierarchical layers to produce their idea at the right place.

Ideas generated must be protected. In a highly competitive digital market, Samsung had to ensure that it created an advanced technology and retained exclusivity of the product. The idea become common once its availability is rampant. In order to maintain exclusivity of its innovation Samsung adopted the following strategy:

1. In order to remain ahead of the other companies in LCD technology market, and encouraging innovation, Samsung sources half of its filters from Sumitomo Chemical Company of Japan and the rest half it sources internally. This enables the company to hold an upper hand over its competitors as they are in a position to source their own screens for LCD technology.
2. Further, reducing the time from idea generation to production from one year to six months also helps the company to support innovation.

Ideas are not enough for a manufacturing company to create profit. These ideas once formulated must be put into place. The creation of the ideas into concrete outcome is an essential step in generation of innovation. An idea in itself is just an abstract concept, however, once it is given a tangible form, it becomes innovation. Samsung employs the following strategies to help its employees to give form to the ideas generated:

1. Ideas generated by the innovation team were quickly processed through hassle free organizational structure.
2. As Samsung’s new strategy was to concentrate more on manufacturing, the innovative ideas generated by the managers and engineers were immediately processed through the production process. The company also adopted steps to make the process more competitive in order to speed up the production process.

New products once manufactured must also be accepted by the market. If the market for the new product is not developed this would just leave the products in the warehouses increase inventory cost and mounting losses. In order to avoid this step the company employed the following strategy:

1. Samsung employed a new strategy of marketing and hired a new marketing head.
2. The company produced customer-oriented products such that they could product the products that would tab the unfulfilled needs of the customers.

How did Jong Yong Yun incorporate the five dimensions of entrepreneurial orientation into the reorganization of Samsung in 1996-1998? Please list 2 arguments for each dimension.

II. The five dimensions of entrepreneurial orientation are innovation, autonomy, risk-taking, competitive aggressiveness, and being proactive. Jong Yong Yun as CEO of Samsung displayed all of the above five entrepreneurial orientations.

Yun operated almost autonomously in changing the structure and the strategy of the company. Yun encouraged innovation through hiring of new and young engineers and forged a competitive culture that nurtured innovative product development. The whole process of changing the strategy of the company was a risk that Yun had taken. Further, changing the culture of a company completely is also a risky task that Yun employed.

Further Yun aimed to make Samsung a premiere brand when it had the reputation of being a low-cost product was also a risky adventure. Yun’s competitive aggressiveness helped Samsung become more innovative and achieve the position of one of premiere brands of the world. Yun did not wait for ideas to come to him. He went about making changes as and where he felt it necessary. His proactive decision-making helped the company to achieve a new height of success.

III. The international strategy adopted by Samsung is to project itself as a company provides innovative, stylistic, and high quality products. in order to project itself as a brand that nurtures innovation, the company employed one advertising agency that looked after its promotions globally.

They helped Samsung create this new image. Further, Samsung stopped selling products through chains like Wal-Mart and K-Mart that had the reputation of selling cheap products. Instead, it started marketing its products through higher end chains. This helped Samsung change its strategy and internally project itself as a premiere brand.

IV. Yun has been a successful leader to transform the company from a loss making, low-end digital manufacturer to an international premiere brand. The transformation was done by employing the following steps.

1. Setting a direction: Yun from the very beginning aimed at making Samsung a premiere brand. His idea was to change the image of the company and produce products that would suit that new image. That is why he stopped the production of low-end replicated technology products and stressed on innovation and product development. Yun also created a structure that would sustain this innovative culture.
2. Designing the organization: In order to create a new organization, Yun changed the structure and culture of the organization. Samsung’s hierarchical structure was changed to have fewer layers to stop bureaucracy. Secondly, he also created an environment that would nature innovation within the organization. Innovation became the key to the success of the company.
3. Nurturing a culture dedicated to excellence and ethical behavior: culture is an essential element that nurtures successful innovation. Yun believed that he had to create an organization that innovated from within and not through replication. Therefore, Yun hired young minds who would brainstorm in a different, more open and energetic environment to create new ideas and put it into implementation. Another endeavor in this direction was setting up the innovation lab in Seoul that natured futuristic design and technology.