Friday, August 26, 2005

Crisis is good!

A highly interesting article in the last issue of Fortune (Sept. 5, 2005, no. 15) explains how Jong-Yong Yun, CEO of Samsung, is relentlessly building a culture of perpetual crisis at Samsung Electronics.

The South-Korean powerhouse has become the worlds largest consumer electronics company.

Without a doubt, Samsung is also a leading company on innovation, registering 1600 patents in 2004 (more than Intel), and spending a whopping 9% of revenue on R&D. The company employs around 27.000 researchers, 40% of it's global workforce. It seems like Yun's strategy to control the core technologies of digital convergence simply ensures that the profits keep flowing in.

However, according to Yun, it is not the corporate strategy that made Samsung so successful. Rather, it is the corporate culture that support the execution of this strategy that's vital.

Yun actively and relentlessly spreads a philosophy which emphasizes that disaster is just around the corner:

  • Markets for today's cash cows may implode overnight.
  • Reinvigorated competitors such as Apple, HP, Intel, Microsoft, Motorola and Sony may bounce back.
  • Chinese companies will inevitably and aggressively take away the electronics commodity market (a strategy that Samsung itself knows very well from its history). Product innovation is the only remedy.
  • A constant obsession with cutting cost and complexity is needed to lead the innovation pace in consumer electronics and be first to market.
  • Success only increases the danger of complacency and eventual failure.

Is this way, the cultural ability to deal with crises can indeed become a competitive edge over companies that are less agile in dealing with disaster.

Thursday, August 18, 2005

Innovating Globally

According to Patricia Sellers a.o. in Fortune (Vol. 152, No. 2, July 25, 2005) operating globally involves more than reaching out to far-flung locales for needy customers, low-cost labor, and ready capital.
Increasingly, large companies are also globalizing innovation as well.
  • Jeff Immelt from GE is reaching out to try multiple ideas. To build a better wind turbine, it first built an international team of researchers in Germany, China, India and the USA.
  • A.G. Lafley from Procter and Gamble has improved R&D productivity by co-developing brands with other companies from around the globe.
  • Chinese engineers in the Beijing lab from Motorola conceived a Linux-based mobile phone, now a crucial part of its software strategy.
  • The revolutionary (non processor frequency based) technology behind Intels Centrino wireless technology was developed in Haifa, Israel where challenging orthodox ideas is rooted in the culture.
  • Swiss-based Novartis is developing new medicines in a Shanghai laboratory, specializing in ancient remedies.
  • Dutch electronics giant Philips got the idea for a core product, their new home heart defibrillator "HeartStart", via a US-based research lab.

Accessing the brains everywhere in the world is paying of for these companies apparently.