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Samsung Rising : book summary

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Samsung Rising : book summary

  1. 1. Samsung Rising Geoffrey Cain Book Summary
  2. 2. To get a job with Samsung, Hyundai, LG, SK. Then your parents and society, say you're a success and brag about you to their friends. If you don’t get into Samsung, well, then you’re a failure and you don’t exist. Locals refer to South Korea as the Republic of Samsung.
  3. 3. South Korea’s economy hinges not just on the Samsung group as a whole but on a single company within the group. South Koreans refer to it as the “Samsung risk”. And many see it as an urgent concern.
  4. 4. “I think people are most happy when they know what gives them their life purpose” read a quote from Chairman Lee Byung-chul (B.C.Lee) – Samsung’s founder - on a plaque. “I am unshakable in my faith that strengthening the nation through business is the path I must walk”
  5. 5. While American companies were keen to snap up technical specialists and give them short term projects rewarded with short-term incentives, Samsung became obsessed with cultivating lifetime generalists – creating what became known as “Samsung Men”. Future managers shuffled into new roles every few years by a powerful HR department. Company was family and family was company.
  6. 6. Nunchi is the Korean art of gauging other’s moods, even if the other person says nothing. Unlike America’s talkative, more straightforward business culture, B.C. made Samsung a place of terse and spare communications. You had to feel your boss’ emotions. To survive, you had to master nunchi.
  7. 7. B.C. built his first fortune using political savvy and by playing into the sudden postwar boom. In the 1950s, people began using the word chaebol or “wealth clan” to describe family empires like Samsung or Hyundai.
  8. 8. In 1961, General Park Chung-hee mounted a coup d’e’tat and became South Korea’s Dictator. As Samsung’s founder and a reviled symbol of illicit wealth in South Korea, B.C. was on the interrogation list. B.C. had to give up large portions of his three banks to the state and cough up $4,400,000 in unpaid taxes and penalties. Samsung would be expected to fully cooperate with the General’s plans to build a new, wealthy, powerful nation. If B.C. refused to cooperate, a prison cell awaited.
  9. 9. B.C. Lee became the first chairman of the Federation of Korean Industries, a council of business elders who convened to align their goals with the regime’s and to protect the chaebol groups from heavy handed intervention. B.C. Lee’s son was implicated in a corruption scandal and to save his son, he was forced to step down and surrender 51% of his fertilizer plant to the government.
  10. 10. With the fertilizer business gutted, B.C. turned Samsung to a much riskier, fast paced endeavor; electronics. In 1983, B.C. asked his right hand man to publish a statement called Tokyo Declaration in the company owned newspaper. “We hope to advance into the semiconductor industry, on the strength of our people’s great mental fortitude and creativity.”
  11. 11. At the insistence of B.C. (the Chairman), Samsung began a series of physical and mental conditioning exercises for its managers. The managers were asked to hike a distance of sixty four kilometers through the mountains – through day and night. The hike was designed to test the team’s mental toughness as they prepared to race forward making a 64K DRAM chipset, an early semi-conductor used in calculators.
  12. 12. Samsung christened its first semi-conductor fabrication plant in 1983. the company built it in only six months rather than the industry standard of three years.
  13. 13. Samsung’s engineers where granted limited access to Micron, a Idaho based chip maker, for technology training. The Americans banned the Korean engineers from touching computers or going in certain sensitive rooms. So the Korean engineers visited with their eyes open, memorizing the diagrams they saw. They returned to their hotel room each night to recreate the diagrams, piecing together the incredibly complicated semiconductor charts from memory.
  14. 14. Samsung, the butt of the technology world’s jokes just 2 decades earlier, leapt out of nowhere to become the designer of just about every type of premium electronic device in the world, as well as the parts inside them.
  15. 15. The way Samsung loyalists talk about the chairman and his family – the way they venerate him and seem to regiment themselves as a hard-fighting units inside the company in almost military fashion – is like the culture of North Korea.
  16. 16. North Korea’s and Samsung’s common heritage shows itself in 5 traditions; the extreme reverence for family dynasties, the belief that their strength is derived from an ethnic bloodline, the promulgation of military-like rituals, ceremonies and slogans, nationalistic paranoia and distrust of outsiders; and the veneration of a supposedly wise, paternalistic emperor-like leader.
  17. 17. In a seemingly royal tradition, purges of potential rivals within the family began following B.C.’s death, members of the family were let go from Chairman Lee II’s domain. My nickname is ‘the silent one’; the new chairman of Samsung admitted. At home, I’m known as the person who’s no fun.
  18. 18. While, Lee II was slow to taking the reins of Samsung Electronics, he gradually began to rise to the occasion. In 1991, when the Cold War ended, he realized that the company was not keeping up with the emerging global boom.
  19. 19. Chairman Lee II called his executives and yelled at them for an hour, demanding that his call be recorded and distributed within the executive group. Samsung would play the recordings of the chairman’s voice for years in company buildings as a continuing reminder of the mandate of every Samsung employee.
  20. 20. In 1993, Lee II invited his executives to Frankfurt and addressed them for 3 days. This event, called the Frankfurt declaration gave rise to a an internal booklet called Samsung’s New Management. Change everything except your wife and children, he said, using a phrase that became his motto. Samsung called this philosophy ‘perpetual crisis’ Chairman Lee II went to Samsung offices across the world, giving speeches. In the end, his speeches came to 8,500 pages of transcripts.
  21. 21. Samsung began distributing the book of proverbs, called Change Begins with Me: Samsung’s new management. And a raft of other educational material to every recruit. There were comic books and posters all around the office.
  22. 22. The Chairman summoned factory workers and engineers to a courtyard. They were made to wear headband that read Quality First. There was a mountain of cellphones, fax machines – over 140,000 devices worth over $50 million. Employees were asked to pick an item, smash it and throw into a pile. In the end they the covered the pile, poured petrol and set them on fire. After they had melted and burnt a bulldozer razed the remains. “If you continue to make poor quality products like these,” the chairman said, “I’ll come back and do the same thing.”
  23. 23. The Asian debt crisis of 1997 was a painful moment for Samsung. They laid off one-third of its workforce and sold off multiple non-core business. Samsung started focusing on the American cell phone market and in 2 years its stock rose from its crisis stricken discount rate by 233% to $227 a share. Samsung was exporting its way out of the financial crisis.
  24. 24. But Samsung was known as a cheap follower. The phrase “Made in Korea” was an international laughing stock. Samsung hired Gordon Bruce from the renowned ArtCenter College of Design in Pasadena to set up IDS – Innovation Design Lab of Samsung. “I want you to do 3 things,” the chairman explained. “first make my designers creative, second make them globally aware. Finally, I expect a three percent return.”
  25. 25. Chairman Lee II said, “The upcoming 21st century marks the Age of Culture, an era in which intellectual assets will determine a company's worth. No longer is a company selling products. Instead they have to sell their philosophy and culture.”
  26. 26. Gordon Bruce and designer Tom Hardy drew on the Korean symbolism of the taegeuk which means “supreme ultimate” to evolve the new design slogan – “Balance of Reason and Feeling”
  27. 27. In 2008 Chairman Lee was convicted for tax evasion and breach of trust, claiming he damaged his company’s interests and profits by forcing Samsung subsidiaries to sell shares at unfairly low prices to his son. He had been stripped of his imperial aura, shamed and disgraced.
  28. 28. Despite the chairman’s guilty verdict, the whistleblower, Kim Yong-chul felt little sense of triumph. Friends and colleagues stopped calling him. Once a popular prosecutor, he was now persona non grata.
  29. 29. But in December 2008, the president announced special amnesty to Chairman Lee II. “The latest pardon reconfirms the common saying in South Korea that Samsung lies above the law and the government.”
  30. 30. But Samsung and others were pursuing carrier-centric marketing, putting more efforts into winning carriers rather than consumers. Samsung found itself near the bottom of the mobile category, with Apple on top.
  31. 31. Samsung hired Todd Pendleton from Nike. There was this growing base of Android users who could become a tribe, but they needed a leader. Samsung wanted to be that leader.
  32. 32. Trucks carrying fresh apples arrived at the Texas headquarters of Samsung. Baskets were placed in the elevator banks and break rooms, so that Samsung employees could be reminded of their mission – to take a bite out of Apple.
  33. 33. In a Coke Pepsi redux, Samsung marketers attacked Apple head-on so that they could establish themselves as the challenger brand. They then redirected the marketing budgets at consumers rather than carriers and hired a new agency. They created the ‘The Next Big Thing Is Already Here’ commercials poking fun at Apple.
  34. 34. The campaign was a phenomenal success, In 2012, Samsung’s ‘Next Big Thing’ was the most popular tech ad. The Wall Street Journal headline in 2013 read ‘Has Apple Lost Its Cool to Samsung?”
  35. 35. Samsung executives were frustrated at the omnipresence of iPhones in the hands of celebrities. It was free advertising for Apple without getting paid by them. White Glove was Samsung’s guerilla marketing program where they gave Samsung products to celebrities. The famous Ellen DeGeneres Oscar selfie was a result of this program.
  36. 36. As Samsung continued its forays into software, Google was furious with the conflict of interest and threat to their business. Android chief, Sundar Pichai went to negotiate with Samsung and in 2014, Google and Samsung signed a wide ranging global deal.
  37. 37. In 2014, Samsung pledged to do away with their authoritarian top-down hierarchy. This initiative was called ‘Start-up Samsung’ Jay Lee (the Chairman’s son) was trying to reboot the company.
  38. 38. Samsung’s managers continued to be in a frenzy to beat Apple in the marketplace, to replace Apple as the world’s most famous and successful electronic device company. And this desperate desire would expose a critical hole in their corporate culture.
  39. 39. Untouchable “generals” charged headlong into each new project and even when things looked iffy, the field troops were expected to praise them to the skies, convincing themselves of their company’s and leader’s greatness. “In the chase to beat Apple, it looks like Samsung crammed the Note 7 with features until it became uncontrollable”
  40. 40. After the Galaxy Note 7 fiasco, Samsung launched Galaxy S8 to rave reviews. Consumers are fickle. The love of a beautiful product in their hands and a compelling brand are ultimately what matter. Even after an embarrassing recall, consumers move on quickly and forget easily.
  41. 41. But then Jay Lee got embroiled in South Korea’s version of the Watergate scandal and was sentenced to prison on charges of bribery, embezzlement and perjury. But he retained his title of vice chairman and his position on the board until his second trial. Despite the fall of the Lee dynasty. South Korea is still the Republic of Samsung and the nation cannot survive without Samsung.
  42. 42. In September 2018, President Moon made a historic trip to North Korea for a diplomatic mission, accompanying him, despite the conviction was Jay Lee. As per South Korean business tradition, Jay Lee’s criminal conviction seemed to be of little importance to political leaders as long as he and his company helped the national interest,
  43. 43. ‘We look around and our Samsung spirit exists no more, our empire is not an empire. We are becoming like any corporation.” lamented a former Samsung vice president.