Samsung – from fast-follower to first-mover.
There has been a lot of talk over the last week with Samsung increasing its share in the market even beyond Nokia. This was the final but necessary blow to Nokia’s multi-decade-old leadership in the mobile industry.
It’s actually interesting to see that there are few people who ask the very obvious question: how did that happen?Samsung’s success is based on nothing else than an extreme focus on execution. Samsung is the most prevalent example of how you can turn from a fast-follower into a first-mover. Yes, let’s face it. By taking over the lead from the dinosaur Nokia, Samsung has effectively made itself not only the market-leader, but also the product- and innovation-leader. If we only look back five years, Samsung was nowhere close to Nokia. Back then Samsung did well here and there, but was still the underdog compared to Nokia and Motorola. Its products were good in quality and already very popular in its home market South Korea, but none of them had the power to take on those stylish, trendy and high-quality phones from Nokia. Nokia was THE brand back then.
But then came the window of opportunity opened by Apple and that window was wide open for everyone, but only Samsung managed to fully take advantage of it. There was little clarity regarding which operating software would prevail. S60 was still a big name and Nokia would encourage other handset manufacturers to use its OS. Google pushed Android, but didn’t have the huge ecosystem that Apple already offered. Microsoft also emerged trying to use its dominance in the PC-industry to enter the mobile OS market. And to tell the truth, Samsung also was contemplating for quite some time, trying Android, trying out S60, trying out Microsoft and also trying out its own OS “Bada” (which actually still exists today somewhere in Korea).
However, while everyone was busy contemplating, Samsung did what it could do best: it made a decision and then executed on it. Samsung realized two things, 1) it would be too expensive and time-consuming to create a proprietary eco-system which was required as the base for an OS, and 2) there was only one OS that had the potential to become a competitive ecosystem against Apple, and that was Android.
So with these two insights in mind Samsung acted rigorously. If you have ever visited the Samsung headquarter in Korea or even one of its factories, you will agree that Samsung is one of the best organized companies in the world. Everything is meticulously organized. There are clear-cut structures, processes and designs for everything. From the shape of its office-buildings, the visitor registration process to the cafeteria and shops in the basement, there is no spot where you can find an “undermanaged” area. There is even a wedding-hall in the basement of its headquarters, so its employees have “quick” access to it!
So if Toyota invented “lean production”, Samsung took it to the next level by inventing “fast lean production”. Samsung basically executed faster than anybody else. Life is sometimes tough for its employees, Samsung has a rigorous approach to putting resources together once a decision is made and if that decision requires quick action, Samsung is an organization that can put together large development-teams and assign million-dollar budgets within hours. Work – Life balance doesn’t even come into the equation. It can analyse competitor models and have reports for its top-management within days. Samsung also has the managerial capability of putting things together on a larger-scale. Let’s not forget: for Samsung, mobile-phones is just one business-unit beyond its other electronics businesses, e.g. the mission-critical semiconductors! And it is just one business-unit beyond all its other group-businesses that stretch from insurance, to amusement-parks, to ship-building and advertising. So Samsung is a company that has the resources and scale of a huge multinational, but also the decision-making of a small innovator and attacker. Which other company in the world has that?
Once Samsung realized that Android-based phones were doing well, it quickly put in tons of resources. In Korea alone Samsung sold more than 3 million units of one smartphone model in 2010 already. So with the technological question solved, the battle quickly became very familiar to Samsung. Now was the time of scale-economies and learning-curve, i.e. how fast are you at generating which quantity and how much do you learn every time you make the product. As stated above, that is where Samsung is invincible and the interesting point now is that Samsung has turned from a fast-follower into the number one and first-mover.
You don’t believe me? Then let’s look at the car-industry, because there Toyota was also seen as a fast-follower for decades. There was always a sentiment in the US and Europe that the Japanese car-maker is really good in quality, but nowhere near to innovation. These days everybody knows where hybrid-motors came from, certainly not the big dinosaurs in the US or Europe.