Lessons From Samsung's Chairman Lee: Sometimes It Takes A Match

Samsung can teach us a lot of lessons. Sometimes, you just need to change everything you are doing. 

In 1995, Samsung chairman Lee Kun Hee piled 2,000 inoperable cellphones on the pavement at the company’s manufacturing plant in Gumi, South Korea. He then burnt them all to the ground. What was left was ground to dust by bulldozers.

According to an in-depth report on the internal processes of Samsung by Sam Grobart at Bloomberg Businessweek, Chairman Lee had given the cellphones to employees as Christmas gifts. They turned out not to work and the bonfire that ensued has been a defining moment in the way Samsung approaches its business ever since.

Chairman Lee, as he affectionately known, took over Samsung in the late 1980’s after the death of the company’s founder, his father. He then set out to build his own global empire. That included completely rethinking everything that the company had ever done. Lee assembled his executives in Frankfurt, Germany in the early 1990s and delivered a three-day speech, known now as the Frankfurt Declaration.

“Change everything but your wife and children,” was the main message, according to Grobart. In a way, this was the real bonfire that spurred Samsung to the heights of global manufacturing and the leader in the smartphone wars years later.

This is a lesson that Samsung’s competitors can learn from.

Burn Your Crappy Smartphones To The Ground

The competitive landscape in the smartphone business is … well, it’s not good. There is Samsung. There is Apple. Then there are a bunch of has-beens and wannabes. That list includes former powerhouses of the gadget world, companies that nobody ever thought would be in decline. Nokia, BlackBerry, Motorola, HTC and Sony are the headliner has-beens, while Huawei, LG and ZTE are among the wannabes. 

Media gets its hands on the Samsung Galaxy S4 Media gets its hands on the Samsung Galaxy S4

What is the lesson that each can learn from Samsung? Each should take its mediocre and middling smartphones and burn them to the ground. Then get that bulldozer and grind them to dust. 

Anybody who has ever lived with an HTC Thunderbolt would probably be extremely happy to see a pile of them in flames. Or maybe a group of Motorola Razrs or Atrix smartphones. Or anything running BlackBerry OS 7. These companies got complacent and made mediocre products aimed at the top of the market. Samsung ate their lunch. 

And now they need to completely rethink their products to compete. In the end, that should lead consumers to better choices of smartphones and, hopefully, cheaper prices. 

Already Burning

Some burning has already begun, of course. Google is clearing the Motorola pipeline and working on a so-called “X” smartphone that has had some wild rumors attached to it, such as personally customizable hardware and a 4000 mAh battery. (For comparison, Samsung's new Galaxy S4 will sport a 2600 mAh battery.)

Similarly, after the debacle that was 2011 — see: Thunderbolt and its ilk — HTC redesigned its products and came out with the critically acclaimed HTC One X in 2012 and now the HTC One 2013. Great phones in hand, HTC just now needs to burn everything else down about its approach, from its marketing to distribution. The company has started this approach with aggressive marketing efforts aimed against Samsung’s newest Galaxy S4 smartphones. BlackBerry basically set fire to its entire smartphone lineup and is coming fresh with BlackBerry 10, which has shown early signs of success. 

Samsung Electronics president and head of mobile JK Shin introduces Galaxy S4 Samsung Electronics president and head of mobile JK Shin introduces Galaxy S4

Nokia may be in a tough spot. Its “burning” metaphor has already come and passed when CEO Stephen Elop wrote the infamous “burning platform” memo, ditched the company’s MeeGo and Symbian operating systems and went all-in with Microsoft’s Windows Phone mobile operating system. As yet that bet has not really paid off for Nokia and it's hard to envision a future where it will.

The smartphone industry is a fickle beast. Nokia’s example shows that, even when you do pile up your old strategy into a rhetorical pile and set it on fire, that does not guarantee you will succeed on the other end.

There is more to Samsung’s ascendancy than Chairman Lee’s pile of burning plastic and metal, of course. Samsung succeeds because it is hyper-focused, controls most of its own component processing and spends a ton of money on marketing. It can iterate on ideas faster than its rivals and spread its distribution further. Its rivals, HTC in particular, just don't have the bandwidth to match it. 

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