Strategic Direction

How innovation keeps Samsung one step ahead: A chip off the new block
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(2006) "How innovation keeps Samsung one step ahead: A chip off the new block", Strategic Direction, Vol. 22 Issue: 2, pp.21-24, https://
doi.org/10.1108/02580540610644087
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 How innovation keeps Samsung one
step ahead
A chip off the new block

n the frantically evolving world of technology, its easy to get left behind. Todays

I must-haves soon find their way into the bargain bin and only those companies with their
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fingers on the pulse will remain competitive. We all know that innovation and technology
go together like burger and fries, but many organizations remain surprisingly ignorant of this
fact.
This is plainly not the case at Samsung, a company able to churn out a constant stream of
groundbreaking products that are envied and admired in almost equal measure. Its little
wonder the South Korean giant remains a world leader in many areas of the consumer
electronics and semiconductor industries.

Why its chips with everything at Samsung

An old adage reminds us that we invariably reap what we sow. Perhaps the scholar
responsible for these words of wisdom had Samsung in mind at the time of writing them.
Since the company attaches huge importance to the early stages of product development,
you would obviously be forgiven for thinking so.
And why are these early stages so important at Samsung? Because it proves more beneficial
to address key issues surrounding quality, cost and production time sooner rather than later.
The payoff from this includes:
B lower manufacturing costs;
B higher profits; and
B products reaching the market more swiftly.
Samsung CEO Jong-Yong Yun champions a philosophy that balances frugality with a
willingness to invest substantially to secure longer-term advantage. At Samsung, this means
high levels of investment into improving its core technologies. Significantly, these levels
remain constant even when profits dip. Yun is clearly not short of pluck to make a decision
that bucks industry norms.

Unlike many rivals, Samsung is able to remain ahead of the

game by launching new products that ensure profitability long
before the commodity stage looms.

DOI 10.1108/02580540610644087 VOL. 22 NO. 2 2006, pp. 21-24, Q Emerald Group Publishing Limited, ISSN 0258-0543 j STRATEGIC DIRECTION j PAGE 21
 Having these capabilities makes for a largely autonomous
organization able to control its own destiny to a considerable
extent.

But it makes sense. No business is immune from the impact of outside forces, and Samsung
has had its own share of storms to ride through. Asias 1997 financial crash and the
notoriously volatile chip market have seen to that. But instead of sitting around waiting for the
next one to strike, the company concentrates on an investment policy that has enabled:
B parts to be manufactured in-house; and
B the development of a range of products such as computers, CD players and mobile
phones that share common components like chipsets, display drivers and LCDs.
Having these capabilities makes for a largely autonomous organization able to control its
own destiny to a considerable extent. This is especially significant in view of the threat posed
by low-cost Chinese manufacturers ready to pounce as soon as existing products become
commodities. Unlike many rivals, Samsung is able to remain ahead of the game by
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launching new products that ensure profitability long before the commodity stage looms.
However, complacency has no part in this organization and Yun acknowledges there is
always room for improvement. To this end, Samsung:
B has strived to ensure that its high standards are replicated in other areas like design and
brand image. The company believes products that also look the part will appeal more to
the customer; and
B uses its design centers around the world to monitor any regional developments in
consumer tastes so it is able to respond quickly to market changes.
Samsung clearly enjoys being first and intends to keep it that way. It is now focusing on the
next phase of the digital revolution using nanotechnology and wireless networking among
other developments. Importantly, though, the ever-shrewd Yun only believes in aiming for
stars he considers within reach and Samsungs mighty presence is thus limited to markets it
has a realistic chance of becoming leader in.

HHV: partnerships and product development

If the Samsung story is impressive, then the one starring Hind High Vacuum borders on
fairytale. The Indian organization has risen from humble roots to become a respected player
in vacuum technology used in a diverse range of areas such as food processing, electronic
components and aerospace engineering. Ironically, HHV stumbled into this field by chance,
having initially set out to manufacture optical equipment. The company obviously possessed
an eye for opportunity even during its embryonic stages. This quality has been a driving
force ever since.
The growth of HHV is even more remarkable given that Indias business climate at the time
hindered any budding entrepreneur. And with its future uncertain, it is hardly surprising that
recruiting talent also proved difficult. By the same token, prospective customers were
naturally wary about a minor Indian company with no track record to call upon.
But these and other barriers have only served to spur HHV on and the rest, as they say, is
history. The company has been first to market with many impressive new and exclusive
products and now includes the likes of Siemens, Philips and Unilever among its customers.
HHV is certainly no overnight success story. The company began life in 1965 as a family
concern and has developed gradually ever since. But anyone deriding its rate of progress
would be well advised to remember that lasting success demands the completion of a
marathon rather than a sprint. This company is clearly in it for the long haul.

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PAGE 22 STRATEGIC DIRECTION VOL. 22 NO. 2 2006
 The learning curve has seen HHV develop through distinct phases. For example, during its
seminal years the main objectives were to develop skills and acquire a thorough
understanding of the technology required to make standard products. Since then, the
organization has steadily improved its capabilities and is now able to manufacture systems
that some others can only dream about.
The company has never been short on direction or purpose. Take, for example, the way it
attracted and retained customers during the early days. HHV identified a void in customer
care then filled it by providing a level of after-sales service previously unheard of. The
outcome? A reputation for reliability that sent trust levels soaring. This enabled the company
to forge long-term relations with its clients, many of whom effectively became partners on
subsequent projects.
A smart move? You bet. HHV has always kept its feet on the ground and remained conscious
of the limitations brought about by its size. Using partnerships to supplement in-house
capabilities was thus ideal, especially as the company selected partners regarded highly in
their respective fields. As a consequence, having specialist support on hand helped
increase the companys ability to develop advanced products and systems. Nice work if you
can get it.
Any organization is only as good as the people in it, and HHV clearly appreciates this fact.
The company takes the development of its workforce seriously and provides a positive
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working environment in which:

B experimenting is part of everyday life;
B risk taking is positively encouraged; and
B failure is never condemned.
Everyone is thus able to prosper from their mistakes without the fear of retribution hanging
over them. The company has to be applauded for this.
The development process for HHV personnel also involves exposure to various sources of
literature, visits to other companies and attendance at conferences, seminars and
exhibitions all around the world. The investment is worthwhile since there is always the
possibility of identifying future market opportunities along the way.
But HHV does not just turn out any old products blindly. Like Samsung, it has always done its
homework where customer needs are concerned. The tone for this was established right at
the outset, when visits were made to several Indian Research Institutions that had been
targeted as possible clients. Its a safe hunch to assume that the personal touch helped pave
the way to the fruitful partnerships that HHV continues to benefit from today.

How IKEA moves forward to stand still

Product development at IKEA is a different animal altogether. In fact, some might even
question the claim that development is actually taking place at all because many of the
furniture retailers products effectively remain the same for many years down the line.
At least on the surface they do. But we all know that appearances can be deceptive and that
is definitely the case here. IKEAs Lack table provides a perfect example.
The product originated in the 1970s and was the brainchild of IKEA of Sweden (IKEA-oS), a
business unit in the global organization and responsible for activities such as design and

Since then, the organization has steadily improved its

capabilities and is now able to manufacture systems that
some others can only dream about.

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VOL. 22 NO. 2 2006 STRATEGIC DIRECTION PAGE 23
 development. Other IKEA units handle the manufacture and distribution of Lack, which is
now produced in Poland.
Lack posed a unique challenge to IKEA after a pledge made in the 1980s to sell the product
at a price no competitor could ever hope to match. To its credit, the company proved as
good as its word and, even more remarkably, the basic version of Lack still retails at 99 LEK
over two decades later.
How does IKEA pull it off? Effectively through a system of ongoing assessment and
modification of all the processes involved in design, production, distribution and other
stages of the cycle. Development involves experimenting with various old and new
combinations of the resources used in these processes.
Buts it is not always that easy, as another Lack example illustrates. A version of the product
contained a genuine veneer surface that accounted for almost a third of the costs involved.
Naturally, IKEA saw this as fair game and eventually devised a new production technique.
The new method prints a less expensive veneer film on to the table surface without affecting
its appearance. However, finding this solution took two years and involved developers,
technicians, designers and hosts of other staff from across a range of business units and
divisions spanning different countries. But the effort is worthwhile, as providing the customer
with essentially the same product at a much lower cost to the organization is a decent payoff
in anyones book.
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Comment
The review is based upon: Information technology at IKEA: an open sesame solution or just
another type of facility? by Enrico Baraldi and Alexandra, The perpetual crisis machine by
Peter Lewis and Management of technology in an SME: a case study of Hind High Vacuum
Co. Pvt. Ltd by Sakhamuri Prasanth. The first article investigates the role of technology in
product development at IKEA. The authors closely analyze a specific IT system in relation to
the continuous development of the companys long-standing Lack table. While the article
concedes that technology has a place during the development process, it concludes that
the ITsystem in this case serves as little more than a data storage system at the conclusion of
the project. In relation to Lack, some useful practical implications can be drawn from IKEAs
brand of product development that involves seeking improvement by constant assessment
of all the resources used. Lewis provides an informative account of how Samsung is able to
build a range of innovative products that share common components, and how it profits by
getting its products to markets ahead of its competitors. He explains why the company
sustains high levels of investment in its core technologies and how it has helped the
company become independent and protect itself from outside threats. The article also refers
to Samsungs plans to capitalize on new technological developments. An interesting and
valuable read. The final piece chronicles the formation and subsequent development of Hind
High Vacuum, detailing how it has overcome initial barriers to become an industry leader in
vacuum technology. The author explains how the company has enhanced its capabilities by
forming partnerships with client companies and how this has enabled increasingly more
Keywords: complex systems to be built. He reveals that employees are encouraged to take risks and
Product development, how its people development can also help the company identify new opportunities. Another
Innovation more than useful article.

References
Baraldi, E. and Waluszewski, A. (2005), Information technology at IKEA: an open sesame solution or
just another type of facility?, Journal of Business Research, Vol. 58, pp. 1251-60, ISSN 0148-2963.
Lewis, P. (2005), The perpetual crisis machine, Fortune, September 5, pp. 36-43, ISSN 0738-5587.
Prasanth, S. (2005), Management of technology in an SME: a case study of Hind High Vacuum Co. Pvt.
Ltd, International Journal of Technology Management, Vol. 32 Nos 1/2, pp. 73-87, ISSN 0267-5730.

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