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Organizational theory and Design

Topic
Samsung Group Background & Article Summary Leadership and process oriented management Structural Change Communication, Technology development Analysis Recommendations Appendix Pioneering the digital, Samsung website How Samsung transformed its corporate R&D center, Sangmoon Park Samsung Group Timeline, Samsung website

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6-7 8-16 17-21

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Samsung Group Background and Article Summary

Samsung was funded in 1938 Samsungs mission statement and slogans has reflected the worlds development as well as its own. Among their slogans are: Economic contribution to the nation, Priority to human resources and pursuit of rationalism each reflective of one stage in Samsungs growth from a domestic to a global electronics producer Entered the world consumer and commercial electronics business in 1968 Samsung Group felt the need for a change in their organization and mission statement moving from being a technology follower to a world leader in technology with superior products and which led to substantial change in Samsung organizational structure. Samsung has experienced tremendous growth thereafter. its total sales triple and its operating income increase five-fold since the Asian financial crisis1 In the 1990s Samsung transformed its mission statement to reflect their growth and operations, rapid changes in the world economy, and escalating competition from well-established rivals2 Dec,2004 Samsung group export revenue reached 50 billion USD, 21% of Koreas revenue from export; In Feb 2005 Samsung was selected as 39th global Allstar by fortune for most admired company Leadership commitment to structural change, strong teamwork, use of cross functional and horizontal structure, along with extensive use of communication technology has driven the organization towards success Sangmoon Park in his article, How Samsung transformed its corporate R&D center, goes specifically over the development process of the Samsung corporate R&D center-Samsung Advanced Institute of
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HOW SAMSUNG TRANSFORMED ITS CORPORATE R&D CENTER, Sangmoon Park, Youngjoon Gil. Research Technology Management. Washington: Jul/Aug 2006.Vol. 49, Iss. 4; pg. 24, 6 pgs 2 Samsung website: www.samsung.com.

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Technology (SAIT) - and also Samsung organizational transformation. Among others structural, leadership and process oriented management as well as technology related aspects of the transformation in Samsung Group were emphasized in this article.

Leadership and process oriented management

One important aspect of the successful implementation of transformation plan for Samsung SAIT3 was consensus among the top management. Even though many researchers left the company during the implementation period management pursued the major transformation plan. Leadership insured that there is a balance between the investment made in corporate research centers for long term projects and short term goals of the corporation that would keep the company in a financially sustainable position. In early and mid 90s Samsungs cost efficient management orientation was replaced by quality oriented management and management set the bar high in terms of projects quality and achievements.

Structural Change
Samsung went through tremendous structural change in recent decades. Samsung established SAIT in 1987 that unlike its rival R&D centers created a balance between basic research areas and applied technologies aimed towards short and long term financial sustainability. Organizational structure was changed to research laboratories around major research fields and new ties between business divisions and R&D centers were created to guarantee a consistent transformation with minimal waste of energy and resources. Customer value creation or methodology of DFSS originally designed for management was successfully incorporated and customized into R&D process stages which enabled Samsung to become more efficient in developing customer value and satisfaction. Samsung efficiently evaluated its R&D projects based on objectives achieved, transfer of technology to business divisions and future plans for the project. Roles were modified and created to collaborate with rapid growth and technological expansion.
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Samsung corporate R&D center-Samsung Advanced Institute of Technology

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Management continuously recruited talented R&D employees and practiced a new evaluation system that ranked employees based on their experience and expertise for projects and team leadership positions.

Communication and Technology development

It is quite bizarre that Moving from a technology follower position to a leader in technology requires technological capabilities, adequate research areas and experience in R&D management which Samsung Group did not have. However, SAIT helped Samsung increase its R&D performance resulting in more business lines and patents coming out of R&D projects. SAIT focused on areas that were tied into new and existing business opportunities; such as digital technology, nanotechnology energy optoelectronics and biotechnology. Samsung was open to creative ideas and methods. They used technology tree technique to "identify key technologies and relationships among core technologies" helping them better understand the significance of each project and to set priorities. Information Technology was routinely used and upgraded to coordinate between Samsungs international bodies around the world.

Analysis
Concepts of organizational structure design and change, goal setting, adaptation to environmental uncertainty, innovation, and interorganizational relationships are significant in explaining Samsung Groups past, development period and its future. Leadership commitment to change is perhaps the most important element of any major transformation as Oracle Applications a major vendor of ERP4 systems also suggests that for any major organizational transformation. Leadership went on with the plan even though some managers had to give up some of their power and new jobs were created. A rapid change in the organizational structure of the Samsung Group, viewed as moving towards a more horizontal organization, creation of cross functional units and collaboration among R&D centers, product development, marketing

Enterprise Resource Planning

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and also continuous assessment of the rivals programs, and the market altogether contributed to companys growth. Leadership assured that strategies defined for R&D are precisely adjusted to corporate short and long term investments plan. Unlike traditional R&D project management, SAIT based evaluation of its projects on discussion and project review which led to better "knowledge management" and understanding between SAIT and experts from different business units. Collaboration between SAIT and development and manufacturing groups became an effective tool which facilitated commercialization of their projects.

Recommendations
This article could further evaluate the changing role of management, as their role was critical during the transformation period, and also the current challenges facing Samsung and how the company should deal with them. Having moved from a technological follower to leader in technology and the more important role of R&D in maintaining this position Samsung perhaps needs to prepare for another organizational change. SAIT should begin developing new business areas by investing in not very reassuring technologies hopping to be able to commercialize them. Building competitive advantage in core and new technologies, and also research results management are other challenges that now Samsung is facing. Geographical expansion of R&D also makes it more difficult to coordinate between different local and distant R&D units in terms of global technology changes and human resource and specially recruitment process management and making sure the work culture and values that Samsung has created will be shared globally. In conclusion, important elements in bringing about a successful transformation of Samsung organization include consensus among stakeholder on the need for organizational change, determined and committed top management, close relation between business units, stable investment, effective performance evaluation and "actionable planning."

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Appendix
Pioneering the digital age With the start of the second millennium, SAMSUNG begins its second century. The digital age has brought revolutionary opportunities and changes to global business. The SAMSUNG Group has responded to these changes and is currently upgrading its business structure, management perspective, and corporate culture to meet global standards. At SAMSUNG, we see every challenge as an opportunity, and believe that we are perfectly positioned to be one of the world's recognized leaders in digital technology. Our commitment to being "World's Best" has won us the number one global market share for thirteen of our products. Our target is to have thirty of our products rated "number one in world products" by 2005, adding digital TVs, IMT 2000, and printers to our current list of world market leaders: semiconductors, TFT-LCDs, monitors and CDMA mobile phones. Always a step ahead, we're making historic advances in research and development of our overall semiconductor line, including flash memory and non-memory, custom semiconductors, DRAM and SRAM. An example of this is SAMSUNG Electronics, which remains one of the world's "top 10" in US patents for four consecutive years, with 13,000 researchers representing a US$ 1.7 billion investment in Research and Development. Financially, SAMSUNG is committed to being the World's Best, with the SAMSUNG Card, a payment solution selected as the "Best Card Company in the New Millennium" by Master Card. The SAMSUNG Card secured more than 1 million members within one year through the release of "Aha Loan Pass," the first loan-only card in Korea. Euromoney has also selected SAMSUNG Securities as the "Best Security Company" for the 3rd consecutive year, and SAMSUNG Life Insurance was ranked as "10th Largest Company" by Fortune's "Global 500" in the Life/Health insurance category. We are also actively promoting our brand value, a key engine of business growth. SAMSUNG's brand value increased to US$8.31 billion in 2002 from US$6.37 billion in 2001 and was recognized by Interbrand Corporation as the fastest growing global brand. Our success in achieving global competitiveness is achieved through continually improving our financial structure and profitability, as we examine the structure of our own organization. Reducing production costs and working hard to maintain our brand image has greatly contributed to our progress, and SAMSUNG Electronics has secured a nation's credit rating from S&P and Moody's, while SAMSUNG Fire also has been recognized by S&P for its stability and growth potential, receiving its second consecutive A rating. The quick pace of our development is reflected in our management philosophy "We will devote our human resources and technology to create superior products and services, thereby contributing to a better global society." Our active participation in sporting events has helped promote community spirit, as well as returning corporate profits to society. As a Worldwide Olympic partner in the wireless 6

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equipment sector for the 2000 Sydney Olympics, SAMSUNG provided 25,000 advanced digital wireless telecommunication devices including mobile phones. We have also served in that capacity at the 1999 Nagano Winter Olympics, and will be a Worldwide Olympic Partner in the 2006 Torino Olympics and 2008 Beijing Olympics. SAMSUNG is an active contributor to the Asian Games, SAMSUNG Nations Cup Riding Competition, SAMSUNG Running Festival, SAMSUNG World Championship (a U.S. LPGA Tour), and many other sporting events around the world. In 2000, SAMSUNG started its management program with a new twist and aimed to stay ahead of the great waves of digital changes now engulfing the world. We expect nothing less than to lead the digitalization of society with our advanced technologies, competitive products, and professional human resources.

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HOW SAMSU G TRA SFORMED ITS CORPORATE R&D CE TER Sangmoon Park, Youngjoon Gil. Research Technology Management. Washington: Jul/Aug 2006.Vol. 49, Iss. 4; pg. 24, 6 pgs Subjects: Classification Codes Locations: Companies: Author(s): Document types: Document features: Publication title: Source type: ISSN: ProQuest document ID: Text Word Count Document URL: Case studies, Strategic management, Research centers, Organizational change, Six Sigma, Electronics industry 9110, 9190, 2310, 8650, 5400, 5320 United States--US Samsung Group (NAICS: 334310, 335221 ) Sangmoon Park, Youngjoon Gil Feature References, Diagrams Research Technology Management. Washington: Jul/Aug 2006. Vol. 49, Iss. 4; pg. 24, 6 pgs Periodical 08956308 1079318431 3504 http://proxy.lib.sfu.ca/login?url=http://proquest.umi.com.proxy.lib.sfu.ca /pq dweb?did=1079318431&sid=12&Fmt=3&clientId=3667&RQT=309&V Name =PQD

Abstract (Document Summary) A study of the strategic transformation of Samsung's corporate R&D center (SAIT) shows how the R&D center transformed its organization and processes to align the company's business units for value creation. In the early days, SAIT struggled to find a position between a development-oriented and a research-oriented center. During the transformation, SAIT enhanced its R&D capabilities by aligning with business strategies and integrating R&D processes with Design for Six Sigma (DFSS). Key drivers of the transformation included consensus on the need for organizational change, strong leadership from top management, close alignment of R&D and the business units, and actionable planning and performance management. [PUBLICATION ABSTRACT]

Copyright Industrial Research Institute, Incorporated Jul/Aug 2006 [Headnote] A strategic transformation allowed Samsung to leapfrog from technology follower to leader. OVERVIEW: 8

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A study of the strategic transformation of Samsung's corporate R&D center (SAIT) shows how the R&D center transformed its organization and processes to align the company's business units for value creation. In the early days, SAIT struggled to find a position between a development-oriented and a research-oriented center. During the transformation, SAIT enhanced its R&D capabilities by aligning with business strategies and integrating R&D processes with Design for Six Sigma (DFSS). Key drivers of the transformation included consensus on the need for organizational change, strong leadership from top management, close alignment of R&D and the business units, and actionable planning and performance management. KEY CONCEPTS: corporate transformation, R&D performance, technology follower, technology leader.

Technological capability is recognized as a key engine of both short-term business performance and long-term survival (1,2,3). In a difficult environment for global leaders, technology followers have scarcely derived any better performance from their technology capabilities. However, Samsung's recent success has shown how important product development and manufacturing have been in the face of fierce market competition. Samsung has become one of the big players in the global electronics business, which it entered in 1968. Total sales of the Samsung Group and its 63 affiliates reached $122 billion in 2004, up from $102 billion in 2003. This accounted for 20.7 percent of Korea's total exports in 2004. The conglomerate has become a global leader in such technology-intensive businesses as DRAM semiconductors, LCD (Liquid Crystal Display), and handsets. In 2005, Samsung Electronics had total sales of W57.46 trillion (US$58.24 billion) and net profit of W7.64 trillion. Compared to other global leaders with huge net losses or flat growth in recent years, Samsung has seen its total sales triple and its operating income increase five-fold since the Asian financial crisis. This performance resulted from Samsung's commitment to technology management and stable R&D investment aimed at enhancing the competitiveness of existing business areas and identifying new business opportunities. The high level of uncertainty in R&D has made it difficult to manage corporate research centers and R&D departments in business units (4). Previous studies have suggested numerous management practices, including close alignment of R&D strategy with business strategy, balance between corporate research centers for longterm projects and R&D departments in business units for short-term development, and cross-functional integration between R&D and marketing departments (5,6). However, most of these practices are derived from the experiences of technology leaders. There are few studies of how the corporate R&D centers of technology followers can conduct R&D activities that create value for their business units. Consequently, this paper investigates how corporate R&D centers of technology followers can transform their major R&D management systems. More specifically, it examines the development of the Samsung corporate R&D center-Samsung Advanced Institute of Technology (SAIT)-and its organizational transformation processes.

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Samsung's rapid growth has resulted from the development of technological capabilities adhering to the philosophy of its founder and top management. In 1987, the company established a corporate R&D center to develop technology capabilities for value creation in diverse business areas and provide the next growth engines for global competition. This R&D center has pursued the development of basic technologies for new businesses and applied technologies for product development and manufacturing problems in the business divisions. However, unlike the corporate R&D centers of global leaders, which focused on basic technologies, the Samsung R&D center struck a balance between basic research areas and applied technologies. It was also expected to support diverse business divisions with different levels of technological capabilities. For the competitive business divisions, it would develop more basic technologies and transfer them to business development groups for commercialization. It also provided research support for technologically inexperienced business areas. These mixed roles allowed the R&D center to implement management systems characteristic of both research and development labs. However, they also made it difficult for Samsung to adopt the advanced R&D management systems that were used by the corporate research centers of global leaders. Still, although there were many problems in the development of mission, organizational processes, and accumulation of technological capabilities after inception, close ties between the corporate R&D center and business divisions in Samsung were created through organizational transformation. Evolution of the Corporate R&D Center Transformation of the Samsung corporate R&D center (SAIT) took place over four periods: 1. 1987 to Early 1990.-SAIT was founded in 1987 to prepare future businesses and support existing ones by developing advanced technologies. Despite the high expectations, SAIT had difficulty in maintaining its unique status among the company's other R&D centers, which were focused mostly on short-term and applications-oriented R&D projects. In uncomfortable relationships with the business units, SAIT invested significant resources in short-term R&D projects to satisfy the needs of business units. Eighty percent of R&D projects were allocated to applied development. This created conflict between SAIT and the business unit R&D centers. 2. Early and Mid 1990s.-The Samsung Group adopted a new management philosophy and redirected its cost-oriented management to quality-oriented management. Since 1993, this new management philosophy has penetrated into all business lines and given SAIT an opportunity to improve the uncomfortable relationship with business units and focus on the organizational mission. However, with inefficient R&D management systems and relatively low levels of technological capability, SAIT had difficulty carrying out its primary mission of increasing the competitive advantage of existing business lines and pursuing new business opportunities. 3. Mid and Late 1990s.-To improve its technological capabilities and upgrade its R&D management systems, SAIT initiated various organizational innovations and changed how it

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allocated resources. For example, the organizational structure was changed to research laboratories around major research fields, focusing on long-term and basic R&D projects rather than short-term and development-oriented R&D ones. In addition, SAIT paid more attention to recruiting talented R&D employees. Nevertheless, although these organizational changes made the R&D management system more efficient, it remained inefficient in increasing technological capability and creating new business opportunities. 4. 2000 to Present.-Concentrating on value creation for customers, SAIT adopted many innovative management programs like knowledge management and DFSS programs, and initiated them concurrently. SAIT was designated a key engine of Samsung businesses and a global R&D center with advanced technological capabilities. As the Samsung corporate research center, it focused on the key technological areas and upgraded the R&D process from one of planning to commercialization. Recently, SAIT developed close relationships with the business units and increased R&D performance as measured by the number of R&D projects successfully transferred into business lines and the number of patents. In 2004, 80 percent of SAIT's R&D projects reached commercialization, compared with 61 percent in 2002 and 18 percent in 1997. Also, applications for U.S. patents increased from 19 percent of 380 total applications in 1997 to 85 percent of 1,400 patent applications in 2004. Transformation of the Corporate R&D Center Since 2000, SAIT has transformed its organization and R&D processes in the following principal directions: Visioning and restructuring Although SAIT aimed at advancing beyond technology follower, it encountered difficulty in managing a corporate research center because of the low level of technological capabilities and inexperience in early R&D management around basic technologies. To create new businesses and enhance Samsung's competitive advantage in existing businesses, SAIT assessed its R&D projects and core technology areas. It found that the initial research areas and technology capabilities were hardly adequate for the organization's mission, and that fundamental transformation around top management teams and business divisions was needed. Through formal and informal discussions with researchers and communication with business units, top management teams developed specific action plans for becoming a global R&D center. Principally, SAIT rearranged its overall R&D projects around core technology areas. It restructured its R&D areas and projects to focus on such key technologies as digital technology, nanotechnology, optoelectronics, energy, and biotechnology. These areas are closely linked to existing businesses and new business opportunities for Samsung. However, the transformation process was so painful that many researchers decided not to adopt these changes and some of them left the organization. Nevertheless, by recruiting and promoting talented researchers, SAIT built up a global level of technology capabilities. To create world-class products and valuable research results, it developed sophisticated R&D

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management processes based on DFSS (defined as the design of new products and services with a Six Sigma capability and performance). It also enhanced knowledge management and network infrastructures for close collaboration within research laboratories and between SAIT and the business divisions. Excellence of product During the organizational transformation, research and development projects were aimed at developing state-of-the-art technologies. Each project targeted specific goals to develop the first or the best technological innovations through fundamental patents or state-of-the-art technologies. In the planning stage, each R&D project assessed the technological development status of leading global organizations on key technologies and set high goals for project performance. These world-class targets evoked research challenges on the new R&D projects and motivation to achieve the expected results. Samsung invested in continuous improvement in existing technology and business areas. To survive and grow in the competitive world market, Samsung needed to develop key patents in basic technologies, actively participate on global standardization committees, and create more value. This realization made researchers set top-notch targets for new R&D projects and motivated them to make greater efforts to achieve differentiated technologies and radical innovations. In addition, SAIT built close relationships with business divisions by sharing business strategies and technology roadmaps to increase the successful commercialization of developed technologies. R&D projects for commercialization in the near future should specify business strategies and coordinate responsible roles for technological success and value creation. Excellence of process To increase the efficiency of R&D processes, SAIT adopted the quality-oriented philosophy of DFSS. There was some criticism of this because DFSS programs were developed for quality improvement in manufacturing rather than R&D, where creativity is important. Despite the criticism, however, the basic DFSS goal of customer value creation is similar to the purpose of R&D. Consequently, the philosophy and methodology of DFSS were customized into the overall R&D process, from project planning through stage-gate processes to commercialization. Integration of R&D management and Six Sigma methodology in Samsung.

DFSS programs were utilized across the development stages of R&D projects (see illustration, below). At the planning stage, the project manager aligned technology roadmaps with the business strategy of business units and analyzed diverse customer needs by using value curve and QFD methods. For ongoing projects, the main processes include review of project milestones, relevance of project objectives in changing environments, and key problems and potential obstacles to progress. At the final stage, all R&D projects are assessed in terms of accomplishment of project objectives, technology transfer to business divisions, and the next R&D plans.

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To respond to rapid technological change and converging technologies, SAIT was reorganized as a matrix organization of technology groups and projects. Technology groups emphasize developing core technological capabilities around key technologies and identifying emerging technologies and new business opportunities. Project managers are responsible for developing specified R&D activities and commercializing technological advances. In addition, SAIT has made significant efforts to recruit talented R&D employees and develop individual skills and careers. Beyond the traditional recruiting of graduates from Korean universities, SAIT has made extensive efforts to recruit talented researchers with technological capabilities in the global market. Project managers and researchers have also learned to use tools for project management, technology management and business development, and to develop balanced perspectives on the efficient management of R&D activities and commercialization of R&D results. SAIT expects all researchers to become professionals armed with technological expertise and business acumen in their R&D activities. Each researcher reaches a certain level depending on the experience and expertise, from entry to the highest level. These levels are used to organize new project teams, recruit new researchers, and plan career development. For example, only experienced researchers above a certain level can become R&D project leaders. The evaluation and performance measurement systems were also changed to assess both the R&D project results and potential capabilities in key technology areas, so as to support researchers' career development as experts in the related fields. Currently there are approximately 1,000 researchers in the SAIT, 86 percent of whom hold graduate degrees. Organizational transformation The painful organizational transformation contributed to the improvement in R&D performance, and the subjective satisfaction of business units with the SAIT R&D results grew rapidly. Among 133 R&D projects conducted up to 1997, only 24 (18 percent) were successfully transferred to business units and contributed to commercial business value creation. The other 109 R&D projects contributed hardly at all to value creation. Only 32 R&D projects were technically successful, while 77 R&D projects succeeded technically but failed commercially. Foreign patent applications comprised 19 percent of all patent applications in 1997. The organizational transformation was intended to increase the R&D performance of the corporate R&D center in terms of both the commercialization of R&D projects and the generation of important patents. That performance increased dramatically. Among 79 recently completed R&D projects, 33 were transferred successfully to business units and contributed to commercial value creation. Another 15 R&D projects are now in the process of commercialization. The remaining R&D projects succeeded technically but not commercially. More surprising was the change in patenting-foreign patent applications reached 85 percent of all patent applications in 2004, about four times the 1997 figure of 19 percent.

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A number of factors accounted for the successful organizational transformation, including a consensus on the need for organizational change, strong leadership by the top management team, close alignment with business units, stable corporate investment, and actionable planning and performance management. Most of all, however, the initial success of the transformation can be attributed to the clear strategic direction as a corporate R&D center and the close relationships with business divisions, from planning through ongoing management to commercialization of R&D projects. SAIT developed Samsung R&D management practices by integrating research methodologies such as technology roadmapping and scenario management and development methodologies like robust stage-gate processes. At the initiation and planning stage, each R&D project was aligned with the business and technology strategies of the business units through sharing technology roadmaps. The strategic alignment between SAIT and business divisions was regarded as a key success factor for R&D projects and performance maximization. Also, this clarified roles and responsibilities in the successful commercialization of projects. Through technology roadmapping, SAIT and business divisions coordinate roles and allocate resources, make specific plans for R&D activities and commercialization, and develop the next technology roadmaps. To develop world-class technologies, SAIT identified key technologies and relationships among core technologies by using the technology tree technique. These analyses had an influence on assessing the importance and priority of R&D projects. Also, SAIT adopted TRIZ methodology to find new and creative solutions by predicting evolution trajectories of specific technologies. Traditional R&D project management focuses on the management of stage-gates to review the progress of projects and make decisions to proceed. The R&D management at SAIT focuses on project review and discussion, called design review, among technology experts and business professionals. These design reviews facilitate knowledge management and discussions between SAIT and business experts on critical issues and potential problems. To increase the success rate of technological commercialization, SAIT project teams collaborate with business divisions before the projects are finished. During these periods, R&D teams transfer technological results and know-how related to the projects and find solutions to potential commercialization problems. In addition, SAIT and the business lines in the development and manufacturing groups can communicate with each other efficiently by sharing the same DFSS methodology, including documentation forms and terminology. Emerging Challenges Despite the improved R&D performance, Samsung's corporate R&D center faces many challenges. First, Samsung is rapidly leapfrogging from a technological follower to a global leader. During the last three decades, Samsung has been focusing on the imitation and internalization of key technologies developed by global leaders. Now, however, as a global leader it has to develop its own technological innovations and change the role of the corporate

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R&D center. Instead of pursuing a catching-up technology strategy of imitation and acquisition of advanced technologies, SAIT must create new business areas and drive technological innovations by investing in emerging research areas with a high level of uncertainty, such as nanoelectronics, energy and intelligence. It must develop a balanced strategy between exploitation in existing businesses and exploration in new businesses. Second, many business units have asked the corporate R&D center to upgrade technological capabilities for existing businesses and create disruptive technologies for new businesses. In response to the increasingly competitive environment, companies need to build core competencies based on sustainable knowledge and capabilities. For example, the corporate R&D center should consider how to exploit the accumulated knowledge base and explore new technological knowledge, combining internal investment and strategic alliances. Although SAIT improved R&D productivity and efficiency through the adoption of DFSS programs, these management systems may be insufficient to develop new and innovative research fields. SAIT needs a more systematic approach to efficiency in development-oriented projects and effectiveness in research-oriented projects. Finally, globalization of R&D is another challenge facing Samsung's corporate research center. As R&D boundaries extend from local and regional areas to other countries, it becomes increasingly important to coordinate local R&D centers and distant global R&D centers. To adapt to the rapidly changing environment, global R&D networks and management systems are needed to monitor global technological changes and to develop key technologies in emerging areas. The management of global R&D and strategic collaborations with other global leaders is an upcoming challenge in terms of strategic human resource management, global recruitment of talented researchers, and management of these global researchers within the culture of Samsung. [Sidebar] An Application of Samsung R&D Processes The development of MPEG-4 technologies exemplifies a successful application of Samsung R&D practices. MPEG-4 is an international standard developed by MPEG (Moving Picture Experts Group); the committee developed MPEG-1 and MPEG-2 standards for interactive video on CD-ROM and Digital Television. The MPEG-4 is the next-generation multimedia compression standard to deliver high-quality audio and video streams for digital television, interactive graphics applications, and interactive multimedia. To respond to the rapidly changing competitive environment. Samsung investigated recent technological progress and developed technology roadmaps in multimedia areas in cooperation with business units including digital television, mobile handsets and display. As only standardization patent holders can gain competitive advantage in this area, Samsung actively participated in international expert forums and standardization meetings. It also updated technology roadmaps regularly and coordinated the development schedules with the standardization meeting schedules. To develop specific technologies for the new standards, Samsung used technology-tree techniques to identify major functions and explore alternative technologies for each function. The new technologies in the technology roadmap specified main functions, and key technological characteristics cascaded from generic functions to sub-functions and sub-sub functions. For example, the performance of video compression is specified by the color 15

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transformation and compression functions. At the sub and sub-sub-function level, Samsung investigated existing technologies and developed new technologies for each function. As a result, Samsung developed key technologies for the MPEG-4 and became one of the leading members in MPEG-4 standardization and its related industry.-S.P. and Y.G. SAIT built close relationships with business divisions by sharing business strategies and technology roadmaps.

[Sidebar] Researchers are expected to become professionals armed with technological expertise and business acumen.

[Sidebar] SAIT project teams collaborate with business divisions before the projects are finished.

[Sidebar] Samsung is rapidly leapfrogging from technology follower to global leader.

[Reference] References 1. Christensen, C. M. The innovator's Dilemma, Boston: Harvard Business School Press, 1997. 2. Foster, R. N. Innovation: The attacker's advantage. Summit Books, 1986. 3. Utterback, J. M. Mastering the dynamics of innovation: how companies can seize opportunities in the face of technological change. Boston: Harvard Business School Press, 1994. 4. Buderi, R. Engines of Tomorrow: How the world's best companies are using their research labs to win the future. Simon & Schuster, 2000. 5. Roussel, P. A., Saad, K. N. and Erickson, T. J. Third generation R&D: Managing the link to corporate strategy. Boston: Harvard Business School Press, 1991. 6. Miller, W. L. and Morris, L. Fourth generation R&D: Managing knowledge, technology, and innovation. John Wiley & Sons, 1999.

[Author Affiliation] Sangmoon Park is a full-time lecturer at the Department of Management, College of Business Administration, Kangwon National University, Chuncheon City, Korea. Previously he worked for the Samsung CTO office at the Samsung Advanced Institute of Technology (SAIT). He received his M.E. and Ph.D. from the Graduate School of Management at the Korea Advanced Institute of Science and Technology (KAIST). His research interests include management of technology and entrepreneurship in technology-intensive industries. venture@kangwon.ac.kr Youngjoon Gil is the president of Samsung Information Systems America in Sun Jose, California and worked for Samsung Advanced Institute of Technology since 1987. Before that he was a vice president of the Samsung CTO office at SAIT in Korea. He received his B.S. in mechanical engineering from Seoul National University and an M.S. in mechanical engineering 16

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and Ph.D. from the Graduate School of Management at the KAIST. yjgil@samsung.com Samsung Group Timeline 2000-2005 2005 July June SAMSUNG hosted the Asian Strategy Conference. SAMSUNG Electronics' BlueBlack Phone was recognized as top premium product in Europe. SAMSUNG Electronics launched new brand campaign entitled "Imagine". SAMSUNG received the most US IDEA design awards. SAMSUNG Electronics provided assistance in recovery work for Iranian earthquake. President Gun Hee Lee was selected as World's 100 people by the US Time Magazine. With the beginning of SAMSUNG Management Principles, SAMSUNG accelerated its efforts in boosting transparency in management. Announcement of 2005 Samsung Principles for Transparency Management. SAMSUNG selected by Fortune as '39th Global Allstar' for most admired company. SAMSUNG Electronic's BlueBlack Phone (D500) receives 'Best Mobile Handset' from ' 3GSM World Congress 2005' SAMSUNG donates 5 million dollars to the East-Asian tsunami relief efforts.

April

March

Feb

Jan 2004 Dec

SAMSUNG Group reaches 50 billion USD in export revenue, 21% of entire export revenue in Korea SAMSUNG Group total sales reaches 135.5 trillion and accomplishes best profit ever SAMSUNG Semiconductor celebrates 30th anniversary SAMSUNG Construction received an order to build world highest building Burj Dubai (over 700m) Kun Hee Lee selected by FT (Financial Times) as 21st most admired CEO Kun Hee Lee receives Design Leadership Award SAMSUNG Heavy Industry receives three 'Best Ship of the Year' Opens SAMSUNG art gallery Leeum SAMSUNG Electronics opens SAMSUNG Experience Center in New York City

Nov

Oct Sep

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SAMSUNG earns Olympic 8 medals including 4 gold medals Opens Greece Olympic SAMSUNG advertisement booth (OR@S) SAMSUNG brand value ranked 21st in the world with an estimated value of $12.5 billion USD (Selected by Interbrand) SAMSUNG mobile phone achieves 1st place in market possession in France, Russia and Africa Kun Hee Lee receives honorable 'La Legion d'honneur Commandeur' from France

July

Jun 2003 Dec

Starts SAMSUNG Group 'Share the business' Hotel Shilla selected as 2003 Korea's best hotel Launches SAMSUNG 2004 Olympic marketing SAMSUNG Electronics Digital TV technology achieves #1 in the world SAMSUNG Electronics produces the world's first land-based DMB receiver SAMSUNG brand value ranked 25th in the world with an estimated value of $10.8 billion USD (Selected by Interbrand) Establishes Kun Hee Lee Scholarship Foundation SAMSUNG Finance selected by 'Finance Asia' as Korea's best security company SAMSUNG Social Volunteer Group supported "SAMSUNG Dream Tree project" in Vietnam SAMSUNG strategically targets China to build brand awareness through premium products SAMSUNG receives 2 billion dollar Export Award SAMSUNG Economic Research Institute opens Multimedia Service, SERICEO, for top executives. SAMSUNG SDI develops world largest 15.1" full color Active Matrix Organic Electro Luminescece Display SAMSUNG SDI commercializes high definition 65,000 color STN-LCD SAMSUNG Electronics signs strategic alliance agreement with Microsoft to create digital home technologies SAMSUNG develops enhanced cooperation with Hewlett-Packard in IT field SAMSUNG Card's US$500 million ABS issued overseas 18

Nov

Sep July 2002 Sep July

2001 Nov

Oct

Sep

Payman Shafiee 200134671

Organizational theory and Design

Cheil Industries' Fashion Division ranked number one in Korean Customer Satisfaction Index by the Korea Management Association for 2nd consecutive year Aug SAMSUNG Electronics commercializes 1G Flash memory SAMSUNG Electronics develops world's largest 40 inch TFT-LCD SAMSUNG Electronics develops 16M DDR SRAM SAMSUNG Electronics begins mass production of 128M / 256M DDR333 SAMSUNG Electronics commercializes Home-network products SAMSUNG Electronics begins mass production of 256 mega RAMBUS DRAM SAMSUNG Electronics produces world's first 40 inch TFT-LCD display SAMSUNG Fire & Marine Insurance establishes SAMSUNG Traffic Safety Culture Research Center SAMSUNG Corning successfully develops world's first ultra-fine polishing technology for cathode-ray tube glass for use in digital Televisions SAMSUNG Electronics signs strategic marketing alliance with AOL-Time Warner SAMSUNG Electronics begins mass production of 512Mb Flash memory SAMSUNG's global brand value increases 22% (ranked 42nd worldwide, US$6.37 billion) SAMSUNG Advanced Institute of Technology successfully develops world's first video object extraction technology S1 Corporation begins Smart Card business SAMSUNG Fire & Marine Insurance signs agreement with The People's Insurance Company of China (PICC) SAMSUNG Corning selected best contributor to the Korean economy among all foreign companies in Korea SAMSUNG Everland reaches 100 million accumulated visitor of SAMSUNG Card begins integrated financial transaction management service SAMSUNG Life Public Welfare Foundation opens Noble County SAMSUNG Economic Research Institute (SERI)'s website selected the No. 1 think-tank site in the world by Alexa SAMSUNG Electronics awarded the Asia Award 2001 sponsored by Investor Relations SAMSUNG Heavy Industries acquires international certificate SAMSUNG Fire & Marine Insurance first among domestic insurance company to open Shanghai branch in China SAMSUNG Electronics selected "2001 Best Asian Company" by Finance Asia SAMSUNG selected "The Most Reliable Korean Leading Company" by P&P research CEO Kun-Hee Lee selected among "Asia's 25 movers and shakers of 2001" by ZDNet Asia 19

Jul

Jun

May

Apr

Payman Shafiee 200134671 Mar

Organizational theory and Design

SAMSUNG Heavy Industries builds first Korean-made large passenger ship SAMSUNG Capital issues foreign currency bond (ABCP) of US$200 million, a first among domestic financial institutions SAMSUNG Electronics signs agreement for "2002 Busan Asian Games Sponsorship" SAMSUNG Electronics acquires 4G DRAM technology SAMSUNG Electronics given the first ever award to a Korean company by ISS (Institutional Shareholder Service) SAMSUNG Life Insurance ranked 6th among Far Eastern Economic Review's "Top Ten Korean companies" SAMSUNG Electronics ranked the world's first in TFT-LCD production for third consecutive year SAMSUNG Electronics registers cellular phone production volume of 50 million handsets SAMSUNG produces 50,000,000th cell phone

Feb

Jan

2000 Dec Nov Five ships built by SAMSUNG Heavy Industries designated "Ship of the year" SAMSUNG Everland awarded Customer Satisfaction prize for fifth consecutive year SAMSUNG Card designated "Best Card Corporation in the New Millenium" by MasterCard SAMSUNG Advanced Institute of Technology develops perpendicular magnetic recording technology, the world's highest recording density (60Gbits/in) technology SAMSUNG Heavy Industries develops world's biggest large-sized jumbo container ship (9000TEU class) SAMSUNG Corporation Otel Inox designated best enterprise in Rumania SAMSUNG Electronics donates 600 million won in education funds to UNESCO SAMSUNG Electronics wins award from Russia National Brand Contest's organizing committee SAMSUNG Fire & Marine Insurance rated A (Excellent) for financial strength by A.M.Best, a credit evaluation agency specializing in U.S. insurance companies SAMSUNG Electro-Mechanics subsidiary in Taiwan awarded Best Enterprise prize by Taiwan government SAMSUNG Electronics signs contract for opening of Sidney Olympic public information center and next Olympic Games sponsorship

Oct

Sep

20

Payman Shafiee 200134671 Aug

Organizational theory and Design

SAMSUNG Corning subsidiary in Germany designated best foreign investment company and celebrates six years since its founding SAMSUNG SDS establishes global software Development Center in Beijing SAMSUNG SDS ranked 44th in "Best 500 software companies" in 1991 by Software (U.S.) SAMSUNG Electronics acquires U.S. patent for Next-generation Management Control System technology SAMSUNG SDI develops world's 1st super slim, perfect flat cathode-ray tube SAMSUNG Techwin develops digital camera with 2.1 million pixel CCD SAMSUNG Electronics begins manufacturing 256M Flash memory SAMSUNG Electronics participates in establishing world's biggest e-commerce company, with 11 other companies including Hewlett-Packard, NEC and COMPAQ Asiaweek magazine selects CEO Kun-Hee Leeamong the 50 most influential people in the political & financial world for fifth consecutive year SAMSUNG Corning localizes Wide ITO Coating Glass, core material of PDP TV SAMSUNG Electronics starts Content Certification Business SAMSUNG Fire & Marine Insurance creates business alliance with Kamakura Corporation, U.S.A, for financial risk management SAMSUNG begins collaboration with Chosun Computer Center of North Korea SAMSUNG establishes Secui.com, a global information security corporation SAMSUNG brand value reaches US$5 billion Cheil Industries Inc.'s ASTRA designated one of world's best 5 golf brands SAMSUNG Heavy Industries signs contract for joint marketing of Shipping Nautical System with Raytheon Marine U.S.A. SAMSUNG Electronics attracts US$100 million investment from Apple Computer Inc. U.S.A. SAMSUNG Electronics launches joint corporation with Thomson CSF France SAMSUNG Heavy Industries introduces world's first commercialized new industrial waste-water treatment technology SAMSUNG Life Insurance signs comprehensive business alliance with 10 Korean banks SAMSUNG Corporation receives US$550 million order to build Taiwan Highspeed Railway SAMSUNG Electronics develops first 288M RAMBUS DRAM

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