Samsung’s constant makeover

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Samsung’s constant makeover

Samsung Group Chairman Lee Kun-hee famously told his executives, “Change everything except for your wife and children,” to declare a new management style in Frankfurt, Germany, in June 1993. Since then, the country’s top conglomerate has transformed itself into one of the biggest and best manufacturers in several fields. The tycoon’s vision of a transformation for Samsung was not produced in a day. Veteran Samsung men cannot forget Dec. 1, 1987. It was the day Lee started work as the new Samsung chairman, succeeding his father, Samsung founder Lee Byung-chull. He was 46.

His inauguration speech was nothing extraordinary. Lee announced that he would follow his father’s management principles of strengthening businesses, prizing talent and pursuing reasonability. The presidents of various divisions and secretariat personnel gathered at his office after the inauguration ceremony at Hoam Art Center. Lee neatly folded one of the napkins next to the sofa he was sitting on in half. Then, he folded it in half again. He said, “Our late chairman made Samsung like this,” holding up his twice-folded napkin. He ripped the napkin into tiny pieces. “I plan to make Samsung like this and transform it.” The people in the room understood his pledge to rebuild Samsung and make it a global name by the 1990s. They realized that his inauguration speech had been a big deal indeed.

Samsung is undergoing another transformation in subtle but significant ways under the leadership of Jay Y. Lee, who has begun to take a decisive hold on the conglomerate on behalf of his ailing father. Lee is 47. Although he serves as vice chairman of Samsung Electronics, Lee reportedly declined to ascend to the chairmanship of Samsung C&T, which is now the de facto holding company of the group following the merger of Samsung Corporation and Cheil Industries. Whenever he encounters other business leaders who, out of courtesy, ask about his father’s health and comment on how tough it must be for him to run the conglomerate, he politely answers that he cannot complain as he was fortunate to be born into a good family that has a good standing amongst business leaders.

Under the son’s leadership, Samsung has been doing new things. It sold off defense and chemical arms businesses based on Lee’s belief that a business must be agile and lean and focus on what it does best. Lee thinks Samsung is most competitive in the fields of semiconductors and biological products that can be manufactured when an original product’s patent expires. Samsung believes it is unrivaled in product management. Innovations require fast decision-making, efficient operations of production lines and high output yields. This is why he promoted industrial engineers to executive positions in a round of recent appointments. Another field Samsung is investing in is electric and automated vehicles, in which electronic components and sensors are essential. Insiders believe their new leader has a quintessentially different management style and vision. Samsung sold off three personal airplanes and one helicopter. Lee takes the company plane on business trips only when necessary. Most times, he flies business class on commercial airlines. He does not have an entourage when attending outside events. His aides are concerned about his safety. Executives who used the company planes or flew first class obviously are uncomfortable with the young heir’s modest traveling habits. Lee’s practical ways are making waves across the group.

When the elder Lee announced a new direction in 1993, he had lost weight - 10 kilograms (22 pounds) - in the previous six years because he could not sleep well enough due to stress. Samsung is retooling itself to brace for a lengthy slowdown or possible stagnation similar to Japan’s. U.S. multinationals have raised the bar by expanding to new frontiers, and Chinese technology companies like Xiaomi are making fast inroads into the markets of Korean companies like Samsung. The Korean economy is headed for a structural slowdown due to a shrinking and aging working population. The Lee family empire is gearing up for changing times. We don’t know how successful it will be. But its new leader won’t go astray if he always remembers his father’s warning that Samsung could lose all of its core businesses within the next decade.

JoongAng Ilbo, Dec. 8, Page 34

The author is a senior editorial writer of the JoongAng Ilbo.

BY Lee Chul-ho

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