The Paradox of Samsung's Rise
The Globe
The Paradox of Samsung’s Rise
Samsung’s unlikely success in mixing Western best practices with an essentially Japanese business system holds powerful lessons for today’s emerging giants. by Tarun Khanna, Jaeyong Song, and Kyungmook Lee
A
s today’s emerging giants face the challenge of moving beyond their home markets, they have much to learn from the pathbreaking experience of South Korea’s Samsung Group, arguably the most successful globalizer of the previous generation. Twenty years ago, few people would have predicted that Samsung could transform itself from a low-cost original equipment manufacturer to a world leader in R&D, marketing, and design, with a brand more valuable than Pepsi, Nike, or American Express. Fewer still would have predicted the success of the path it has taken. For two decades now, Samsung has been grafting Western business practices onto its essentially Japanese system, combining its traditional low-cost manufacturing prowess with an ability to bring high-quality, high-margin branded products swiftly to market.
The two sets of business practices could not have seemed more incompatible. Into an organization focused on continuous process improvement, Samsung introduced a focus on innovation. Into a homogeneous workforce, Samsung introduced outsiders who could not speak the language and were unfamiliar with the company’s culture. Into a Confucian tradition of reverence for elders, Samsung introduced merit pay and promotion, putting some young people in positions of authority over their elders. It has been a path marked by both disorienting disequilibrium and intense exhilaration. Like Samsung, today’s emerging giants—Haier in China, Infosys in India, and Koç in Turkey, for instance—face a paradox: Their continued success requires turning away from what made them successful. The tightly integrated business systems that have worked in their home markets
142 Harvard Business Review July–August 2011
PHOTOGRAPHY: AP IMAGES
The Paradox of Samsung’s Rise
Samsung’s unlikely success in mixing Western best practices with an essentially Japanese business system holds powerful lessons for today’s emerging giants. by Tarun Khanna, Jaeyong Song, and Kyungmook Lee
A
s today’s emerging giants face the challenge of moving beyond their home markets, they have much to learn from the pathbreaking experience of South Korea’s Samsung Group, arguably the most successful globalizer of the previous generation. Twenty years ago, few people would have predicted that Samsung could transform itself from a low-cost original equipment manufacturer to a world leader in R&D, marketing, and design, with a brand more valuable than Pepsi, Nike, or American Express. Fewer still would have predicted the success of the path it has taken. For two decades now, Samsung has been grafting Western business practices onto its essentially Japanese system, combining its traditional low-cost manufacturing prowess with an ability to bring high-quality, high-margin branded products swiftly to market.
The two sets of business practices could not have seemed more incompatible. Into an organization focused on continuous process improvement, Samsung introduced a focus on innovation. Into a homogeneous workforce, Samsung introduced outsiders who could not speak the language and were unfamiliar with the company’s culture. Into a Confucian tradition of reverence for elders, Samsung introduced merit pay and promotion, putting some young people in positions of authority over their elders. It has been a path marked by both disorienting disequilibrium and intense exhilaration. Like Samsung, today’s emerging giants—Haier in China, Infosys in India, and Koç in Turkey, for instance—face a paradox: Their continued success requires turning away from what made them successful. The tightly integrated business systems that have worked in their home markets
142 Harvard Business Review July–August 2011
PHOTOGRAPHY: AP IMAGES