Samsung's Leadership

The New York Times published an article earlier this month, revealing that the owner of Samsung Lee Kun-hee sent a companywide email in June, telling employees to do better despite shipping millions of its products worldwide.

Some might call that an encouragement, but his message undoubtedly conveyed a gloomy future for the company following the tradition of sending similarly dim letters in the past. It has proven more effective for Samsung than warning workers of complacency at a more frequent rate.

Lee’s so-called "fear management" at the workplace was in effect when Samsung was going after Sony during the 1990s and it continues to this day.

The interest in Samsung’s internal operations and its corporate governance structure has been growing over the last few years. The company has achieved success without Lee ever presenting a keynote or agreeing to an interview. Apart from a few people, the majority of the public aren't familiar with his voice.

A mysterious lifestyle might not be a strategic decision, but not showing up at a "Galaxy event" is a reflection of Samsung’s core values and Lee’s perception of the products.

He doesn’t care.

He doesn’t care for the phones or the TVs, because it’s about the bigger picture, Samsung. Lee orders others to take care of the Galaxy products while he observes from a much higher ground, scanning the entire portfolio of products — what to bin and what to keep.

The obsession of becoming No.1 and defending its position is embedded in the company’s DNA. The reason why Samsung went after Sony is the same reason why it went after the iPhone — enter an established industry, then defeat every player to become No.1.

So how is the company leadership set up?

According to "Samsung Way" by Song Jae-yong and Lee Kyung-mook, professors at the Seoul National University, Lee is part of the leadership triangle that consists of himself, his loyal CEOs, and the Corporate Strategy Office. These three control Samsung collectively and keep an eye on each other to prevent betrayal.

Under the founder Lee Byung-cheol, managers were not authorised to make key strategic decisions. The late founder was keen on maintaining his influence and kept it that way until his death in 1987. In contrast, the chairman today allows CEOs to manage companies with freedom. These handpicked executives not only understand, but share the same vision and value as the chairman.

The Corporate Strategy Office, formerly known as the Chairman’s Office, creates synergy by driving the subsidiaries for competition and cooperation while assisting the executives with management decisions. The assistance is supported by Samsung Economic Research Institute, the in-house think tank.

The Office also prevents competition between divisions escalating into a conflict. A good example is the rivalry between semiconductor (DS) and mobile (DMC) — the Office intervenes when it senses a hint of friction to make sure that things don’t get out of hand. It also manages complex relationships with its competitors.

Samsung couldn’t shy away from being called a "fast-follower" even with the Galaxy Gear. As it approaches the software industry the same way it entered the TV and the smartphone market, abandoning its fast-follower strategy in the near future sounds hard to believe.