Lee Kun-hee

Lee Kun-hee (Hangul: 이건희; Hanja: 李健熙; Korean pronunciation: [iːɡʌnhi]; born
January 9, 1942) is a South Korean business magnate and the chairman of Samsung Group.
In 1996, Lee became a member of the International Olympic Committee. With an estimated
net worth of $70.2 billion, he and his family rank among the Forbes richest people in the
world. He is the third son of Samsung founder Lee Byung-chul.
He resigned in April 2008, owing to a Samsung slush funds scandal, but returned on
March 24, 2010. In May 2014, he was hospitalized for a heart attack.[5] In 2014, Lee was
named the world's 35th most powerful person and the most powerful Korean by Forbes
Magazine's List of The World's Most Powerful People along with his son Lee Jae-yong.
Lee Kun-hee was born on 10 January 1942 in Uiryeong, South Gyeongsang, during the
Japanese occupation of Korea. He is the third son of Lee Byung-chul, the founder of the
Samsung group.

Samsung
Lee joined the Samsung Group in 1968 and took over the chairmanship on December
24, 1987, just two weeks after the death of his father, Lee Byung-chul, who founded
Samsung.[7] In the early 1990s, believing that Samsung Group was overly focused on
producing massive quantities of low-quality goods and that it was not prepared to compete
in quality, Lee famously said in 1993 "Change everything except your wife and kids" and true
to his word attempted to reform the profoundly Korean culture that had pervaded Samsung
until this point. Foreign employees were brought in and local employees were shipped out
as Lee tried to foster a more international attitude to doing business.
Under Lee's guidance, the company has been transformed from a Korean budget
name into a major international force and arguably[according to whom?] the most
prominent Asian brand worldwide. One of the group's subsidiaries, Samsung Electronics, is
now one of the world's leading developers and producers of semiconductors, and was listed
in Fortune magazine's list of the 100 largest corporations in the world in 2007. Today
Samsung's revenues are now 39 times what they were in 1987, it generates around 20
percent of South Korea's GDP, and Lee is the country's richest man.
On April 21, 2008, he resigned and stated: "We, including myself, have caused
troubles to the nation with the special probe; I deeply apologize for that, and I'll take full
responsibility for everything, both legally and morally."[9] On December 29, 2009, the South
Korean government moved to pardon Lee Kun-hee.
On March 24, 2010, he announced his return to Samsung Electronics as its chairman.
In an interview, Lee expressed pride in the fact that Samsung attracts the brightest
minds in South Korea but added that his new goal is to attract talent from all over the world
to ensure that Samsung will remain one of the top companies in the world for years.
Notable Samsung industrial subsidiaries include Samsung Electronics (the world's
largest information technology company measured by 2011 revenues),[11][12] Samsung
Heavy Industries (the world's largest shipbuilder measured by 2010 revenues),[13] Samsung
Engineering and Samsung C&T (respectively the world's 35th- and 72nd-largest construction
companies),[14]Samsung Electro-Mechanics Co. Ltd. (Established in 1973, Samsung Electro-
Mechanics has become a remarkable developer and manufacturer of key electronic
components not only in Korea but also in other parts of the world) and Samsung Techwin (a
weapons technology and optoelectronics manufacturer).[15] Other notable subsidiaries
include Samsung Life Insurance (the world's 14th-largest life insurance company),[16]
Samsung Everland (operator of Everland Resort, the oldest theme park in South Korea)[17]
and Cheil Worldwide (the world's 19th-largest advertising agency measured by 2010
revenues).
Samsung produces around a fifth of South Korea's total exports[20] and its revenues
are larger than many countries' GDP; in 2006, it would have been the world's 35th-largest
economy.[21] The company has a powerful influence on South Korea's economic
development, politics, media and culture and has been a major driving force behind the
"Miracle on the Han River".

Samsung scandal
On January 14, 2008, Korean police raided Lee's home and office in an ongoing probe
into accusations that Samsung was responsible for a slush fund used to bribe influential
prosecutors, judges, and political figures in South Korea.[24] On April 4, 2008, Lee denied
allegations against him in the scandal.[25] After a second round of questioning by the South
Korean prosecutors, on April 11, 2008, Lee was quoted by reporters as saying, "I am
responsible for everything. I will assume full moral and legal responsibility.” On July 16,
2008, The New York Times reported the Seoul Central District Court had found Lee guilty on
charges of financial wrongdoing and tax evasion. Prosecutors requested Lee be sentenced to
seven years in prison and fined 350 billion won (approx $312 million USD). The court fined
him 110 billion won (approx $98 million USD) and sentenced him to three years' suspended
jail time. Lee has not responded to the verdict.[citation needed] Months later, South Korean
president Lee Myung-bak pardoned Lee so he could remain on the International Olympic
Committee.
In 2010, the company's former chief legal counsel, Kim Yong-chul, published a book
called "Think Samsung". It revealed shocking alleged details of Lee Kun-hee's personal
corruption, claiming he stole up to 10 trillion won (approx $8.9 billion USD) from Samsung
subsidiaries, destroyed evidence, and bribed government officials to ensure the smooth
transfer of power to his son.[8]
Lee Kun-hee's wife, Hong Ra-hee, is the daughter of Hong Jin-ki, the former chairman
of the JoongAng Ilbo and Tongyang Broadcasting Company, and Kim Yoon-nam. Kim was
born in the coastal city of Mokpo, South Jeolla. While attending Ewha Womans University as
a junior in 1943, she married Hong Jin-ki (1917–86), who at the time was working as a judge
at the Jeonju District Court in Jeonju, North Jeolla. The two are survived by four sons and
two daughters: Ra-hee, director general of Leeum, Samsung Museum of Art and the wife of
Lee Kun-hee; Seok-hyun; Seok-joh, CEO of BGF Retail; Suk-joon, CEO of Bokwang Investment;
Seok-kyu, CEO of Bokwang; and Ra-young, deputy director at Leeum. Kim was also the
mother-in-law of Cholsoo Charles Lho, publisher of the Korea JoongAng Daily. Kim Youn-nam
died of natural causes at Samsung Medical Center in Gangnam District, southern Seoul in
2013 when she was 90 years old.
To know where South Korea is heading, you can weed through mountains of
government data, trade flows and analyst reports. But the real clues often come from the
nation's corporate flagship.
 Asia's fourth-biggest economy is not called the "Republic of Samsung" for nothing.
The Samsung conglomerate can generate revenues equivalent to 20% of gross domestic
product and dominates everything from electronics to credit cards, real estate and sports.
Now Korea's greatest success is again the subject of major controversy -- and
headaches for President Moon Jae-in.
Biotechnology arm Samsung BioLogics faces a criminal investigation, possible
delisting and epic losses in shareholder value. Regulators say the company "intentionally"
flouted accounting rules in the run-up to a 2016 initial public offering.
The probe comes at an awkward time for the broader Samsung Group. Its leader, Lee
Jae-yong, is awaiting a Supreme Court ruling on bribery charges related to a separate
political scandal. It also comes as politicians demand greater corporate transparency.

Here lies Moon's problem. It is not just Samsung that is in trouble; it is the whole
economy.
Moon was elected in May 2017 to retool an economic system in midlife crisis.
Competitiveness had waned, wages had stagnated, youth unemployment topped 9% and
China's rising dominance had hit Korea's confidence. Moon pledged "trickle-up growth," a
clear break with the top-down policies that champion family-owned chaebols like Samsung.
Then, plans to turn Korea Inc. upside down took a back seat to peace talks with North
Korea. Now, as U.S. President Donald Trump's trade war threatens growth, Moon's team has
some serious explaining to do.
Samsung's travails demonstrate why on two levels. Granted, the 2016 IPO that raised
$2 billion happened on former President Park Geun-hye's watch. But Moon's team has been
glacial about taking on the chaebol system. Promised steps to police monopolistic behavior,
create more space for small-to-medium-sized enterprises and increase innovation remain on
the drawing board. So do tax tweaks aimed at catalyzing a startup wave that reduces Korea's
reliance on exports and -- and alters its reputation for copycat products.
BioLogics is a key part of Lee's succession plans. Though he is the de facto boss, Lee's
father, the hospitalized Lee Kun-hee, is still technically chairman. Lee Jae-yong has run the
show since his father's May 2014 heart attack. Investigations of past transactions pose new
risks.
The "Crown Prince of Samsung," as Korean media call Lee Jae-yong, only got out of
jail in February. He spent a year there in connection with bribery charges that put Park in
prison (she is currently serving a 24-year sentence). Lee Jae-yong is appealing those charges
at the Supreme Court. Only time will tell if BioLogics complicates his chances.
BioLogics represents a promise of future high-tech success for Korea's most
important name and for Korea Inc. With China getting better at making cars and
smartphones, Korea is seeing the rapid commoditization of its most lucrative industries. That
has Samsung, and Seoul by extension, banking on biopharmaceuticals for growth. The same
goes for artificial intelligence and 5G mobile technology, areas on which Samsung is placing
big bets.
It is hard not to worry that a potential move to delist BioLogics -- and the specter of
more troubles to come -- will distract the group from investing in future growth. Though the
unit denies any wrongdoing, the Korea Exchange last week suspended trading in BioLogics
shares for at least 15 days.
The bigger question is how Moon responds. Since the 1997 Asian crisis, every Korean
leader pledged to curb the chaebol excesses that then hit the economy. Each talked big
about shining daylight on their opacity and sheer size. Yet each stepped back, deferring to
chaebol leaders, when they realized the magnitude of the task.
Park is an example. In 2013, she took office with bold designs on a more "creative"
model. She talked of antitrust enforcement, taxing cash hoards that could be used to fatten
paychecks and supporting smaller companies.

Within months of taking office, though, Park sat down with chaebol leaders, including
Samsung's Lee Kun-hee, to ask them to help boost gross domestic product. That hinted at a
quid pro quo: if they helped Seoul avert recession, Seoul might go easy on the chaebol. Park
did more than just soft-pedal reform. In 2017, she was removed from office on bribery and
influence peddling charges.
Moon now faces questions about his own determination to bring Korea Inc. to heel.
In December 2017, he put a key win on the scoreboard: a corporate tax hike for top-earners
to 25% from 22%. The first such move since 1991 was a shot across chaebols' bows. Since
then, though, Moon's detente efforts with Pyongyang dominated the agenda.
Dimming prospects for the economy are slamming Moon's approval rating. Last
week, it slid to 53.8% in a Yonhap News poll, the seventh-straight weekly drop. That
dovetails with waning GDP prospects. Korea grew an annualized 2% in the third quarter,
down from 2.8% in the second. That trajectory collides with a youth-unemployment crisis,
frothy real estate prices and surging household debt.
Korea's ratio of household debt-to-GDP is outpaced only by China and Hong Kong.
Bank for International Settlements data put it at 95.2% at the end of March, up 2.3
percentage points from a year earlier. No surprise consumers are frustrated with Moon's
preoccupation with North Korea talks yielding few results.
Rather than redouble reform efforts, Moon's team is dabbling in policies that paper
over problems. Case in point: a new $443 million public fund to prop up a Kospi index down
16% over the last 12 months. While not a huge amount for a $1.7 trillion economy, it looks
terrible to the ordinary Korean.
 Moon was elected to address the underlying causes of the "Korea discount," not
treat the symptoms with Beijing-like Band-Aids. The Republic of Samsung is back in the
headlines for precisely the reasons global investors undervalue Korea Inc. It is past time
Seoul took on behavior denting the national brand.
Hong Ra-hee majored in applied art at Seoul National University and gained
experience as a museum art director in 1995 at Ho-am Art Museum in Yongin, Gyeonggi
Province. The museum was established by Samsung founder Lee Byung-chul in 1978.
His siblings and some of their children are also executives of major Korean business
groups.[27] Lee Boo-jin, his eldest daughter, is president and CEO of Hotel Shilla, a luxury
hotel chain, as well as president of Samsung Everland, a theme park and resort operator that
is "widely seen as the de facto holding company for the conglomerate" according to
Associated Press.[27] As of 2010, his son Lee Jae-yong is vice chairman of Samsung
Electronics,
Lee has 4 children: the eldest child and the only son Lee Jae-yong (born 1968) and
three daughters Lee Boo-jin (born 1970), Lee Seo-hyun (born 1973) and Lee Yoon-hyung
(born 1979, died 2005)†.
Kim Jae-Yeol [ko], the son in law of Lee Kun-hee, and husband of Lee Seo-hyun
Lee's eldest brother's son is currently chairman and CEO of the CJ Group, a company
holding businesses in food, beverages and adult entertainment. His second eldest brother's
sons ran Saehan Media, one of the largest blank media producers. His older sister is the
owner of Hansol Group, the country's largest paper manufacturer and producer of
electronics and telecommunications. One of his sisters is married to Koo Ja-hak, brother of a
former chairman of the LG Group and himself a former chairman of LG Semiconductor. He is
currently running one of the largest food services firms in South Korea. Lee's younger sister,
Lee Myung-hee, is chairwoman of the Shinsegae Group, the largest retail company in South
Korea, with major holdings such as the Shinsegae Department Stores and E-Mart. His
daughter Lee Yoon-hyung committed suicide in Manhattan in 2005.[29]

In late 2005, Lee was tested for cancer at the MD Anderson Medical Center in
Houston, Texas.
Lee's older brother Lee Maeng-hee and older sister Lee Sook-hee initiated legal
action against him in February 2012, asking a South Korean court to award them shares of
Samsung companies totaling US$850 million (913.563 billion won), which they claim their
father willed to them.[31] Court hearings began in May 2012. On February 6, 2014, courts in
South Korea dismissed the case.[32] On May 11, 2014, Lee was hospitalized for a heart
attack. On May 16, 2014, the AsiaN claimed that Lee had died, citing a whistleblower inside
the firm. It deleted the article seven months later, saying it was unable to obtain further
information to substantiate the claim.[5]
Lee speaks Korean, English, and Japanese.

The Samsung way shows how to make change stick —

your way
Samsung went from being a trader of fish, fruit and vegetables, to a leading
Korean player in construction and electronics. The company then had the vision
to become a global leader of the digital economy.
“Change everything, except your wife and children.”

The casual sexism of the era aside, these were the bold words of
Samsung Group chairman Lee Kun-Hee to his senior management team in
1993. Decades of growth had turned Samsung from a trader of fish, fruit and
vegetables into a leading Korean player in construction, shipbuilding and
financial services, as well as electronics and consumer appliances. But Lee had
a vision to transform it into a global leader of the digital economy.
If you’ve bought a phone or tablet lately, or watched Samsung’s recent
YouTube ads ridiculing the new iPhones and Apple Watch, you know that
strategy succeeded. Samsung has ridden the waves of technology leadership
and speedy decision-making to become the world’s largest electronics
producer, with 200 subsidiaries and US$269-billion in revenue for 2013.
Samsung now ranks as the world’s second most innovative company (behind
only Apple, and just ahead of Google), up from 26th place five years ago,
Boston Consulting Group says.
In a new book, The Samsung Way, Korean academics Jaeyong Song and
Kyungmook Lee trace the company’s journey. Two decades ago, says the
authors, “the Samsung name was almost unknown outside Korea. In terms of
product quality and management style, Samsung lagged far behind the global
leaders.”
But Lee, the third son of founder Lee Byung-chul, saw an opportunity to
change that. With the coming of globalization and digitization, he used the shift
from analog to digital technologies to leapfrog over the world’s top electronics
giants, by investing in R&D, quality, marketing and branding.
Samsung’s restructuring from plodding, price-based commodity producer
to nimble, world-class innovator will interest anyone who wants to grow in
today’s turbulent markets. Song and Lee credit Samsung’s success to its ability
to manage three fundamental business paradoxes: making a large corporation
act fast; being extremely diversified, yet highly competitive in its core
industries; and successfully integrating (and surpassing) the two predominant
models in Asian business, the disciplined, harmonic flow of Japanese
management and the dog-eat-dog world of U.S. management.
The authors are business academics who were invited by Samsung’s
Economic Research Institute to conduct in-depth research into the sources of
Samsung’s competitive edge. Between 2008 and 2011, they interviewed more
than 80 key executives. In the end, Song and Lee hope The Samsung Way will
help big and small companies alike rejuvenate their organizations and “catch
up with front-runners.”
 Before the 1990s, Samsung focused on three missions: “Contribution to
the nation through business,” “People first,” and “Pursuit of rationality.” As
chairman, Lee made the case for change by pointing out that in a global
market, Samsung could not survive “as anything other than a world-class
enterprise. If we stay the same, we are doomed.”
He introduced new touchstones such as “Autonomous management,”
“Respect for humanity,” “Focus on technology,” and “Seeking opportunity
first.” But it wasn’t just words. Lee also ceded significant authority to
subsidiaries and affiliates, in the belief that “Good products come from the
fingertips of our employees and partners.”

Samsung lays out 3-year strategy

SEOUL, South Korea -- Samsung Electronics plans to spend $22 billion
over the next three years on artificial intelligence, auto components and other
future businesses as the company maps out its strategy under the restored
leadership of Vice Chairman Lee Jae-yong after he was freed from prison.
The announcement Wednesday by South Korea's biggest business group
was welcome news, coming at a time of deepening unease over slowing growth
in Asia's fourth-largest economy. It also highlights that South Korea's decades-
old reliance on big businesses for jobs and investments is unlikely to end
anytime soon since the country lacks a strong pool of small and medium-size
companies like those in Japan or Germany.
Samsung said it will spend the sum on increasing the number of artificial-
intelligence researchers to 1,000 at its artificial-intelligence centers around the
world, ensuring it will be a global player in next-generation telecoms
technology called 5G and on deepening its involvement in electronic
components for future cars.
"Samsung expects innovations powered by AI technology will drive the
industry's transformation, while the next-generation 5G telecommunications
technology will create new opportunities in autonomous driving, the Internet
of Things and robotics," the company said in a statement.
Some of the funding will go to Samsung's biopharmaceutical businesses.
Samsung has been beefing up its contract drugmaking operations to help
counter a potential decline in its mainstay electronics businesses.
South Korea relies heavily on Samsung and its affiliated companies for
investment and jobs, even after a corruption scandal that resulted in Lee's
conviction for bribery. Lee was freed after nearly a year in jail but former
President Park Geun-hye and a close associate remain imprisoned for bribery
and other crimes.
 Lee kept a low profile after his release in February but has been
emerging in his public role in recent weeks. The most notable appearance was
in India, where Lee met with President Moon Jae-in and Samsung announced
plans to expand its smartphone production there.
Including the latest plan, spending by Samsung Electronics and its
affiliates on research and development and capital expenditures over the next
three years will amount to $161 billion, Samsung said. Of that total, $116 billion
will stay in South Korea, the company said. The rest will likely be distributed to
China, Vietnam and other production lines overseas.
Samsung also said Wednesday that it plans to create 20,000 more jobs
over the next three years, on top of a previously announced 20,000. The new
investment is expected to indirectly lead to about 700,000 jobs in related
industries and businesses in South Korea, Samsung said without giving a time
frame.
No company in South Korea can match Samsung's scale in investment or
job creation. But even by Samsung's standard, the size of the investment
announced Wednesday was unusual. In 2010, under the leadership of Lee's
father, Lee Kun-hee, who was then in charge of the group, Samsung had said it
would spend $21 billion over the next 10 years on future businesses.
South Korean voters weary of scandals and critical of big businesses like
Samsung elected Moon to replace Park after she was ousted.
Moon pledged to reform outdated practices and abuses in politics and in
business and appointed a critic of big conglomerates, known as "chaebols," to
lead South Korea's fair-trade commission.
Such moves raised hopes for change, but more than a year after taking
office, Moon's administration is facing mounting criticism over its handling of
the economy. Youth unemployment rates are at historic highs and exports,
apart from the booming memory chip sector, have been slow to recover.
Moon's approval ratings have fallen to around 60 percent for the first time, the
lowest level since he took office.
Samsung's investment announcement came two days after the finance
minister visited a Samsung computer chip factory, where he touted Samsung's
importance in South Korea's economy.
 How Samsung Became a Design Powerhouse

Until 20 years ago, South Korea’s Samsung Electronics manufactured

inexpensive, imitative electronics for other companies. Its leaders valued
speed, scale, and reliability above all. Its marketers set prices and introduced
features according to what original-equipment manufacturers wanted. Its
engineers built products to meet prescribed price and performance
requirements. At the end of the process designers would “skin” the product—
make it look nice. The few designers working for the company were dispersed
in engineering and new-product units, and individual designers followed the
methods they preferred. In a company that emphasized efficiency and
engineering rigor, the designers had little status or influence.

Then, in 1996, Lee Kun-Hee, the chairman of Samsung Group, grew

frustrated by the company’s lack of innovation and concluded that in order to
become a top brand, Samsung needed expertise in design, which he believed
would become “the ultimate battleground for global competition in the 21st
century.” He set out to create a design-focused culture that would support
world-class innovation.

By any measure, his goal was achieved. Samsung now has more than
1,600 designers. Its innovation process begins with research conducted by
multidisciplinary teams of designers, engineers, marketers, ethnographers,
musicians, and writers who search for users’ unmet needs and identify cultural,
technological, and economic trends. The company has built an impressive
record on design, garnering more awards than any other company in recent
years. The bold designs of its televisions often defy conventional style. With its
Galaxy Note series, Samsung introduced a new category of smartphone—the
phablet—which has been widely copied by competitors. Design is now so much
a part of its corporate DNA that top leaders rely on designers to help visualize
the future of the entire company.

It has been a bumpy journey. Despite strong support from top

management, the company’s designers continue to face constant challenges
stemming from its efficiency-focused management practices, which are deep-
rooted. Shifting to an innovation-focused culture without losing an engineering
edge is not a simple matter. It involves managing a number of very real
tensions. Engineers and designers sometimes don’t see eye-to-eye. Suppliers
must be brought on board. Managers invested in the status quo must be
persuaded to buy in to idealized visions of the future. A risk-averse culture
must learn to accommodate experimentation and occasional failure.

Samsung’s success in making this shift can be traced back to a single

early decision—to build design competency in-house rather than import it. As
we’ll describe, Samsung chose to create a committed, resourceful corps of
designers who figured out that they could manage the tensions and overcome
internal resistance by deploying the same tools that they use in pursuing
innovation—empathy, visualization, and experimentation in the marketplace.
The corps has helped institute policies and structures that embed design
thinking in all corporate functions and provide a framework for reevaluating
products in the face of dramatic technological change.

Building an In-House Competency

One of the world’s biggest technology companies and the leading
subsidiary of Samsung Group, Samsung Electronics has been much in the news
ever since it branched into consumer electronics and decided to go head-to-
head with Apple (whose patent-infringement lawsuits against the company are
ongoing). Competition from Apple and others has been intense; in the third
quarter of 2014 the company’s profits dropped 60% from the same quarter of
the previous year. By the first quarter of 2015 profits were recovering but were
still below prior-year levels. Nevertheless, the big picture is one of impressive
innovation and marketplace success. Samsung’s mobile division is the sole
survivor of the radical market revolution led by the iPhone (the mobile divisions
of former competitors such as Nokia, Motorola, and Ericsson no longer exist),
and smartphone sales drove record earnings for the company in 2013.
Moreover, Samsung has been the leader in the global TV market since 2006,
generating a series of hit models such as Bordeaux, Touch of Color, One Design,
and Curved Smart.

These design leaps all began with Lee’s 1996 resolve—triggered in part
by a consultant’s report on Samsung’s innovation deficiencies—to instigate a
design “revolution” in the company. (This wasn’t the first major leap for
Samsung. In 1993 Lee had launched an initiative to integrate Western practices
on strategy, HR, merit pay, and design into the conglomerate, but he had been
unsatisfied with subsequent progress.) To fuel its design revolution, the
company could have sought first-rate expertise from outside. That certainly
would have been the fastest approach, and a number of senior managers
pushed to have an internationally known Korean designer take over the design
function. But other executives persuaded Lee to nurture internal designers who
would focus on the company’s long-term interests rather than just their own
projects.
As part of its investment in developing an organization-wide design
capability, Samsung brought in faculty members from a well-known art college
and created three training programs. One program trained in-house designers,
taking them away from their jobs for as long as two years. (The other two were
a college and graduate-level school and an internship program.) Lee made the
programs a personal priority, which prevented them from being derailed by the
objections of business and design executives who were furious about losing
their designers for so long.
Numerous Samsung executives now agree that dependence on outside
expertise would have done long-term damage. Developing in-house expertise,
while laborious, created a group of designers who take a holistic view. An Yong-
Il, the vice president of design strategy, puts it this way: “When we had our
own place in the organization, we started caring about the future of the
company.” The designers also developed a capacity for strategic thinking and a
tenacity that enabled them to overcome resistance over the long term. It
seems doubtful that any group of outside designers, no matter how brilliant,
would have been able to do that—even with support from the chairman.
Empathizing with the Whole Organization
In large companies, the process of innovation is long and tortuous. Even
if a design team’s new-product concept wins raves and garners executive
support, it still must survive numerous downstream decisions—by engineers,
programmers, user-experience experts, team leaders, managers, and even, in
some cases, suppliers. Each of those decisions creates an opportunity for an
idea to be hijacked by other functions’ priorities and the strong tendency to
steer the process toward the safety of incremental change rather than the risky
territory of radical innovation. Kang Yun-Je, a senior vice president and the
creative director of Samsung TV, says that nondesign functions typically think
they can make good profits simply by using existing technology to make
existing products a bit better and a bit faster.
Even in a company that embraces design principles, the reality is that
designers must take steps to ensure that their ideas prevail as originally
conceived. To do this they need to consistently empathize with decision makers
from other functions throughout the process.
Consider, for example, the attempt by Lee Min-Hyouk, Samsung Mobile’s
creative director, to “sell” what was eventually nicknamed the “Benz phone”
after a Norwegian newspaper likened it to the Mercedes-Benz. It was the first
flip-cover mobile phone to have no external antenna. Lee, then a junior
designer, knew that in order to persuade the engineers to eliminate the
antenna, he’d need a better reason than to make a phone look good. To bring
them on board, he reached well beyond the usual design role and took on an
engineer’s mindset, coming up with a new hinge design that created an internal
space for a larger and more effective antenna. He also studied different types
of paints that would enhance signal reception. “I had to imagine a new design
for engineers as well as users,” he says. The engineers were won over, and the
phone ultimately sold 10 million units.
Design must also win the support of suppliers. If parts makers are
unwilling to collaborate, no new design, no matter how compelling it may be,
can survive. For example, when Samsung was working on its One Design flat-
panel television, it faced strong resistance from its LCD panel supplier, which
was accustomed to providing panels with inner covers to protect the
components. TV manufacturers would add an external cover, which typically
resulted in a thick profile for the final product. Because Samsung’s designers
envisioned a thin, metal-encased TV, the company wanted the supplier to omit
the inner covers.
But “they didn’t listen to us,” Jung Hyun-Jun, the vice president of
engineering for Samsung TV, says of the supplier. “They were selling
standardized LCD panels as a complete set to many other TV manufacturers,
and they did not see any reason why they should do something different for
just one model of one client.”
So Samsung’s designers, working with its engineers, invented a supply-
chain model for LCD panel systems that would radically reduce the shipping
cost, because without the covers about 10 times as many LCD cells could be
packed into the same space. The cost saving was shared with the supplier, and
Samsung got its coverless panels.
Visualizing the Future, Reframing the Problem
Managers are trained to draw on the past and the present to project the
future—that’s what budget planning is all about. Designers, by contrast, are
trained to break from the past. But if they want to persuade decision makers to
take a chance on their radical visions of the future, they need to adopt a
managerial mindset. Visualization is a powerful tool for bridging the two ways
of thinking and getting skeptics to support new ideas.
The development of the Galaxy Note provides a case in point. Soon after
Samsung Electronics introduced its Galaxy S smartphone and Galaxy Tab tablet,
some members of its design team noticed an unmet need in the market: In
Korea and Japan many knowledge workers had a habit of jotting down notes
and keep their schedules in wallet-size pocket diaries, for which neither the
four-inch phone nor the nine-inch tablet provided a good substitute. Realizing
that a whole new platform was needed, the design group developed the
concept of a smart diary that featured a pen interface and a five-and-a-half-
inch screen.
When the designers introduced the concept to management, fierce
debate about the screen size ensued. At the time, the marketers firmly
believed that no mobile phone should be larger than five inches. Even after the
designers produced mock-ups, managers worried that users would not accept
such a large smartphone.
“Although everyone is for innovation, no one wants to change when we
start talking about details,” says Lee Min-Hyouk, of Samsung Mobile. “People
told us, ‘It won’t sell.’ ‘You cannot hold it in your hand.’ ‘How can you put that
thing next to your face?’ ‘The only reason to buy this is to make your face look
small.’”
It was clear that the new size would require people’s beliefs about
smartphones to undergo a fundamental shift. The team was able to prevail by
reframing the conversation: It prepared a mock-up of the product
demonstrating what eventually became the widely imitated “smart cover,”
which connects with the user-experience software to display an interactive
screen when the cover is closed. The mock-up looked more like a pocket diary,
and those present at the design review realized that when it was thought of in
that way, the new phone did not look so big. This shift in perception allowed
Samsung to create the phablet category, which led to the highly successful
Galaxy Note series. The company now uses the smart-cover concept for the
smaller Galaxy S series as well.
Experimenting in the Marketplace
Empathy and visualization aren’t always enough to generate the internal
support necessary for radical change. In some cases Samsung designers
experiment and refine their ideas in the marketplace and use the market data
to build support.
Around 2003, Samsung’s designers wanted to improve the aesthetics of
the company’s TVs. This grew out of an initiative to question the very definition
of a television. Ethnographic research revealed that in most homes, TVs are off
far more hours than they’re on. In other words, much of the time they are
pieces of furniture. As such, the designers felt, sets should be visually stunning.
They proposed removing the speakers from their usual location, on either side
of the screen, and hiding them. This radical design alteration would require a
trade-off on audio quality, but the designers believed that a fundamental
change had occurred in consumers’ thinking about TV sound. Because so many
people were connecting their sets to home-theater systems, their thinking
went, audio quality was no longer a priority and could safely be compromised.
Accordingly, they hid the speakers below the screen, creating downward-facing
speaker holes that would direct sound to the unit’s graceful, chevron-shaped
bottom edge, where it would be reflected toward the viewer.
Many Samsung managers were skeptical. They still believed the
conventional wisdom about TV design: that, in descending order, the priorities
were visual quality, audio quality, usability, and physical shape. The CEO was
concerned about the idea of putting speakers below the screen, says Kim
Young-Jun, a design SVP. To build consensus, the design group urged the
company to experiment with the idea in the European market. The model was
a big hit, and the CEO and the entire TV development team, including
marketers and engineers, backed the concept. Bolstered by the experiment’s
success, the design group chose an even more daring design for what became
the Bordeaux model, with a glossy white border and a red chevron-shaped
lower edge. When the full line of products finally came out, Samsung sold a
million units in six months.
Samsung has also learned to use marketplace experimentation to
support forward-looking design research. After one team’s folding-screen
concept generated a rapid share increase in the PC-monitor market, the team
found it easier to secure funding for other long-term design initiatives. It was
able to develop and launch a series of highly successful products in the TV
market. All Samsung’s recent hit models have their origins in such a process.
With commercial successes like these to the designers’ credit, the value
of advance design is now widely appreciated within the company, and Samsung
has made substantial investments in deep-future thinking. In fact, four distinct
time horizons now exist simultaneously for design within Samsung.
Creating a Sustainable—and Flexible—Design Organization
Internal resistance has been a fact of life at Samsung ever since the
company started on the road to design excellence, 20 years ago. In the late
1990s An Yong-Il, the design strategy VP, met strong opposition from Samsung
managers when, after studying the design organizations of companies such as
IBM, Sony, Mitsubishi, Panasonic, and Phillips, he recommended adoption of a
companywide design philosophy described as “Inspired by humans, creating
the future.” Executives made it very clear that meeting short-term profit
targets by selling cheap imitations of competitors’ products was more
important to them than establishing a design philosophy. Even designers gave
An’s philosophy a lukewarm reception. He says, “About 20% agreed with what I
said but did not want to do it. About 50% said, ‘Why bother? We just draw
pretty pictures as told by others.’ It was only about 30% of designers, mostly
young, who were interested.”

“I had to imagine a new design for engineers as well as users.”

 So it’s perhaps not surprising that during the Asian financial crisis of
1997, the company cut back on its design initiatives. Discouraged, An
considered leaving the company. His boss urged him to enter a PhD program
instead, to study management and organizational design and to reflect on what
would ensure a strong future for design thinking at Samsung.
A design review meeting at Samsung’s Corporate Design Center Courtesy
of Samsung COURTESY OF SAMSUNG
His studies brought An to the conclusion that design philosophy and
design principles must be visualized through clear organizational structures and
processes and a new personnel policy. The design group should include people
who understood social science, ethnography, engineering, and management. In
2000, when Samsung emerged from the financial crisis, An’s boss worked with
the company’s corporate strategy office to conduct a strategic review of the
design organization. The review found that Samsung needed to establish a
strategic design group, later dubbed the Corporate Design Center, that would
plan for the company’s future and lead the way in perpetuating its emphasis on
design thinking. Today the CDC is organized around twice-yearly strategic
design review meetings that involve all the company’s senior executives. The
most crucial element of those meetings is visualizing Samsung’s future.
The importance of design is felt everywhere. In the TV division, for
example, engineers will tell you that their primary job is to help designers
realize their vision. When sales of the Galaxy S series declined recently, it was
design that received the most scrutiny from corporate leaders.
Nevertheless, Samsung faces enormous challenges going forward. Its
approach to design is still largely based on the development of hardware
products, even though most of that hardware runs on software. As digital
technology changes the business landscape—and as Samsung continues to
develop its own operating system and various service platforms in
transportation, health, and payments—the company will have to radically alter
its design process. Designers are already experimenting with agile development
for software-based user-interface designs that require frequent rapid iterations
and shorter design cycles. They are trying various forms of cross-functional
coordination as they deal with increasingly convergent products. Recently
Samsung conducted the first companywide design-management capability
review, which is being used to inform a corporate restructuring. The company’s
design revolution is far from complete.
As the technological landscape continues to shift, executives of all
corporations that seek an advantage through design thinking will need to
constantly review their design processes, cultures, decision making,
communications, and strategy. Recognizing that Lee Min-Hyouk’s comment
“Although everyone is for innovation, no one wants to change when we start
talking about details” applies even to design groups, companies must push the
usual bounds of design thinking and create an ever more radical vision for the
future.
Lee Kun-Hee: Innovation for Transformation Lee Kun-Hee is not only the
person primarily responsible for transforming an agricultural firm into the
electronics giant, Samsung, but also, in good measure, the person behind
Korea’s economic boom. Without doubt, one of the primary traits which define
Lee Kun-Hee is his determination to constantly transform his firm. The latter
began as an agricultural conglomerate until becoming the world’s leading
producer of computer chips, flat screens and latest generation mobile phones.
His vision is perfectly reflected in a letter he dedicated to Samsun clients,
employees and friends: “We live in passionate times of digital revolution,
characterised by change and constant creative innovation. […] To maintain our
leadership in these turbulent times, we have to be able to adapt quickly to the
setting around us and transform changes into opportunities. The 20th century
was moved by advances in productivity. The new era in which digital
technology is transforming all of society will be pushed by creativity and
innovation.” Lee Kun-Hee is not only the person primarily responsible for
transforming Samsung from an agricultural firm into an electronics giant but
also, in good measure, the person behind South Korea’s economic boom, a
phenomenon in which Samsung has played an enormous part. This role is well
illustrated by the fact that the group accounts for a fifth of all the country’s
exports. As tends to occur with highly charismatic and influential people, Lee
Kun-Hee’s name has not eluded controversy. These include a long legal battle
with the company’s main competitor, Apple, embodied by Steve Jobs’ will to
fight until the very end and the sentence which found him guilty of tax evasion
though he was finally pardoned by the Korean Government in 2010. This
pardon was another example of the power Lee Kun-Hee wields in his country
where, as a member of the Olympic Committee, many feel he was responsible
for Korea having been named to host the 2018 Winter Olympics. However, his
conviction for tax evasion ended up having a much higher price, eventually
leading him to resign as President of Samsung. Since 2008 Samsung has been
managed by professionals who don’t belong to the family, though the latter has
always been in control. Even more so after Lee Jae Yong, Lee Kun-Hee’s son,
was named President of Samsung Electronics Ltd last December, the group’s
leading company. Many believe that Lee Jae Yong’s new post reflects his
intention to soon fill the President’s chair which is still vacant after his father
abandoned it. Finding a leader in each generation capable of adapting the firm
to the times is necessary to be able to ensure the firm’s continuity. The Lee
family has been able to do so in the past thanks to the model they apply to
structure the business group’s governing bodies. It basically consists of a
complete symbiotic relationship between the family and the company, in which
the family is involved in almost every day-to-day decision. In this case, the
family is an added value, providing management talent and institutional
relations at every level. NEWSLETTER MARCH 2013 Samsung, one of the
world’s largest manufacturers of mass consumer electronic products, began
with a small store in Seoul, when Lee Byung-Chul created Samsung General
Stores to export fish, vegetables and fruit to Manchuria and Beijing. As of 1938,
Korea grew rapidly with the end of Japanese occupation. In little more than
two decades, the country’s per capita income grew from 200 dollars to more
than 10,000, becoming one of the leading developing countries. The founding
family would take thirty years to transform its company into Samsung
Electronics in 1969, later integrating with Samsung Semiconductors in 1988 and
becoming a crucial part of the most influential conglomerate in Korea. With the
Asian economic crisis in 1997, however, Samsung Group’s balance sheet
suffered dramatically, with a debt-equity ratio of nearly 4:1. The company’s
income fell sharply and, without external financing, Samsung’s investment
plans were no longer sustainable. But, as had occurred in 1974 when the
company detected an opportunity in the semiconductor market, the 1997 crisis
provided a new vision to Samsung. The company decided to optimise and
modernise its competitive strategy and business model based on the mass
production of copies to independently developing the brand based on digital
technology. This period was also characterised by a statement associated to
Lee Kun-Hee: “Excepting our wives and children, everything has to change.” In
little time, Samsung sold 10 subsidiaries and, breaking with the Korean
tradition of providing long-term employment, it dismissed more than 30,000
workers. It was an exercise in the characteristics which have defined Lee Kun-
Hee’s leadership based on entrepreneurial innovation and a great ability to
manage through foresight and determination. This sacrifice transformed the
group into the worldwide leader in the electronics industry, currently
employing more than 200,000 people around the world.
If Lee Kun-hee, the Chairman of SAMSUNG, Korea’s largest
conglomerate were to provide his date, place and time of birth to an Indian
astrologer, Mr. Lee may get very revealing insights to the course of events in
his life.
According to the Indian astrologers, the twelve planets impact lives of
individuals depending on their position in the birth chart of an individual.
 It is believed that Hindu Prince Gautama Siddharta, the founder of
Buddhism, 563-483 B.C. said, “Nothing remains the same”. This adage is proven
right by looking closely at the life of Mr. Lee Kun-Hee.
In 2008, having suffered a humiliating setback, Mr. Lee Kun-Hee, owing
to the Samsung slush funds scandal, officially resigned, and stated, “We,
including myself, have caused troubles to the nation with the special probe; I
deeply apologize for that and I’ll take full responsibility for everything, both
legally and morally.” Within a short time, on December 29, 2009, the South
Korean government moved to pardon Lee Kun-hee.
Notwithstanding the setback, he once again led and spearheaded his
companies. Samsung Electronics, with sales of $155 billion in 2011, and became
the world’s largest memory chip and flat screen television producer. Samsung
Electronics also pulled in its highest revenues ever from its growing mobile
phone business.
Today, with a net worth of 8.3 billions of US dollars in March 2012, Mr.
Lee Kun-hee is rubbing shoulders with the world’s richest people in the Forbes
list of global billionaires and carrying the number one position in the Korean
industrial scene.
Yet, as “Nothing remains the same”, Mr. Lee is once again facing
problems — of a family feud. For the first time in 25 years, he is likely to hold a
separate memorial service to commemorate the group’s deceased founder, Lee
Byung-chul, a traditional Korean ceremony where family attendance is
mandatory.
Understanding the life and travails of Lee Kun-hee may not be very
difficult for the Indian astrologers since they would chart the movements of the
planets through his natal chart and somewhat predict the happenings in his
life.
For us mortals to understand this, we just have to follow his business
philosophy. Way back, in the early 1990s, believing that his companies were
overly focused on producing massive quantities of low-quality goods and that it
was not prepared to compete in quality, perhaps believing in the Buddhist
philosophy, Lee famously said to his employees, “Change everything except
your wife and kids”.
In an interview, Lee expressed pride in the fact that Samsung attracts the
brightest minds in South Korea but added that his new goal is to attract talent
from all over the world to ensure that Samsung will remain one of the top
companies in the world for years. This became clear to us in India when
Samsung Electronics commenced its operations in India in December 1995.
Today, Samsung is a leading provider of consumer electronics, IT and
telecom products in the Indian market. Samsung India is the Regional
Headquarters for Samsung’s South West Asia operations, which provides
employment to over 8,000 employees with around 6,000 employees being
involved in R&D. In 2010, Samsung India achieved a sales turnover of US$3.5
billion.
India, the world’s second-largest mobile phone market after China, is key
to Samsung’s growth and it will do everything it takes to tap the next big
opportunity. According to GFK Nielsen, the current urban market share stands
at around 23.4 percent in value, and by the end of this year, Samsung expects
to reach the target of 40 percent.”
Smart Samsung is outsmarting Nokia with their smart phones segments
and Samsung has already left the Finnish company far behind at least in India if
not in the world. In 2011, market of Nokia smart phones shrunk by over 50
percent because Samsung came out with phones with different operating
platforms like Symbian, Android and Windows Phone, as also the proprietary ‘
bada’ platform.
Looking at the socio-economic situation in India, apart from research and
development, Samsung has given great importance to Corporate Social
Responsibility concepts for the communities where it operates. Its CSR
programs respond to the social and environmental needs and seek to give back
to communities that support the company.
‘Samsung Hope Project’ in the areas of education, culture, sports, social
welfare and community development stem out of the interest Mr. Lee holds
close to his heart.
In India, Samsung manufactures colour televisions (including 3D, LED and
LCD Televisions), mobile phones, refrigerators, washing machines and split air
conditioners. Samsung commenced operations of its second state–of-the-art
manufacturing complex in November 2007.
With a huge growing middle class population, disposable incomes and
upward looking economy, India was the right choice for Samsung to make huge
investments here.
 The Economist quotes Barry Eichengreen of the University of California,
Berkeley, as saying that Korean conglomerates are “among the most
technologically and commercially progressive agents in the Korean economy”.
The British legacy of licenses required for setting up of industry and over-
staffed lethargic bureaucracy have been the bane for rapid development of
India. It is only in the 60s that South Korea was one of the poorest countries in
the world, with an income per head on a par with the poorest parts of Africa.
Just last year “The Economist” wrote, “By the end of 2011 it [South
Korea] will be richer than the European Union average, with a gross domestic
product per person of $31,750, calculated on a basis of purchasing-power
parity (PPP), compared with $31,550 for the EU. South Korea is the only
country that has so far managed to go from being the recipient of a lot of
development aid to being rich within a working life”.
Whatever the stars foretell or the Indian astrologer predicts…Samsung
under the keen eye of the great pioneer industrialist, Lee Kun-hee, will only
shine brighter for he firmly believes that, “”One genius can feed millions of
others. For the upcoming era where creativity will be the most important driver
of business success, we need to hire the best. The economic value of one
genius is more than $1 billion.”
Lessons From Samsung’s Chairman Lee: Sometimes It Takes A Match
Samsung can teach us a lot of lessons. Sometimes, you just need to
change everything you are doing.
In 1995, Samsung chairman Lee Kun Hee piled 2,000 inoperable
cellphones on the pavement at the company’s manufacturing plant in Gumi,
South Korea. He then burnt them all to the ground. What was left was ground
to dust by bulldozers.
According to an in-depth report on the internal processes of Samsung by
Sam Grobart at Bloomberg Businessweek, Chairman Lee had given the
cellphones to employees as Christmas gifts. They turned out not to work and
the bonfire that ensued has been a defining moment in the way Samsung
approaches its business ever since.
Chairman Lee, as he affectionately known, took over Samsung in the late
1980’s after the death of the company’s founder, his father. He then set out to
build his own global empire. That included completely rethinking everything
that the company had ever done. Lee assembled his executives in Frankfurt,
Germany in the early 1990s and delivered a three-day speech, known now as
the Frankfurt Declaration.
 “Change everything but your wife and children,” was the main message,
according to Grobart. In a way, this was the real bonfire that spurred Samsung
to the heights of global manufacturing and the leader in the smartphone wars
years later.
This is a lesson that Samsung’s competitors can learn from.

Burn Your Crappy Smartphones To The Ground

The competitive landscape in the smartphone business is … well, it’s not
good. There is Samsung. There is Apple. Then there are a bunch of has-beens
and wannabes. That list includes former powerhouses of the gadget world,
companies that nobody ever thought would be in decline. Nokia, BlackBerry,
Motorola, HTC and Sony are the headliner has-beens, while Huawei, LG and ZTE
are among the wannabes.
Media gets its hands on the Samsung Galaxy S4
What is the lesson that each can learn from Samsung? Each should take
its mediocre and middling smartphones and burn them to the ground. Then get
that bulldozer and grind them to dust.
Anybody who has ever lived with an HTC Thunderbolt would probably be
extremely happy to see a pile of them in flames. Or maybe a group of Motorola
Razrs or Atrix smartphones. Or anything running BlackBerry OS 7. These
companies got complacent and made mediocre products aimed at the top of
the market. Samsung ate their lunch.
And now they need to completely rethink their products to compete. In
the end, that should lead consumers to better choices of smartphones and,
hopefully, cheaper prices.
Already Burning
Some burning has already begun, of course. Google is clearing the
Motorola pipeline and working on a so-called “X” smartphone that has had
some wild rumors attached to it, such as personally customizable hardware and
a 4000 mAh battery. (For comparison, Samsung’s new Galaxy S4 will sport a
2600 mAh battery.)
Similarly, after the debacle that was 2011 — see: Thunderbolt and its ilk
— HTC redesigned its products and came out with the critically acclaimed HTC
One X in 2012 and now the HTC One 2013. Great phones in hand, HTC just now
needs to burn everything else down about its approach, from its marketing to
distribution. The company has started this approach with aggressive marketing
efforts aimed against Samsung’s newest Galaxy S4 smartphones. BlackBerry
basically set fire to its entire smartphone lineup and is coming fresh with
BlackBerry 10, which has shown early signs of success.
 Samsung Electronics president and head of mobile JK Shin introduces
Galaxy S4
Nokia may be in a tough spot. Its “burning” metaphor has already come
and passed when CEO Stephen Elop wrote the infamous “burning platform”
memo, ditched the company’s MeeGo and Symbian operating systems and
went all-in with Microsoft’s Windows Phone mobile operating system. As yet
that bet has not really paid off for Nokia and it’s hard to envision a future
where it will.
The smartphone industry is a fickle beast. Nokia’s example shows that,
even when you do pile up your old strategy into a rhetorical pile and set it on
fire, that does not guarantee you will succeed on the other end.
There is more to Samsung’s ascendancy than Chairman Lee’s pile of
burning plastic and metal, of course. Samsung succeeds because it is hyper-
focused, controls most of its own component processing and spends a ton of
money on marketing. It can iterate on ideas faster than its rivals and spread its
distribution further. Its rivals, HTC in particular, just don’t have the bandwidth
to match it.