Innovate or die!
The news that South Korean company Samsung is believed to have surpassed both Nokia and Apple become the largest mobile phone manufacturer demonstrates the importance of being able to offer technology that is, as well as being innovative, is perceived to be value for money.
For example, Samsung's galaxy handset is acknowledged to offer better technology than Apple's iPhone but at a lower price.
As Francis Jeronimo from analyst IDC comments, why would you buy the iPhone, which has a five megapixel camera, if you can purchase a Samsung that has an eight megapixel camera and a better (brighter) display for less money?
Notably, Samsung's rise has been achieved from roots that gave no indication of the current pre-eminence it enjoys in electronics. Indeed, Samsung is a company that has learnt to adapt, diversify and innovate in a way that demonstrates the importance of being both agile and creative in terms of both strategy and technological development.
The history of Samsung is instructive for any organisation that wishes to innovate its way out of the current economic crisis.
Samsung, the name means "three stars" was founded in 1938 by Byung-Chul Lee in Dageu. Initially it dealt in the export of foodstuff such as dried fish, and fruit and vegetables.
After second world-war it had its own flour mills and had started to develop other interests such as insurance. Significantly in 1969 Samsung-Sanyo Electronics was established and started producing black and white televisions in 1972.
During the 1970s whilst Samsung invested in industries as diverse as 'heavy', chemical, textile, petrochemical, shipbuilding and textiles, it was in electronics that it gained recognition abroad by export of its products. In 1974 is began producing washing machines and refrigerators and in 1979 began making microwave ovens.
The 1980s was another decade of what was, as well as breath-taking development of new products, expansion into global markets.
In 1980 it commenced production of air conditioners. Having 1982 having produced 10 million black and white television s in 1983 Samsung started making personal computers and developed video cassette recorders which were exported to the US the following year.
In 1985 is established Samsung Data Systems to create an ability to become a leader in information technology (including systems integration, management, networking and consulting).
Significantly in 1987 as well as launching Samsung Aerospace Industries, it recognised that innovation was the key to continued success and created two research and development institutes.
Following the death of its founder in 1987, who was succeeded by his son Kun-Hee, Samsung started a restructuring of existing business and the development of new ones with the aim of being one of the top five electronics companies in the world.
From the 1990s Samsung's dedication to development best-in-class products was what marked it out as a company capable of competing with any other global 'player' and contributed to the digital technology we enjoy as standard.
So, as well as starting to make mobile phones in 1993 and producing the first ever digital video disk recorder (DVD-R) in 1993, it began manufacturing in China and acquired US firm HMS.
From this base Samsung was able to focus on continued development of revolutionary products that were regarded as world-class because of the obsession with total customer satisfaction.
It also developed the technology that revolutionised computer and television screens. And with resonance to Fugifim, which sponsored the 1984 Olympics, Samsung became a contributor to athletics; assisted by Kun-Hee being selected as a member of the International Olympic Committee in 1996.
From the late 1990s Samsung has cemented its position as one of the most widely respected (and admired) companies in the world - particularly in electronics. Looking at its achievements over the last decade or so demonstrates that its pace of development through innovation remains phenomenal.
Samsung's research and development into both flat screen technology for its digital televisions and computer monitors and touchscreen technology for its mobile phones and tablets have ensured that the reputation of its products mean that they are as good (if not better) than competitors. And better still, they are not the most expensive.
So, it's as easy as that! Well, of course it isn't. Constant innovation through research and development is expensive and time consuming. Undoubtedly Samsung has been helped by the fact that many of its competitors in, for example, mobile phones, are experiencing difficulties helps.
Not getting into a 'death spiral' is imperative as, it seems, once you experience losses it is extremely difficult to recover. Horace Dediu who used to be a senior manager at Nokia, and is now an independent analyst, states that he has found no instance of a firm that has been able to recover from experiencing losses.
Whilst innovation may not be easy or inexpensive, it seems that if you don't engage in it you will not survive. This is the message that is contained in the latest edition of The Harvard Business Review (May 2012) which considers the importance of innovation.
Adi Ignatius, editor in chief states the belief that innovation is a company-wide process that is 'total' and must be 'across the organization'. Further, he contends, if it is regarded as something ad hoc it will not succeed.
In their article 'Innovation and Creativity', Bansi Nagji and Geoff Tuff stress the need for companies to have a balanced portfolio of innovation as well as having the 'ability to approach it as an integrated whole'. Interestingly they state that having carried out research found a 'striking pattern':
Outperforming firms typically allocate about 70% of their innovation resources to core offerings, 20% to adjacent efforts, and 10% to transformational initiatives.
They go on to stress that there is an inverse ratio in that innovation investments in that typically there is a 70% return from the 'transformational realm'.
Further, as well as suggesting that there is a need to discover talent for 'breakthrough efforts,' there should be separation from the core business through a defined structure and sufficient funding.
As they summarise, whilst innovation is never likely to be a dominant activity, it will require particular things to be put in place:
1. Those with 'talent' should be identified/appointed who possess appropriate skills to deal with complexity, uncertainty and ambiguity
2. Management should focus on a few 'promising ideas' rather than trying to attempt to operationalize many that will only dissipate effort and cause confusion
3. Metrics should be used to assess non-financial achievement (especially in the early phases)
As Samsung shows, the desire to innovate and create is an objective that must come, involve all members (it is part of the culture), and that there is no limit to what you can attempt to be involved in.