The Legacy of Lee Kun-Hee: Transforming Samsung Into a Tech Giant

Lee had a keen sense of danger that kept both himself and Samsung on track.

As part of his transformation of Samsung from an appliance maker into one of the world’s premier producers of televisions, phones and memory chips, he once advised employees “not to change anything except their wives and children”. On Sunday he passed away at age 78.

Innovation

Lee Kun-hee took over Samsung from his father in 1987 with an ambitious plan in mind – to transform it into a global enterprise. At a time when many domestic conglomerates (chaebol) relied on protectionist policies for growth, Lee saw Samsung as the future through globalization and competition.

To achieve this goal, Samsung needed a culture that supported world-class innovation. Lee initiated radical reforms including mandating subordinates report errors to their bosses and promoting women to executive ranks. Furthermore, Lee began acquiring foreign companies such as computer maker AST Research from the U.S. and Rollei Camera from Germany while also setting up semiconductor plants in Austin Texas and Suzhou China.

But his most crucial contribution was making Samsung more open to ideas from outside. To accomplish this, he introduced a hybrid management system combining chairman authority with consensus building in its ranks.

Samsung designed this system to foster creativity by encouraging employees to challenge existing paradigms and think more creatively. They employed two strategies for this goal: hiring outsiders and sending insiders abroad.

Samsung began sending executives overseas on what are known as “regional specialist programs” in the early 1990s. These managers spent six to twelve months learning local languages and cultures as well as carrying out projects not directly linked with their regular duties.

As a result of these programs, Samsung created many innovative products, including the first digital camera phone and fusion semiconductors that would revolutionize markets while improving consumers’ lives.

Samsung’s current success can be attributed to its ability to innovate and adapt quickly, which has resulted in it becoming one of the world’s premier tech companies today. Let us honor Chairman Lee by taking steps necessary to maintain Samsung’s technological advantage so it remains successful even as businesses adjust quickly in today’s rapidly shifting business environment.

Creativity

As Lee took over his father’s company in 1987, Samsung was still producing imitation Japanese appliances at minimal profit and on the verge of bankruptcy. Determined to transform his firm by emphasizing design, brand image, and technological innovation – his goal was repositioning Samsung as an attractive premium brand targeted towards younger Koreans and upscale customers worldwide.

As part of his initial strategy to enhance product quality, Lee assembled top executives and held an in-company product comparison exhibit, pitting Samsung products against those made by Sony, Siemens and Philips before taking swift action against any subpar ones – this dramatic form of shock therapy forced executives to think twice before continuing the low-cost strategy that had led Samsung down this path of decline.

Lee established clear guidelines for recruiting foreign talent. He made 30% of CEO performance appraisals at Samsung Group affiliates dependent on hiring and retaining foreign S-level managers, while creating an internal management consulting unit known as Global Strategy Group (GSG) to assist with assimilation efforts for these recruits – GSG members are non-Koreans who graduated from top Western business and economics programs and worked for McKinsey, Goldman Sachs or Intel, spending two years learning basic Korean before being assigned overseas subsidiaries.

Lee fostered an environment of crisis within his management teams, encouraging them to continually push themselves beyond complacency and challenge themselves in an unconventional fashion. At one point he ordered all 1.5 million mobile phones sold at that time piled into one factory in Gumi, North Gyeongsang Province before setting them all ablaze as part of a symbolic “burning at the stake.”

The C-Lab program gives employees six to 12 months to develop ideas not aligned with company needs, giving them freedom and unleashing their full potential. At the same time, this initiative keeps your company close to customer demand so you can stay ahead of competitors.

Management

Lee first took control of Samsung in 1987 as a family-run business focused on manufacturing TVs, refrigerators and microwave ovens. He believed it could become more competitive by becoming a worldwide enterprise; so he set about changing it accordingly. He knew he must change how the company was run to take advantage of new opportunities, even if this meant upheaval for many employees, but sought and adopted best practices from abroad to smooth this process. He made sure to promote those practices with the greatest potential to advance the company, seeking employee input in designing them. If resistance was strong enough, he delayed adoption, modified it or, in cases such as stock options, abandoned it altogether.

Samsung was an insular company with an antiquated culture, making its adoption of Western management styles difficult. When the first wave of non-Korean MBAs and PhDs hired to revitalize its chip division were met with resistance by existing managers who suspected these outsiders were taking away promotion from them and shut up ranks to block their progress. Some even went so far as sabotaging these newcomers by withholding important information, exaggerating mistakes made, or socially isolating them from company events.

Lee addressed this problem by creating an internal management consulting unit which reports to him directly. GSG members include non-Koreans who attended top Western business and economics programs and worked at major global firms such as McKinsey and Goldman Sachs; GSG spend two years learning basic Korean before traveling the globe to work on regional projects.

Globalization efforts have required substantial investments of time, money, and executive will. For example, each regional specialist’s training can cost the company $100,000 or more; not to mention opportunity costs and turnover risks of taking key employees out of key roles for 15 months. Yet such investments continue to pay dividends thanks to Lee’s resolve in making difficult decisions.

Leadership

South Korean business giant Samsung stands out as a model of globalization among emerging business giants, having grown from its humble origins as a family noodle trading business into one of the world’s biggest technology firms by revenue, outshone by Japanese rivals Sony, Sharp and Panasonic in chips, TVs and displays while overthrowing Nokia handset hegemony and even surpassing Apple in smartphones.

To achieve their vision, the company’s leadership team had to devise a highly efficient organizational structure and blend Western best practices into its insular culture. Lee was aware of how unsettling such changes might be for some employees; therefore he ensured only necessary changes were implemented, engaging employees fully in decision-making processes, personally advocating for practices he considered critical while seeking employee input on them; in cases of resistance such as stock options being introduced these were delayed, modified, or in some instances (like stock options) abandoned altogether.

Lee advocated for radical reforms to increase quality, insisting on quality over quantity in their pursuit of market share. To do this, they promoted women into their management ranks, encouraged employees to report errors to their supervisors, and once even burned $50 million worth of subpar mobile phones and fax machines in an attempt to demonstrate this point.

At the same time, Lee strongly upheld Samsung’s Korean heritage and advocated the incorporation of Korean art into company offices. For example, he successfully convinced Korean American artist Nam June Paik to incorporate a Samsung television in an installation containing three cellos and keyboard which was displayed at New York’s NMK Gallery in 1993.

Additionally, he insisted that Samsung maintain its core values. In an often-quoted speech he stated that Samsung was “rooted in Korean culture” and no foreign company could successfully operate within Korea without possessing an overwhelming sense of its cultural identity.

Lee used his acute understanding of culture, creative problem-solving strategies and his relentless focus to grow his father’s noodle trading business into an empire worth $375 billion as of May 2020, comprising numerous affiliates in electronics, insurance, shipbuilding and construction – becoming one of South Korea’s most powerful leaders along the way.