Saturday, December 01, 2007

Crisis is good!

Corporate Innovation Forum

A key challenge of leaders who want to stimulate innovation driven growth is creating the “burning bridge”. By definition, innovation means change and change is threatening to most people. Hence, sustainable innovation can be difficult at best and very challenging when the current business is doing well. From my own experience, I will never forget the conversation at the dinner table in the mid 80’s with a future CEO of the Boeing Corporation. They just came off two of their best years yet he knew that Airbus was going to be a powerful force but could not get the attention of his organization.

A highly interesting article in the last issue of Fortune (Sept. 5, 2005, no. 15) explains how Jong-Yong Yun, CEO of Samsung, is relentlessly building a culture of perpetual crisis at Samsung Electronics.

The South-Korean powerhouse has become the worlds largest consumer electronics company.

Without a doubt, Samsung is also a leading company on innovation, registering 1600 patents in 2004 (more than Intel), and spending a whopping 9% of revenue on R&D. The company employs around 27.000 researchers, 40% of it's global workforce. It seems like Yun's strategy to control the core technologies of digital convergence simply ensures that the profits keep flowing in.

However, according to Yun, it is not the corporate strategy that made Samsung so successful. Rather, it is the corporate culture that support the execution of this strategy that's vital.

Yun actively and relentlessly spreads a philosophy which emphasizes that disaster is just around the corner:
• Markets for today's cash cows may implode overnight.
• Reinvigorated competitors such as Apple, HP, Intel, Microsoft, Motorola and Sony may bounce back.
• Chinese companies will inevitably and aggressively take away the electronics commodity market (a strategy that Samsung itself knows very well from its history). Product innovation is the only remedy.
• A constant obsession with cutting cost and complexity is needed to lead the innovation pace in consumer electronics and be first to market.
• Success only increases the danger of complacency and eventual failure.
Is this way, the cultural ability to deal with crises can indeed become a competitive edge over companies that are less agile in dealing with disaster.

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