Summer of Samsung: A Corruption Scandal, a Political Firestorm—and a Record Profit

www.bloomberg.com

Brad Stone , Sam Kim , and Ian King:

The figure most closely associated with Samsung’s global rise is Lee Kun-hee, the son of founder Byung-chull and Jay Y.’s father. Kun-hee, who became chairman in 1987, was known as reclusive but charismatic. Under his guidance, Samsung invested in massive semiconductor and display-panel factories, prodding engineers to overcome the company’s early reputation for creating subpar knockoffs. In 1993, with sales of consumer appliances flat, he admonished executives to “change everything but your wife and children.” A few years later he commanded underlings to collect 150,000 defective cell phones into a pile and set them ablaze. Although not great for the environment, it sent a clear message about quality control.
Despite his eccentricities, Kun-hee is widely lionized. In 1997, after the value of Samsung Electronics fell to $1.7 billion amid a wider Asian financial meltdown, he jettisoned peripheral businesses and doubled down on chips, screens, and phones. Within a decade, Samsung Electronics’ market value had grown sixtyfold. Song Jae-yong, a professor of strategy and international management at Seoul National University Business School, calls Kun-hee “one of the great business leaders of the 20th century.”

The consumer-facing smartphones and phablets get much of the attention -- and the cell phone bonfire was a brilliant maneuver -- but it was the early bet on semiconductors and displays that is really paying off, quite literally, today. Though, occasional battery fire aside, there are clearly still some other issues:

Koh, who has been at Samsung for 33 years and has the top-floor office to prove it, says he knows that becoming a leading software developer will require Samsung to attract creative, entrepreneurial employees. His pitch for Bixby, though, demonstrates some of the company’s familiar culture issues.
Koh asks a reporter, “Do you touch your assistant? Your secretary?”
Reporter: “I don’t have an assistant. Also, it would be a personnel violation.”
“Exactly! Touch is not allowed. Just say something. So if we change our interaction of touching [the phone] and [use our] voice, that would be perfect.”

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