Is Samsung an Elastic Enterprise?

The current edition of the Economist tells an ambivalent story about Samsung, the South Korean dynasty that graduated from making noodles to become the world’s largest technology firm. Here’s a brief intro to the bets Samsung makes followed by an assessment of its elastic strategy:

IN 2000 Samsung started making batteries for digital gadgets. Ten years later it sold more of them than any other company in the world. In 2001 it threw resources into flat-panel televisions. Within four years it was the market leader. In 2002 the firm bet heavily on “flash” memory. The technology it delivered made the iPhone and iPad a reality, and made Samsung Apple’s biggest supplier—and now its biggest hardware competitor.

Does this make Samsung an elastic enterprise? The company makes radical adjacency moves and it scales businesses quickly. What more could you want from management?

The reality is Samsung grows through traditional means. When it scales it does so through traditional means, capital intensity and a low labor cost base.

There’s nothing wrong with that – in fact that is what gives Korean firms as well as Chinese their advantages.

What we are drawing attention to in the Elastic Enterprise however is that companies can scale without using traditional means, they can do it faster and they can do it cheaper.

The Economist also says:

Samsung’s story is an old one writ new—the well-run family firm, with a strong culture and a focus on the long term, which has made good use of an indulgent state.

That seems like sour grapes. Samsung is a great innovator and well worth looking at in detail. In my view it could very easily become more elastic and pose a long term challenge in any sector it enters. It not only invests in innovation technologies, it invests substantially in the innovation capacity of its engineers.

A number of historic conditions make that an unlikely route for western companies. The best of them are developing elastic cultures and strategies which rely on the five pillars we detail in the book.

Samsung is also developing those pillars.

We don’t see Cloud having an impact right now across the Samsung empire but as the company moves from infotainment into lifecare, cloud will become more significant.

It has a focus on a platform and business ecosystem strategy, which it rolled out with Bada in the mobile  smartphone space, though that has not always met the objectives Samsung set for it. It will be interesting to see how its ecosystem strategy evolves across other product categories because comapratively speaking the Bada ecosystem has been weak. Think Apple and Android with apps stores many times larger.

This is a companyhowever  that fully grasps how to make adjacencies work and how to innovate both technologically and in the customer-driven market place. Gradually it is assuming more of the characteristics of an elastic enterprise and showing surprising agility in doing so.

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