Samsung aims to spark start-up spirit

A Samsung store in Seoul. Hurt by a rapid decline in smartphone profits and the absence of new businesses to drive growth, Samsung is reforming its military-style working culture to foster innovation.
A Samsung store in Seoul. Hurt by a rapid decline in smartphone profits and the absence of new businesses to drive growth, Samsung is reforming its military-style working culture to foster innovation.PHOTO: BLOOMBERG

Plan to change top-down culture, be more nimble as growth slows

SEOUL • Samsung Electronics, the world's biggest smartphone and memory chip maker, yesterday said it plans to adopt a corporate culture akin to that of a start-up, seeking to become more nimble as growth slows.

Its executives will sign a pledge to move away from a top-down culture and towards a working environment that fosters open dialogue.

The flagship firm of South Korea's dominant conglomerate will cut the number of levels in its staff hierarchy and hold more frequent online discussions between division heads and employees.

"We aim to reform our internal culture, execute as quickly as a start-up company and push towards open communication and continuously innovate," it said.

This is the latest in a series of sweeping changes by the conglomerate and carries echoes of a 1993 exhortation by Samsung Group patriarch Lee Kun Hee to executives to "change everything but your wife and children".

Hurt by a rapid decline in smartphone profits and the absence of new businesses to drive growth, Samsung has been under pressure to reform its military-style working culture to foster innovation.

Shipments of its Galaxy smartphones and other models fell for a second straight year last year as new iPhones gained traction in the high-end category and cheaper models from Huawei Technologies and Xiaomi swayed budget buyers. Revenue and net income fell two straight years, and shares are down 16 per cent since the end of 2012.

"We are actively looking for M&A targets of all sorts in the software area," executive vice-president Rhee In Jong has said. Mr Rhee, who runs the mobile division's R&D business, said the company is also looking to acquire developers of artificial intelligence and other software.

Samsung wants to use some of its US$61 billion (S$84 billion) in cash and equivalents to help it morph into more of a software-driven firm.

Some current and former employees say it will be difficult for a company like Samsung, which has a global headcount of more than 300,000, to transform itself.

Analysts say there is the risk of Samsung losing its edge as a fast-execution hardware company by attempting to change its ways.

Mr Lee has been hospitalised since a 2014 heart attack, and the group is in the midst of a transition to control by his son, Mr Jay Lee.

Other recent moves to ease a rigid corporate culture include flexible working hours, a loosening of dress code and less pressure on employees to attend after-work drinking sessions that have long been a staple of Korean corporate life.

Samsung will also cut down on unnecessary internal meetings and simplify reporting procedures in order to improve productivity and offer training to employees to strengthen their "winning spirit". It will also reduce unnecessary overtime and weekend work.

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on March 25, 2016, with the headline 'Samsung aims to spark start-up spirit'. Print Edition | Subscribe