Camp Samsung

Business Week.com article
Global Business
JULY 3, 2006
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Camp Samsung
To develop winning products, the Korean giant isolates artists and techies for months on end

Last June a group of 11 Samsung Electronics Co. employees pledged to do the last thing most people desire just as spring bursts into summer: stay inside a drab room with small, curtained windows for the bulk of the next six weeks. The product planners, designers, programmers, and engineers had recently entered Samsung's so-called Value Innovation Program (VIP) Center, just south of Seoul. They were asked to outline the features and design of the company's mainstay flat-screen TV, code-named Bordeaux. And their bosses had vowed to keep them posted there until they had completed the assignment.

After an introductory ceremony attended by senior executives of Samsung's video division, the team joined a dozen or so similar groups at the VIP Center and got down to work. The facility is a sort of boiler room where people from across the company brainstorm day after day -- and often through the night. Guided by one of 50 "value innovation specialists," they study what rivals are offering, examine endless data on suppliers, components, and costs, and argue over designs and technologies. The Bordeaux team hammered out the basic look, feel, and features of the model by mid-August. Then over the next five months designers and engineers worked out the details, and by February the sets were rolling off Samsung assembly lines. They hit stores in the U.S. and South Korea this April, starting at about $1,300 for a 26-inch set. "For the first time in our company, we developed a TV appealing to customers' lifestyles," says Kim Min Suk, an official at Samsung's LCD TV Product Planning Group.

It's all part of a new mantra at Samsung: "market-driven change." In the past decade Samsung has radically improved the quality and design of its products. Yun Jong Yong, Samsung's 62-year-old chief executive, now wants the company to rival the likes of Microsoft Corp. (MSFT ) and IBM (IBM ) as a key shaper of information technology. By 2010 he aims to double sales, from $85 billion last year to $170 billion. The Korean giant, however, still isn't an innovation leader on the order of Apple Computer Inc. (AAPL ) or Sony Corp. (SNE ) in its heyday. Yun says Samsung has become "a good company," but "we still have a lot of things to do before we're a great company."

Yun insists that when it comes to manufacturing, his company is second to none. Yet in the Digital Age, when mechanical parts are replaced by chips, Samsung's well-run factories are no longer enough to make it stand out. He points to MP3 players as an example. Samsung rolled out its first players two years before Apple did. But Apple gave consumers the ultimate player -- the iPod -- and, with the iTunes software and Web site, an easy way to fill it with music. It's time for Samsung to start developing similar products, Yun says, that better serve customers. So far, "we don't have the power to deliver total solutions."

INCUBATION STAGE
How to make Samsung more innovative? One key initiative is the VIP Center. Yun set up the program in 1998 after concluding that as much as 80% of cost and quality is determined in the initial stages of product development. By bringing together everyone at the very beginning to thrash out differences, he believed, the company could streamline its operations and make better gadgets. In the past two years, though, the center's primary aim has shifted to "creating new value for customers," says Vice-President Lee Dong Jin, who heads the facility. Translation: Find that perfect balance of cost, innovation, and technology that makes a product great.

If it weren't such hard work, it might almost be fun. The center, at Suwon, Samsung's main manufacturing site, 20 miles from Seoul, is open 24 hours a day. Housed in a five-story former dormitory, it has 20 project rooms, 38 bedrooms for those who need to spend the night, a kitchen, a gym, traditional baths, and Ping-Pong and pool tables. Last year some 2,000 employees cycled through, completing 90 projects with names such as Rainbow, Rapido, and Rocky. Other products that have come out of the center include a notebook computer that doubles as a mobile TV, yet is thin and light enough to be carried in a handbag, and the CLP-500, a color laser printer that was built at the same cost as a black-and-white model. While some teams wrap up their work within weeks, other projects drag on for months, and all division leaders sign a pledge that participants won't return to their regular jobs until they have finished the project...LINK