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Value Innovation and Goal-Oriented Management Made Samsung TV The Global No. 1
HANKYUNG BUSINESS, December 21, 2011 By Mr. Son Wook
Professor at Graduate School of Convergence Science and Technology, Seoul National University (Former CEO of Samsung SDI, Samsung Advanced Institute of Technology and Nongshim)
In 1998, Samsung Electronics established a VIP Center, where VIP stands for Value Innovation Program. Professor W. Chan Kim, The Boston Consulting Group Bruce D. Henderson Chaired Professor of Strategy and International Management at the world-renowned INSEAD Business School, played the key role in establishing the VIP Center. Professor Kim, co-author of the famous Blue Ocean Strategy, is an internationally-acclaimed management guru. He visited South Korea in 1996 and gave lectures to many top leaders in Samsung Electronics. Value Innovation (VI) is one of the theories he introduced to them. The core concept of the theory is that all products must be developed and marketed based on what customers recognize and value. For example, the hotel industry has several factors that customers value, such as quietness, cheap price, delicious food, comfortable beds, etc. The VI theory says that these value factors can be identified systematically. The VIP Center was created based on this theory. Since the establishment of the VIP Center, Samsung Electronics has involved all the VIP team members in the formulation of VI strategy during product development, and has provided the VIP team with support, including consulting services when requested. The VIP team members consist of experts from various fields, from value engineering experts who innovate cost structures to professionals specialized in TRIZ, TQM, Six Sigma and VI. With the help of these experts from diverse fields, the project team charged with developing products operated like commandos on the frontline. Since then, the VIP Center has been credited with generating half of Samsung Electronics profit. However, Professor Kim's influence did not end there. Fair Process is also another outstanding innovative approach instituted under his guidance.
Son Wook, former CEO of Samsung SDI
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Unlike Suwon, the Busan management team had explained and discussed the new cell management system with plant employees from the beginning, which resulted in the employees following the new system smoothly. In contrast, the Suwon plant experienced difficulties in gaining employees acceptance of new innovative ways for several years. This is the key difference between implementing change with and without fair process. In any organization, the management should not neglect fair process, and Samsung Electronics has invested enormous resources in creating fair process in their communication channels. In the Quality Awards ceremony held in the late 1970s, one of the professors from Ajou University said that "LG has been in the electronics industry for more than 20 years, while Samsung has only been around for 10. However, on the walls of Samsung plants, there were posters with the phrase Lets become the world number 1 while on the walls of LG plants, there was not even a single poster with the phrase Lets become Koreas number 1. There should be proper steps in setting goals, so doesnt Samsung need to be the number 1 in Korea first before it becomes the world number 1? Many years later, I met the professor again in the mid-1990s and he said to me. "I was wrong at that time. When I went to the US for a year-long sabbatical, I learned that it is really important to write a goal and always remember it. This is the visualization of a goal. You will get to the goal if you set the goal and keep remembering it. That is when I remembered Samsung Electronics with the phrase on its factory walls and how it has really become the world number 1."
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partnership with Anam. Toshiba had a partnership with Daihan, and Hitachi with LG. For Samsung Electronics, Sanyo was the only company available that could transfer advanced technology through a strategic partnership. I visited Sanyos plant, which was a converted airport warehouse that had an area of about 1.32~1.65 mil m2. It was like a multi-complex where all the work and manufacturing processes were taking place. At that time, most Japanese companies were operating using many small factories spread across the country. It was only Sanyo that operated out of one huge multi-complex. After seeing the Sanyo plant, Chairman Lee said, "Let's build a bigger complex than Sanyos" and the 1.65 mil m2 Suwon complex was built for Samsung Electronics, Samsung Electro-Mechanics, Samsung Corning and Samsung SDI. Today, we emphasize technology convergence, but even at that time, Chairman Lee had an idea that Samsungs Electronics Suwon Plant in 1969. The late geographical closeness will naturally lead to technology convergence. He expressed Chairman Lee implemented the idea of building a much larger complex that its Japanese partner, Sanyo this in the simple and direct phrase, face each other and collaborate. At the time, no one in South Korea thought about using this kind of giant multi-complex for manufacturing factories. Chairman Lee built the CRT (Cathode Ray Tube) manufacturing plant, the core component of TVs at the time, by partnering with NEC of Japan. Then he realized that glass is a key component of CRT, so he partnered with Corning of USA and established Samsung Corning. In 1973, Samsung Electro-Mechanics was established to manufacture key electronic components such as tuners, condensers, and transformers in order to vertically integrate with glass and CRT. Today, Samsung has reached its goal and has made the late Chairman Lees dream of becoming the world number 1 in the TV industry a reality.