Samsung's next reinvention challenge: itself

Wed Aug 6, 2014 9:58pm EDT
 
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By Se Young Lee and Sohee Kim

SEOUL (Reuters) - As its smartphone sales stutter and a generational leadership succession looms, Samsung Electronics Co Ltd (005930.KS: Quote) is under pressure to reinvent itself - to be more innovative, but not lose the rigor and focus that made it a global powerhouse.

One effort this summer to foster a more worker-friendly environment and a more creative culture is to allow staff at its main Suwon campus south of Seoul to wear shorts to work at weekends. Working hours are more flexible, and female staff can take maternity leave without worrying about job security.

The flagship of South Korea's dominant conglomerate, or chaebol, is also trying to address shifting cultural values at home by curbing some of the excesses hardwired into corporate Korea. Forced late-night drinking sessions, long a staple of local office life, are out.

"It's 1-1-9 for evening company outings now: one type of alcohol, in one place and only until 9 p.m," said a Samsung employee in his eighth year at the firm. "Younger staff are no longer forced to stay, and the senior workers will be careful not to upset their subordinates," he said, asking not to be named as he was not authorized to speak to the media.

Samsung last month posted an unexpectedly sharp drop in second-quarter earnings, squeezed by falling market share in smartphones, and with no obvious driver in sight to reverse the decline. Chairman Lee Kun-hee, 72, who has famously managed Samsung with a sense of "permanent crisis", remains hospitalized following a May heart attack.

The ascension of his son and heir-apparent, the Harvard-educated Jay Y. Lee, 46, could be a breath of fresh air, but effecting wholesale change in the way the sprawling company operates would be a Herculean task and could prove a mistake.

"The company is in somewhat of a Catch-22 when it comes to changing its culture," said Jay Subhash, a former senior product manager who left Samsung in April. "It desperately needs to adopt a culture that fosters openness, creativity and innovation. But doing so would jeopardize its greatest existing cultural asset, its militaristic hierarchy, which enables it to operate at lightning speed to outpace the competition."

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Samsung Electronics Chairman Lee Kun-hee meets with reporters after touring the Samsung booth at the 2012 International Consumer Electronics Show (CES) in Las Vegas, Nevada in this January 12, 2012 file photo.
REUTERS/Steve Marcus/Files