This article is contributed by Hur Chul-boo, Professor Emeritus, Myoung Ji University, Seoul, Korea and Adjunct Professor of Business Management, Yanbian University of Science and Technology, Yianji, Jilin, China
Culture, Communication, Leadership and a Fast Growing Organization
Jim Collins and his research team (2001) scanned through US Fortune 500 firms between 1985 and 2000 to select 11 good to great companies based on the criteria of 15 years of sustained growth exhibiting 2.5 times the market value led by "level five leadership of humility and will power. Samsung under the leadership of Chairman Lee Kun-hee fit perfectly into the model only with the adjustment of the different cultural background. Samsung Electronics, the centerpiece of the Samsung group, sales volume was only KRW 2.5 trillion in 1987 when CEO Lee Kun-hee assumed the chairmanship. Ten years later in 1997, it was KRW 27 trillion or roughly 1,008 percent increase. That is not bad. But from that time on, there has been a steep ascending of the market value of 5,440 percent increase of KRW 136 trillion in 2009. One would naturally be tempted to ask, "What happened to the leadership of the first 10 years with ex-chairrman Lee Kun-hee" This paper attempts to theoretically reconstruct his leadership.
Previous Research works on the Samsung Transformation
Samsung Electronic's evolution from a fledgling company within a developing nation to a powerhouse global leader and technological innovator has attracted much attention from academicians and journalists. And as a result, numerous articles have documented the transformation, mostly from Samsung in-house researchers, journalists, and some Japanese observers and scholars, as well as a few Korean scholars.
Chang Sang-soo (SERI, August, 2005), Cho Tu-sup and Yoon Chon-geun, (2005), Kim Shin (June, 2003), Chang Se-jin (2008), Lee Chae-yoon (2008), Midarai Hizami (御手洗久己) (2005), Hasekawa Tanash (長谷川正), (July 11, 2006) discussed raised, leadership, corporate culture and HRM as causes of the rapid Samsung growth.
But they can only explain a part of the transformation process. For example these factors can be the effect of equifinality. In most of the successful firms have similar strategies, corporate culture and superb HRM. One can carefully follow the actions taken by ex-chairman Lee Kun-hee to avoid the easy explanation, because almost every Chebol group with better technological leadership adopted similar strategies and they also enjoy similar corporate culture and HRM.
Samsung can be better compared to the NEC case of 1980's vis-à-vis GTE. C.K Prabalad and Gary Hamel (Harvard Business Review, 1990) observed that top executives will be judged on their ability to identify, cultivate, and exploit core competencies that make growth possible. And Mr. Lee is the right person in that capacity for Samsung.
In 1988, GTE has become a telephone operating company with a position in defense and lighting. GTE has divested Sylvania TV and Telenet and put switching, transmission, and digital PABX into joint ventures. In the same year NEC has emerged as a world leader in semiconductors, consolidated a position in mobile telephones, facsimiles, laptops and mainframe computers. As early as in 1970, NEC communicated her strategic intent of computer and communication convergence (C&C) both internally and externally. The NEC's strategy has been adopted by most South Korean firms as the Government proclaimed in 1983, the first year of the Korean Information Age.
Samsung Group has concentrated her whole effort towards the strategic intent of "world best" and "increase the number of world best products." Its organizational culture is simplified in this precise catch phrase and readily communicated to every corner of the system.
Samsung's successful transformation in the last decade or more can be explained from successful organizational change and innovation model and/or leadership model and/or strategy of core competence building model and/or knowledge management model. However, it can be enveloped into organizational learning, centering on transformation of organizational culture and cultivation of core competence. Some observers attested that Jack Welch started from restructuring to reform of organizational culture, but Mr. Lee went the other way around because the very unfavorable Korean socio-cultural environment and the 1997 IMF crisis have facilitated the process.
Communication of Paradigm Shift and Strategic learning Leadership
When Lee inherited Samsung chairmanship, the group was content with the status of number one firms in the developing countries, Korea in 1987. The problems Lee faced were, firstly, how to provide the momentum for the quantum leap from the developing country model to the advanced country stage model. Secondly, the outcries of the futurists were high with the end of the industrial age and the start of the post industrial age, coupled with the anxiety over the fast approaching millennium. These anxieties were high with the pessimism of the American thinkers as the economic power of Japan accompanied by four small tigers of the region had been posing a major threat to the economic might of the U.S.A.
Against such a background, Mr. Lee's strategic learning leadership as a means of paradigm shift takes form in several waves before completely changing the norms, values and culture or the mindsets of the entire Samsung employees to form the Samsung core competence. The leadership took very forceful and original persuasion or communication mode.
The First Wave: As early as in 1973, Samsung started the semiconductor industry at the persistence of Lee Kun-hee, who in effect, started the IT industry in Korea. Therefore, it can be stated that the seed of the Korean ICT industry was sown and cultivated as early as December 6, 1973. This is when he insisted on purchasing the bankrupt Hankuk semiconductor, a U.S.A. direct investment firm producing transistor level IC and reprocessing primitive wafer, that was regarded as a hi-tech area too far ahead for the Korean firms' technological capabilities. The Korean Government recognized the ICT's potential and proclaimed full-fledged support for the semiconductor industry by pronouncing 1983 as the "First Year of the Korean Information Era." Samsung surprised the world by announcing the development of a 64 KD RAM in December of 1983, only 10 months after a massive investment in semiconductor processing lines. Thus, Samsung announced the development of a 256 KD RAM in January 1985, owing largely to Lee Kun-hee's 10 year effort. In the core competence buildup or learning process, Mr. Lee Kun-hee offered unprecedented compensation packages to induce top level Korean American scientists from top level American IT firms.
The Second Wave: Mr. Lee Kun-hee's second exercise of leadership was clearly expressed in his inauguration, in 1987 "Let us divorce from the tradition of quantity oriented management (economic scale as a source of global competition) and move on to the quantity oriented management (knowledge based and hi-tech based global leadership.)" This is "decree approach," clearly described in the organizational development and change text books in the American schools of management. Every manager from Samsung would not heed what the chairman said. Yes, the Samsung group was deeply immersed in the industrial age and it's accompanying bureaucratic system with many of its inherent symptoms.
The Third Wave: In March 1993, Mr. Lee was on a business tour to Los Angeles, U.S.A. He happened to visit department stores and discount stores there. He was seized by deep distress when he noticed that Samsung products were in the invisible back row covered with thick dust, while the products from Sony and NEC were in the readily visible front row sparkling and shining. He immediately ordered to secure a party parlor of a big hotel and displayed Samsung products with the comparable top class products from Japanese and other world top class firms to clearly emphasize the technological and design contrast, while adding his own expertise of reverse engineering for the Samsung professional managers.
The Fourth Wave: On June 4, 1993, Mr. Lee presided over the technological advancement staff meeting for Samsung Electronics in a Tokyo hotel. Also, included was Mr. Fukuda Shigeo, a Japanese design advisor for Samsung Telecommunication and Electronic Division. Mr. Fukuda personally submitted to Mr. Lee a written report documenting all the design problems he had faced while working at Samsung. He also received a 30-minute video tape rundown of the Samsung washing machine assembly process documenting defective products were mass produced without any corrective measures.
He summoned executives to Frankfurt for a series of lectures in a Frankfurt hotel on June 1, 2003. Mr. Lee personally took the podium to lecture on an average of eight uninterrupted hours, and one lasted for 16 straight hours. The meetings were for the 1,800 Samsung top managers, and conducted over a period of four months. The hours of the meetings, around 10 in all, added up to a total of 500, taking place in the best hotels in Frankfurt, LA, London, Osaka, Tokyo, and Fukuoka, between March and June of that year.
Again, Mr. Lee attempted to spread the locally confined core competence from the Samsung Electronics to the rest of the Group, and in effect the core competence was also spread to the large Korean firms. The process also attempted to mature the core competence to the organizational mindsets, including brand image and design of products in the holistic approach.
The Fifth Wave: In early July 1993, Mr. Lee called Secretariats' to "Start the 7. 4. system immediately." It was meant to readjust over 200,000 employees' work hours from 7 AM in the morning till 4 PM in the afternoon. After some resistance and delay, the system was put into practice five days after the phone call. Mr. Lee wanted to instill behavioral shock, in addition to the symbolic reform effort. He had shown a tangible symbol of change for all Samsung employees who were reluctant to change, despite the successive waves of communication to change.
This move was an attempt to reinforce the core competence including both technological and design/brand in the holistic mindset from "I type specialist" (single area specialists) to "T type specialist" or systemic minded dual and triple specialists, the knowledge workers from the industrial age workers.
The Sixth Wave: On March 9, 1995, at 10 AM, 2,000 managers and employees were assembled from the Koomi Factory, near Daegu. There were signs of quality products such as "quality is our pride." Suddenly every participant was dumb founded by what was happening: At a signal, some 10 employees with large hammers in their hands started to break down the boxes, which were full of freshly made cellular phones, key phones, and facsimiles amounting to 150,000 sets. The broken sets were torched. The leaders of the burning ceremony solemnly pledged, and it deeply touched each participant's heartstring. All the product development and manufacturing processes were closed down, and started all over again from the ashes and scratches of the smashed and torched products worth some KRW 1.5 billion.
The Seventh Wave: Samsung Electronic benchmarked GE Jack Welch, Sony, and other electronic giants. Therefore, the Samsung Group had a secret plan for downsizing and restructuring as well as process reengineering and TQC, as they were the norms of the day. Samsung was hesitant to apply restructuring, because of the general culture in the Far East of lifelong employment. Then the IMF crisis came in December 1997. Subsequent IMF control of the Korean economy was a disaster or curse for many Korean firms with a very high debt ratio. However, the curse for the Samsung Center for Structural Realignment was a blessing. Samsung could concentrate her resources in a few selected business targets and some 30,000 employees, or 20 percent of all the employees, were terminated.
The dramatic dynamics of the leadership took the form of sustained and well timed sets of communication for the whole Samsung Group in a holistic and organic behavioral modification stimulation. This followed the Freudian psychoanalysis, and Bandura's social learning and modeling (benchmarking, process reengineering, QC circles, speedy decisions, speedy and light weight inventory, marketing and HRM towards organizational learning) fully employing Skinner's operant conditioning. The dynamic is also explained in the general systems theory of holistic approach or interdisciplinary (multidisciplinary) approach and/or multi methodological validity.
The transformation dynamics can also be explained from the perspective of complexity theory, also known as the butterfly effect. A remote fluttering of a nearly invisible butterfly wing will, sooner or later, strike with a formidable force in an unexpected zone, thereby creating a paradigm shift. In the case of Samsung--from conservative bureaucracy to an innovative venture type firm. But in the process, one would inescapably notice a sustained flow of energy from the original butterfly wing movement. In complexity theory, the emergence of a paradigm is towards a seeming chaos, but the source lies in the original movement, or in this case, designs. And the emerging outcome is translated in the statistics, with Samsung Electronics and the group reborn to shape the core competence of technology and global brand names in a knowledge-based organization. Students of organizational development would think of unfreezing than freezing for the organizational change.
Reconstruction of Lee Kun-hee's Communication of Paradigm Shift and Strategic Learning Leadership
To reconstruct Lee Kun-hee's communication of paradigm shift and leadership of strategic learning, we should examine the major current of leadership studies; Ralph Stogdill (1974) classified different definitions of leadership in the following types;
- Focus of group processes
- Personality and its effects
- The arts of inducing compliance
- Exercise of influence
- Act or behavior
- A form of persuasion
- Power relation
- Instrument of goal achievement
- Emerging effect of interaction
- Differentiated role
- Initiation of structure
Bernard M. Bass, (1981) succeeded Stogdill and added the following:
- 12. Transformational leader--combining a large set of meaning including personality, and power to be a transformational leadership as a skilled and knowledgeable change agent with power, legitimacy, and energy among others.
One can find rare entrepreneurship from the second generation Korean owner-CEO in Lee Kun-hee who combined five types of behavioral and six types of persuasive leadership. He also employed seven type instruments of goal accomplishment, and 11 types of power relationship, and finally 12 types of leaders of transformation, all combined towards a long range creative communication process to achieve the desired goal(s). His creative communication process took the form of behavioral (1, 3,5,6,7 waves) and persuasive manner (2 and 4 wave), and fit into the behavioral psychology of 3-S theory--Short, Shock, and Surprise--in the 20 odd year time span between 1973 and 1997. In the process Mr. Lee has gradually built core competence of technological capability, brand and design, and high level of quality control in a holistic manner through the maturity of learning organization, which the author proposes to be labeled the leadership of strategic learning and goal oriented communication of paradigm shift.
Conclusion
Thomas Kuhn's (1962, 1970) is employed in describing the human history of industrial revolutions. Therefore, in the case of Samsung's, Chairman Lee, Kun-hee demanded the paradigm shift from the industrial champion to the champion of the knowledge base economy.
Regarding the Learning organization theory, (Peter Senge, 1996) Samsung exhibited much effort to transform the organization into the new model. Unlike the proponents' of strategic model, Lee Kun-hee dwelled on strategic intent and vision for the entire period of his reform efforts. Therefore, the Lee Kun-hee leadership is labeled, the communication of paradigm shift and leadership of strategic learning.
The case of Samsung Electronics transformation under the leadership of Lee Kun-hee has been approached under multiple theories as proposed by the concepts of communication, paradigm shift, strategic vision and intent to bear a series of multiple strategies under the process of learning organizational theory. Such multiple theoretical approaches are often labeled as interdisciplinary approach or organismic approach of the general systems theory and complexity theory. In the complexity theory, a pattern emerges out of chaos. The Lee Kun-hee leadership can be viewed as the emergence of a new pattern out of artificially created chaos.
