Why the Samsung story feels unsustainable?
Samsung’s Chairman, Lee Kun-hee has upped the ante for the employees for Samsung 3.0 – asking for innovation and software focus. Mr. Lee is quoted saying “Research & development center(s) should work around the clock, non-stop” and that Samsung “get rid of business models and strategies from five, ten years ago and hardware-focused ways.” This comes after the President of Samsung, Lee Sang-hoon, said just in November that the company needed to focus on software quality, as they were severely lacking in quality software when compared to the competition.
2012-13 have been magical years at Samsung, but towards the end of Q4 2013, profit growth slowdown became a key concern at Samsung. The South Korean company is expected to report an operating profit of more than $9 billion for the fourth quarter, according to a survey of analysts. That’s more than the overall revenues of many tech companies, but it represents a 9.2% increase from the same quarter a year earlier. By comparison, Samsung’s profit in the third quarter was up 26% year-over-year. Declining profit growth was a top concern for Samsung for much of 2013.
Are these concerns exaggerated? Or the conglomerate referred to as the Fifth Horseman on the technology bandwagon is beginning to see a slow and consistent decline reminiscent of commodity companies. I think, what we are looking at is a slow marginalization of Samsung through 2014, very akin to Nokia through 2008-10. Here are my reasons
1. At its core, Samsung is a “device” company – the future belongs to those who “own” customers and eco-systems
a. A Google for instance is 40% of the web – mining, indexing customer details and customizing the web for individual customer in accordance making money in return on advertisements
b. Facebook is the social key to a person’s identity on the web. It follows the same principle as Google but it uses the social plank
c. Apple is the innovator – fusing experiences, services, devices, platforms into one seamless continuum. Personally, i think Apple’s innovation is far deeply entrenched than Google – and i await the iWatch to change the paradigm around the user
d. Microsoft is a little over the place and is yet to get its act in place – but it has very strong enterprise roots. How it capitalizes and leverages is to be seen
2. Apart from device dimensioning i.e a bigger screen, a better screen, alternate screen; Samsung has not been a significant force in services, customization, intelligence and experience.
3. Samsung’s OS strategy has also been unclear. It launched Bada – then EOL’ed it. Tizen is yet to find any traction. For all good reasons, Samsung is completely dependent on Android to drive volumes and value.
4. Also Samsung’s innovations have mostly been horizontals – a watch that is an accessory to a smartphone. They miss the whole perspective of wearables as a key to a much larger opportunity in terms of the user per se. That is where Apple is doing the trick.
5. Samsung has not invested in other variables of eco-system – a map for instance, a music service, or enterprise suit, a gaming platform – Remember Nokia did all this and still couldnot leverage itself.
6. Samsung has been working on chipsets – but again, it is the likes of Apple who steal the march on 64 bit chipsets. By the time Samsung gets one of these on road, Apple would have a 1yr of learning and experience driving their subsequent roadmap.
7. Samsung has been an outstanding innovator in touch interfaces… its video of touch centric world says it all
However, outside of its perspectives of touch centred interfaces, Samsung could be missing the other big interfaces of the future and it has made very little advances in other user interfaces – speech, augmented reality, alpha waves etc… (and they seem to be missing it)
… but then as a device maker, is it Samsung’s job to dab into making and owning user interfaces and users? Probably not! But then this is exactly what is required from a technology innovator. Will Samsung make the jump from a device maker to a service anchor – possibly not.
Amidst the device makers – Huawei, ZTE, Lenovo and the likes, Samsung will be miles ahead of the pack – but i am not sure if it could be the mythical fifth horseman of technology as is generally believed. I see a flaw which will make this story unsustainable.