Why is Samsung doing better than Sony?

Why did Sony's performance, which had dominated the electronics industry for many decades, drop so rapidly, while Samsung Electronics, an obscure  original equipment manufacturer (OEM) not so many years ago, emerged from nowhere?

This "curiosity", says Sea-Jin Chang, a leading business professor at Korea University, drove him to write "Sony v Samsung: The Inside Story of the Electronics Giants' Battle for Global Supremacy", published earlier this year by John Wiley and Sons (Asia).

Faced with the rapid digitalisation of the electronics industry, Sony and Samsung had pursued rather different strategies. Sony tried to create a synergy between hardware and content by using the network. On the other hand, Samsung Electronics focused on its parts business and attempted to secure competitive advantage in end products by being a superior manufacturer.

However, Chang said, as he "dug deeper" in the analysis, he became more convinced that the difference in performance between Sony and Samsung could not be attributed to their strategies.

Rather, organisational processes and executive leadership may have caused the difference.

"Sony's independent business units quickly became silos when its top management leadership was questioned. Internal politics among executives further exacerbated its stagnation.

"On the other hand, the fit between Samsung's strategy in responding to commoditisation with speed and its militaristic organisation may have contributed to its stellar performance," Sea-Jin wrote in the preface.

The book has eight chapters:

n Sony and Samsung: portraits of two global competitors

n Prince and pauper in the analog world

n Digital dream kids and the digital sashimi shop

n New kids on the block

n Wannabe globals

n Same silos but different outcomes

n From founders to professional managers

n The future of Sony and Samsung Electronics.

In his book, Chang attempts to examine the challenges that Samsung faces despite its remarkable performance, while evaluating Sony's potential despite its present struggles. 

"So far, Samsung's strategy has worked well when it was a follower. Unlike Sony, however, Samsung, now a market leader itself, lacks the ability to develop new technology and products when there is no clear trajectory or another [company] for it to benchmark," the Korean professor pointed out.

Sony still has formidable technology, know-how and human talent. Its failure to develop new products since the mid-1990s has stemmed mainly from its organisation and leadership, rather than from its lack of technological capacity, Chang wrote.

"Sony's misfortune might have started with the late Akio Morita's sudden illness. He could not talk and lay in bed for six years, during which there was a vacuum of top management leadership," he wrote.

The book provides many insights on how Samsung developed itself.

Some of them were the establishment of the "Innovative Design Lab" that employed six foreign professors to teach design to its designers, its "Strategic product system", its "VIP" (value innovation project) room, its "7.4 system", which let the employees come to work at 7 in the morning and leave at 4 in the afternoon, instead of working from 8.30 to 6 in the vening, thus, giving them free time to develop themselves. 

      At a glance

n When the electronics industry began digitalising rapidly, Sony tried to create a synergy between hardware and content.

n Samsung, however, continued to focus on its parts business.

n But, Sony founder Akio Morita's illness also created a vacuum at the top.

n But Samsung thrived as it had a militaristic organisation and innovative ways to manage staff.