You talk about the difference in culture between Sony and Samsung. What is it?

Well, it starts with a dream. Sony’s dream is to be a company that creates unique products for the consumer and they have a great tradition of branded, elegant, beautiful, high-performing products. Samsung started by making invisible products — they were making the insides for other branded manufacturers, so they needed to keep costs low and be highly repetitive in their manufacturing. So the two companies start with starkly different dreams and DNA. Both companies were very successful: Sony because of the way it went to market and Samsung because of its cost-competitive manufacturing.

Now, all of a sudden, Samsung has a different dream. The dream is to be a Sony or an Apple. But they are not changing anything else. My sense is that if you are Samsung, you look around and say we can design a product that looks pretty much like that and does pretty much those things. Not to just make a copy but to emulate. They do it really well and cheaper and faster and, in fact, extend it to a zillion different applications. So whichever way Apple goes, Samsung will catch them at some point. But Samsung can never overtake, because to overtake you have to encourage dreams, you have to try different things and be original. They don’t have that. Any originality they have is a hired hand (outsourced) and not part of the club or the main company. These hired resources can give a boost for some time, but they are not changing the inside of the organisation to catapult them to a higher level.

You Will Have A Higher Probability Of Success When You Allow People To Be Small And Independent

So you don’t think Samsung is going to replace Sony and Apple?

No. In fact, I think that somebody will come out of nowhere and surprise Samsung and Apple. I read a piece in MIT’s technology review that made the argument that mobile devices or iPads or iPhones are going to be as dead as the PC in a few years. I wondered how can that be, because we know mobility is our future. But no, what they are saying is that mobility will continue to be our future but portability will die out. We will not carry these things around, our mobility will be embedded in the places we visit. For all you know, this might turn out to be completely wrong. But if you are in this business, you can’t afford to bet that this is irrelevant. It takes us back to our point on probing the future. There are computer companies that have already missed the tablet. Now, they could end up missing the next big thing too. How many of these can you afford to miss? Apple and Samsung and maybe even Google have invested too much in portability to give it up easily. They are going to hesitate to move in that direction. But there is somebody out there who is not going to hesitate and they might become big.

There is no company in the world that has lasted forever except Philip Morris because it is in the cigarette business, which has given them infinite life. Should companies then reconcile to demise at some stage?

What we should be asking is not what we should be making but what customer needs are we serving

Let me quote two friends. One is Charles Fine at MIT Sloan School of Business. Charlie says that there is no such thing as a sustainable competitive advantage. With the probable exception of the New York Yankees, everybody comes down to average. At IMD, Phil Rosenzweig says that over a period of time, even great companies revert to mean because everybody in the industry eventually gets better, with executives moving from one organisation to the other and sharing information. I think we shouldn’t therefore look for perpetual success; what we ought to look for is whether companies are doing things that will put them at a higher probability to outperform over a significant period of time. Another friend of mine, Michael Raynor, who has written a book called The Three Rules, says that the first rule in business is that performance (product attributes) is more important than price. If you are going to invest, invest in making the product better. The second rule is, emphasise revenue growth over cost reduction. The third rule: there are no other rules. The essence is that competition is a great leveller. Organisations that sustain are disruptive in their own right.
One of the great things about the Haier story is that they never waited to the point where they said, ‘If we don’t do this, we are in trouble’. They always did it beforehand, when resources were in abundance and people were not in trouble. The lesson for companies is that instead of investing in outcomes, products and offerings, invest in an organisational culture that gives you a higher probability of adjusting to an uncertain future.