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Acknowledging a crisis, Samsung is trying to improve its corporate culture

By Max Nisen

Samsung Electronics is struggling to maintain and grow its lead in the most important technology market, and the South Korean company now thinks changing its traditionally rigid corporate culture is key to regaining momentum.

Smartphones have become Samsung Electronics’s big moneymaker, but it is facing enormous pressure from two sides in that market. Apple continues to succeed at the high end, and Chinese companies like Xiaomi are in pursuit with cheap phones. The company’s smartphone market share has fallen to about 25% from highs above 30%, and its overall sales are shrinking.

“Because of rapidly changing technology and market conditions, and very fast pursuit by Chinese companies we’ve felt a sense of crisis,” Samsung Electronics vice president Jaiil Lee tells Quartz. ”We’ve been thinking of many ways to overcome that situation.”

Lee is a 27-year veteran of Samsung Electronics who runs the company’s Seoul-based Creativity & Innovation Center. He’s helped launch two programs that Samsung hopes will help shift the company’s culture, making it more inclusive and innovative.

Both are positive signs for a company that hasn’t been known for giving employees extensive autonomy. But they also prompt questions—relevant for many other businesses—about just how much companies can expect creativity and innovation initiatives to help when a core business is threatened.

For what it’s worth, Samsung has done it before.

Twenty years ago, dwarfed by Japanese competitors, Samsung began its ”New Management Initiative.” The company introduced merit pay and promotions instead of relying solely on seniority, and began to recruit more staff externally.

Tarun Khanna, a Harvard Business School professor who wrote a definitive study on that cultural transition, credits an ability to mix new elements with traditional strengths with the company’s rise. ”I would say that there are companies that are a lot faster in these areas,” Khanna says. “Samsung specializes in moving heaven and earth on big capital-expenditure and manufacturing projects; it’s slower at information and people-based change.” But, he adds, one of Samsung’s signature traits is being able to stick to a plan once it’s committed, even if it takes many difficult years.

Trying to reinvigorate growth in its core business, the company has launched expensive initiatives like an enormous research headquarters in Silicon Valley, and has used its manufacturing prowess to differentiate its phones with features such as metal frames and flexible screens (paywall).

Then there are the programs Lee’s group has launched. The first program is C-Lab, a two-year-old project that lets employees pitch ideas as part of a competition. If they win, they get to take at least a year off from their regular job with a small team to research and develop the idea. It’s a year off to try something unexpected, analogous in some ways to Google’s 20% time program that lets engineers devote the equivalent to one day a week on projects separate from their core work.

Many of the C-Lab projects are interesting, innovative, and have a humanitarian bent not usually associated with Samsung. The one that prompted the program, an eye-tracking mouse for people with diseases like ALS called EYECAN+, came as the spare-time project of a software developer named Sang-won Lee. The company assigned a team of engineers to develop it, and they were able to dramatically reduce the price of the technology to about $500 per unit.

The company is choosing not to commercialize the EYECAN+ technology, as it’s too niche of a market (though it will manufacture some for charity organizations), even as it serves as the inspiration for a program Lee says he hopes will produce “gamechangers.”

There are now C-Lab organizations in 10 divisions throughout the company, with 50 active projects. Other projects that the company shared with Quartz include an inexpensive miniaturized smell sensor that’s garnered five core patents in just a year, a device and software to help those with hearing losses better experience music, and an algorithm that can predict someone’s risk for stroke.

Samsung is already the technology industry’s biggest spender on research and development. But it has struggled to find new breakout products. And, as creative as some of them are, the C-Lab ideas that Samsung shared generally have niche applications and seem unlikely on their own to move the needle for Samsung’s business.

(Samsung appears to disagree with the idea that they’re niche: “The potential applications of these breakthroughs are limitless and show incredibly strong promise for the development of future products,” a spokesperson said in a statement responding to Quartz’s assessment.)

The second initiative from Lee’s group is MOSAIC, a nine-month-old internal website that’s like a combination between Facebook, Reddit, and a series of forums. It’s where Samsung’s 100,000 Korean employees can suggest ideas, raise management problems, and seek expertise from others in the company.

The tortured corporate acronym and inspirational slogan have a long history, and Samsung doesn’t disappoint. “MOSAIC” stands for “Most Open Space for Advice, Intelligence and Creativity.” The slogan is that “we are smarter than me.”

It sounds like the kind of internal network that management releases and never really catches on with employees. But it’s seen rapid uptake and use, according to Lee. Obsessing over internal management tools and technology is a particular hobby of Silicon Valley, and one that Samsung seems to be getting some traction with.

Participation is voluntary. There are about 90,000 logins a day, and 45,000 daily posts, Lee says. It’s used both as a general way for people to connect, to bring problems to experts elsewhere in the company and get their help solving them, to raise dissatisfaction with management, to suggest ideas for the company, and to support ideas from other employees.

At minimum, it’s an important step towards transparency for a company that isn’t exactly known for it. Samsung is not as rigidly hierarchical as it once was, but seniority still plays a powerful role. A lot of executives have been with the company for years, if not decades.

“Samsung Electronics is known for control or for hands-on management and rigid process, that’s how it is known outside,” Lee says. “But through C-Lab and Mosaic we believe that we will be able to build an environment where creative talent will be able to more freely participate.”

Lee says C-Lab has helped the company realize that it’s not getting the most out of the talent it has. At 275,000 strong, that’s not surprising. The uptake is evidence of at least some degree of thirst for a creative outlet, particularly among younger employees.

Samsung transformed itself before, and became one of the world’s most successful companies. That time, it was playing catch up with some well-established practices, like performance pay. Figuring out how to get more business-changing innovation out of employees is easily as difficult a task.