Samsung’s Smartphone Dilemma

October 13th, 2016

The most frightening part of the recent New York Times article on the background of Samsung’s battery problems with the Galaxy Note 7 is that of the company’s ignorance. As of the day that article was written, Samsung, the world’s largest mobile handset maker, had no clue what went wrong, what caused batteries to overheat and sometimes burst into flame.

At first, it was thought the defects could be traced to one of their suppliers, but even when they used batteries from another supplier on the fixed versions, the problems recurred. So it couldn’t be the battery, unless the core design was defective to begin with. But you’d think Samsung has a handle on battery design by now, with hundreds and hundreds of millions of mobile handsets in use. Up till the Galaxy Note 7 arrived, few developed any such problems. It was essentially a non-issue.

Even after the problems occurred, Samsung, according to the Times report, was never able to duplicate the overheating phenomenon in their own testing. The article mentions the rather paranoid methods Samsung used, in which testers couldn’t even communicate with each other via email to compare notes. I understand the desire for secrecy, but when the public’s safety is endangered, there has to be a better way.

So even though Samsung reportedly had hundreds of employees trying to figure out what went wrong, they couldn’t make a dent in figuring it out. Part of that could be the paranoid corporate culture, described by what the Times described as a pair of former employees, as “militaristic.” Worse, the executives who were tasked with managing the problem evidently failed to understand what was going on and what went wrong.

Do they even have technology backgrounds?

As an outsider, I wouldn’t presume to guess just what Samsung needs to do to fix this problem. It may require overhauling the division that manages mobile engineering, or hiring executives with a better handle on the technology and the pitfalls in case the batteries or the supporting circuitry, weren’t properly designed.

I am especially troubled at Samsung’s apparent flailing when confronted with so serious a defect. It has the real and present danger of destroying the brand’s reputation as a maker of quality mobile handsets. Even though the Galaxy Note 7 is dead, will customers flock to the Galaxy Note 8, should there be one, or wait for others to test it first to make sure it’s safe? How does Samsung reassure customers?

What about other models? Is there the danger that the some of the Note 7’s design concepts might find their way into the Galaxy S8? If Samsung doesn’t know the cause of this problem, how do they keep another product from inheriting similar defects?

This problem is going to result in billions of dollars in losses, and not just in lost sales. Reputations are easily lost in the tech industry. Consider the brands that used to lead the market, but failed to recognize changes in customer tastes. BlackBerry hasn’t had reliability troubles, but the smartphone pioneer was bushwhacked by the iPhone and was never able to regain its footing.

Consider Motorola, once a market leader, which fell on hard times by failing to innovate by the time Google bought the division. While current models perform well, people aren’t paying much attention unless they just they just want something cheap that seems to perform beyond its price range.

Nokia had potential too, with well-reviewed products running Microsoft’s mobile OS in its various forms. Microsoft bought Nokia’s mobile handset division, in a move that appeared reminiscent of what Google did with Motorola. Thousands of Nokia employees soon found themselves without jobs as the market continued to move elsewhere.

Today it’s all about Android and iOS. But with Android, there are loads of similar models from a number of handset makers. If someone wants to go Android, or stick with the platform, nobody forces them to choose Samsung. The company is operating in a commodity market where other companies can deliver mobile gear with similar specs and performance. There’s little that distinctive about a Samsung, other than its often flaky software, to have it stand out from the pack.

This is a potentially troublesome situation, because if Samsung can’t find a way to reassure the public that it has a handle on the problem and that future models will be reliable, it’s very easy to see where other companies will prosper at their expense. If Pixel, Phone by Google, shows potential, Google could expand production, make it available at more wireless carriers, and engage a huge marketing campaign to get a leg up on the competition. Google is not going to refuse to sell as much gear as possible, even if it comes at the expense of its partners. Microsoft has already shown the way.

As I wrote in yesterday’s column, Apple also stands to benefit. The stock price continues to soar, and few doubt that a number of Samsung customers might just decide to ditch Android and go Apple. The ongoing iPhone 7 backorder situation may not help, particularly for people who need to exchange a Galaxy Note 7 now for something else. But even an iPhone 6s is better, so maybe that won’t be so much of a problem.

Clearly, time is short for Samsung, and it may require a major overhaul of the corporate culture to set things right.

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