Samsung Judo

The mobile phone industry has two giants today: Apple and Samsung. Apple claims about 72% of industry earnings, Samsung the rest. No one else is turning a profit. But what makes each company strong is different.

“Where Apple stakes its success on creating new markets and dominating them, as it did with the iPhone and iPad, Samsung invests heavily in studying existing markets and innovating inside them,” the New York Times explained this week.

As Kim Hyun-suk, an executive vice president at Samsung, told the Times, “The market is a driver, so we don’t intend to drive the market in a certain direction.” This approach stands in sharp contrast to that of the late Steve Jobs, who brilliantly persuaded customers that they couldn’t live without products that, before he invented them, people didn’t even know they wanted.

So what’s happening here—and who, in Peter Drucker terms, has got the better mindset? In fact, both Samsung and Apple could each earn a Drucker blessing and a Drucker warning.

Drucker would praise Samsung for its use of “entrepreneurial judo” against Apple. “The judo master figures out where this continuing reliance on a particular strength leaves the opponent vulnerable and undefended,” Drucker explained in Management: Tasks, Responsibilities, Practices. “Then he turns his opponent’s strength into the opponent’s fatal weakness that defeats that opponent.”

Apple is unmatched at bringing beautiful, innovative and pricey new devices to market. But any leading business is vulnerable to certain sins. These include “a tendency to ‘cream’ a market, that is, to get the high-profit part of it”; an excessive faith in the power of “quality”; and charging a “premium price,” which Drucker cautioned was “always an invitation to the competitor.” Samsung is well positioned to exploit these vulnerabilities.

At the same time, Drucker would have had high praise for Apple’s ability to think, simply put, about tomorrow. “What innovations will change the customers’ wants, create new ones, extinguish old ones, create news ways of satisfying his wants, change his concepts of value or make it possible to give him greater value satisfaction?” Drucker asked in The Practice of Management. Apple relentlessly asks itself these simple but difficult questions.

What’s more, Drucker saw merit in the Steve Jobs point of view and was skeptical of claims about always listening to the customer (as distinct from understanding the customer). “Markets are not created by God, nature, or economic forces but by executives,” Drucker wrote. “The want a business satisfies may have been felt by the customer before he was offered the means of satisfying it. . . . The want may have been unfelt by the potential customer; no one knew that he wanted a photocopier or a computer until these became available.”

What do you think: Does the customer always know what he or she wants?