South Korea’s largest company, Samsung, came face to face this week with exactly the nightmare scenario that students are often pitched with in MBA classes.
Say you’re battling to compete with a super-successful rival (let’s call it Apple), and you launch a flashy new product (say, the Galaxy Note 7) to compete with their top-of-line item (say, the iPhone 7).
Initially it works: customers love it, your fans publish rave reviews, and there’s a queue round the block.
Then, two months after the launch, your fancy new product begins exploding in customers’ hands.
Samsung’s first error was launching a "limited recall" of 2.5m of its new phones in September, rather than the entire range. What happened is that the phones kept exploding, doing further damage to a brand already taking serious heat.
This week, Samsung threw in the towel, finally recalling all its Note 7 devices.
Headlines this week screamed: "Samsung in flames" — and critics weren’t just talking about the phones. On the day it was announced, Samsung’s stock shed $20bn, equal to about 8% of its value.
True, it was only the lithium-ion battery that was exploding, rather than the phone itself. But the problem, according to one expert quoted, was that "smartphone makers are trying to squeeze these batteries into a small, thin package".
Lesson: you might be desperate to compete, but don’t take short cuts.
It’s a lesson for many of SA’s "innovation companies", looking for the quick-fix to market and willing to compromise on testing and research. It’s a phenomenon you see often, with many companies quick to bill themselves as the "next Nando’s", or the "next Discovery".
Only, Robbie Brozin and Adrian Gore’s success didn’t happen overnight. Such heights are reached only after a long slog where, at times, you’re not even entirely sure if you’ll be around next week.
In SA, where "entrepreneurship" and "innovation" are buzzwords akin to the new gold rush, it’s a cautionary tale.