Samsung, the South Korean electronic devices giant, was flying high as it prepared to launch the Note 7 smart phone at the end of summer 2016. Currently the world’s most significant smart phone maker, Samsung’s move to phones with larger displays countered the perception that it wasn’t as creative as its archrival Apple company.
Reviews of the Take note 7 — a 5. 7-inch, stylus-toting high-end smart phone aimed at workaholics — glowed ahead of the August launch date.
After that disaster struck. Within days of the launch, Samsung’s customers in South Korea reported that the mobile phones were catching fire. Several had even exploded. Simply by Sept. 2, the company stopped producing the device and was sending replacements. The business was buckling: Samsung quickly lost $26 billion dollars in value in the stock market.
This got worse. A Oughout. S. government recall adopted on Sept. 12; another came in October when the replacement units experienced the same incendiary issues. Analysts estimated the problem would cost the company $17 billion in sales, adding that when the problems didn’t sink Samsung’s mobile business, it might almost certainly kill the Note collection.
Great, just 18 months later, it appears that Samsung, and the rest of the world, have shrugged off the crisis. Its next telephone — the Galaxy S9, started debut on Weekend in Barcelona — is anticipated to be a evade to Apple’s iPhone By. Most of the hype about it centers on the standard of its camera instead than the integrity of its battery.
For some reason, the past two years at Samsung — which also saw the company’s de facto chairman, The writer Y. Lee, arrested in a bribery scandal that took down South Korea’s president — have not been its undoing. The sales have rebounded. Final year, the electronics company reported a record fifty dollars billion in profit.
Professionals say a mix of factors — including Samsung’s crisis response, its position in the global smart phone market and good time for the worst possible news — helped it escape a crisis that could have set it back for years or even put it under.
“I have one phrase to describe Samsung, ” said Thomas Cooke, a professor at Georgetown University’s Mc Donough School of Company. “Teflon. ”
The battery issues blindsided Samsung as it undertook the biggest smart phone recall in history — 2. 5 million mobile phones, including 1 million in the United States.
Samsung’s initial reaction to the battery crisis will probably become “a example in what not to do, ” Cooke said. Customer Reports and the Oughout. S. government criticized Samsung’s first moves, including a statement that cautioned of the “battery cell issue” with the phones but did not say they could explode.
Samsung’s communication with American customers was also not good, said analyst Carolina Milanesi of Creative Strategies, perhaps because it was coordinating with its headquarters on the other side of the world. “There was an immediate mea culpa, and then it turned into kind of a mess, ” she said.
While the outside world was clamoring for more information, Samsung’s U. S. executives sequestered 40 employees in a crisis triage team at its headquarters in Ridgefield Park, N. J., said Tim Baxter, Samsung North America’s chief executive.
“I didn’t sleep much for 120 days, ” he said. “At times, we felt a little bit like we were in a bunker. ”
There, Samsung’s top executives started to unpack all of the complicated processes that go into launching a phone, coordinating by video conference with global headquarters in South Korea.
Engineers took the phones apart to find the problem. Staffers spoke with government regulators about the threats to consumer safety. Lawyers braced themselves for lawsuits from people burned by the devices. Others talked to mobile phone carriers about how exactly to get back phones that had been sold. Samsung had to ask retailers to pull stock from the shelves and ship the phones — which had been banned from all U. S. air travel — back to Samsung.
Everyone worked on winning back the trust of consumers who had seen viral social-media videos of smartphones bursting into flame.
“We basically lived in a war room, a conference room for those 120 days,” Baxter said. Often, work days would end at 4 a.m. or 5 a.m., he said, and would sometimes pick back up at 6 a.m. “We learned more about working as a team in that time — almost operating as a start-up — than I’d ever experienced,” he said.
The first step was to figure out what caused the issue, said Justin Denison, Samsung North America’s senior vice president of mobile product marketing.
“It can take a couple of weeks to actually go pick up the device and put it through its paces,” Denison said. Without a computed tomography (CT) scan — the same sort of scan a doctor would use in a medical exam — it’s hard to tell if a battery has internal problems. Samsung didn’t disclose what caused the fires until January, after an internal investigation in which 700 engineers tested more than 200,000 devices and 30,000 batteries, the company said.
Samsung said the recall cost it $5. 3 billion to gather the devices and set up testing facilities. It asked three independent safety auditors — UL, Exponent and TUV Rheinland — to investigate. Ultimately, they found that some factories had crammed batteries in cases that were too small for them, leading to them to crimp and malfunction.
To prevent it from happening again, Samsung set up a battery advisory group that included academics from Cambridge University, Stanford University and the University of California, as well as battery consultancy firms.
It also added new testing to find points of failure — to disassemble batteries, ensure against leaks and make a visual inspection of each battery.
Since the Note 7, Samsung has had two major smartphone launches, for the Galaxy S8 and S8+, and for the Note 8. Neither has had similar battery problems.
On the recall finish of things, Samsung was aggressive. It developed software to make the Note 7s unusable, so customers wouldn’t try to keep them. It sent messages directly to owners through carriers such as Verizon and AT&T. “We urge you to stop using your Note 7, upgrade it to another device, and return the Note 7 to us, ” read one from Verizon.
It even reached Note 7 owners at airports where the Federal Aviation Administration required gate agents to warn passengers that the phone was banned from air travel.
Milanesi said that might have been the most damaging part of the recall because it broadcast Samsung’s woes beyond its own customers. “That hit normal people; any Joe Blow going on holiday heard this phone wasn’t safe, ” she said.
To control its message and also reduce the number of angry customers caught at gates, Samsung set up trade-in booths at major airports.
(How did Baxter experience that? “Luckily, I actually wasn’t traveling much in that time, ” this individual said with careful diplomacy. )
But the outreach efforts appear to possess helped Samsung hit its ambitious goal of getting every phone back. Baxter said that Samsung offers collected 99 % of Note 7 phones offered in the U. H. and that it gathered 96 % within three months.
“We’re still operating on it today, to get that 1 percent, ” Baxter said. “We’ve scaled back our sources on it, but we still have individuals working on that. ”
Even all those who criticize Samsung’s initial reaction give the organization credit for confronting its failures.
“In the end, they were painstakingly obvious about the fact that this happened and it was their fault, ” said Ramon Llamas, a researcher at IDC.
What else helped
Cooke stated things specific to Samsung helped it weather debate better than, for example , the fast-casual restaurant Chipotle, which faced an outbreak of food-borne illness that 12 months.
For one, it’s simpler to look for a different burrito combined than it is to switch over apps, contacts, and pictures into a new system.
It also helped that Samsung’s rivals did not capitalize on the turmoil. Apple’s iPhone 7 plus iPhone 7 Plus are not smash hits. Samsung had been still the top smart phone seller for all associated with 2016 and 2017, IDC reported. Google, which released its Pixel phone immediately after the recall — sold only about one million phones by the particular ending of the yr, according to IDC.
The particular Note, Llamas said, balances for about 10 pct of the company’s smart phone sales and is definitely the drop in the container when it comes in order to the amount of other products Samsung makes, including televisions, fridges and much more. Its most successful business is actually within smartphone chips, which this sells to Apple regarding use in its apple iphones.
He also said Samsung’s phone business benefited since it’s part of the huge conglomerate. The bigger company’s total assets are usually equal to one-fifth associated with South Korea’s gross household product.
That size padded the hit to the brand’s reputation.
“I could still turn on my Samsung TV with no problems, ” he said. Samsung’s woes were largely disassociated from the huge number of televisions, dishwashers, microwaves and computer monitors that also bear its name. (In January 2018, Samsung stated it expects it will certainly have 1 billion linked devices in the market by 2020. )
Samsung might have also helped itself by aggressively pushing its next product, Milanesi said.
“One reaction could have been to rein it in, ” the girl said, talking about Samsung’s pace of product releases. But, she said, that’s not what the audience with regard to the Note — a tech-savvy niche of consumers — would have desired.
“Our Note owners are obviously our most faithful users, ” Baxter stated. Communicating with them has been a top priority, this individual said, and Samsung used the email addresses it gathered from phone registrations in order to offer consumers the possibility to get direct updates through the company. Baxter mentioned 10, 000 men and women finally signed up to obtain updates on the bimonthly schedule.
The openness could have already been the tipping point.
“Samsung was justifiably criticized regarding being slow using a very clear procedure for how so when the faulty phones will be replaced. But it furthermore did something remarkable: They will found a method to replace the particular phones quickly, ” mentioned crisis communications expert Eric Rose from the Los Angeles public relations firm Englander Knabe as well as Allen.
Customers also have short remembrances. Brand index firm YouGov, which asks consumers just how much they trust plus respect companies, found within October that Samsung’s popularity score was despite having Apple’s. Samsung has beaten Apple company to market with the full-screen smartphone, the Universe S8, and has arranged the design language with regard to a new generation of phones.
“At the finish of the day, this is solid proof that good products will conquer some faults along the way, ” Cooke stated. “The case study will become their failure, but it offers a happy ending. ”