Samsung's disastrous launch of its latest smartphone, which ended in a global recall, is a symptom of the family-controlled company's hierarchical structure that has left it prone to group think and has hindered innovation, according to a leading figure in South Korea's burgeoning tech start-up scene.
The South Korean conglomerate, whose $US305 billion revenue ($397 billion) in 2014 is equal to about 20 per cent of the country's gross domestic product, recalled the Galaxy Note 7 early this month - just weeks after it went on sale - after it emerged faulty batteries were overheating and exploding.
While Samsung says most customers are accepting replacement models with new batteries, David Sehyeon Baek, head of international affairs at the Gyeonggi Centre for Creative Economy and Innovation, a tech start-up accelerator just outside Seoul, said it was a sign Samsung could be following companies such as Nokia and Sony by allowing success to breed complacency.
"All the big companies have the possibility to be trapped into groupthink – 'we are Samsung, we cannot fail' – and that is where you start to make mistakes all the time," he said.
Samsung has more than 450,000 employees and Mr Baek said that pool of talent should have stopped the Galaxy 7 disaster from happening.
"But why did it happen? Because there's a lack of diversity in terms of people, and maybe it's because they're too much into groupthink," he said.
The Samsung conglomerate remains controlled by the family of founder Lee Byung-chul, whose son Lee Kun Hee is now chairman. The chairman's own son Lee Jae Yong has been running the company since Mr Lee suffered a heart attack in 2014.
Bloomberg put South Korea at the top of its annual list of most innovative countries this year, but Mr Baek said the hierarchical nature of Korea's largest companies, which were mostly family run, was stifling innovation.
"When you talk about innovation, you really have a decision-making process which is very hierarchical – I make a decision and you follow me. And if I'm wrong, it's OK, it's not my fault, it's your fault. And then if we're successful, I did everything," he said.
This was already hurting Samsung in the Chinese smartphone market, where it was being left behind by domestic manufacturers and had slipped from being the No.1 brand to sixth or seventh in the course of a few years, Mr Baek said.
The GCCEI start-up accelerator, funded by government and industry, nurtures small tech companies with advice and financial support in an effort to create more small and medium enterprises in a country dominated by conglomerates, and to stimulate innovation within existing companies.
"The private sector doesn't want to innovate," Mr Baek said. "The private sector isn't doing anything so the government has to take the initiative.
"We have to find a way to innovate with big companies because big companies are not innovating themselves."
Samsung's misstep comes amid a series of crises hitting South Korea's chaebols, the family-run conglomerates including Hyundai and LG which dominate the economic landscape: shipping company Hanjin, one of the world's largest, collapsed last month and another of South Korea's largest companies, Lotte, is in the midst of a corruption scandal.
The reporter travelled as a guest of the South Korean government.
