A Case Study of Samsung's Failure in the Smartphone Platform Industry
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Copyright by Hogeun Seo 2019 The Dissertation Committee for Hogeun Seo Certifies that this is the approved version of the following Dissertation: Platform Rules: A Case Study of Samsung’s Failure in the Smartphone Platform Industry Committee: Sharon L. Strover, Supervisor Joseph Straubhaar Kathleen R. Tyner Jeffrey Treem Platform Rules: A Case Study of Samsung’s Failure in the Smartphone Platform Industry by Hogeun Seo Dissertation Presented to the Faculty of the Graduate School of The University of Texas at Austin in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy The University of Texas at Austin August 2019 Dedication To my family, friends, and God. Acknowledgements I would like to thank my supervisor, Dr. Sharon Strover. Without her guidance, I might still be writing my introduction chapter of this dissertation. Her insightful advice and thoughtful support have enabled me to complete my dissertation. I am honored to work with her. I also want to thank my committee members, Profs. Joseph Straubhaar, Kathleen Tyner, and Jeffrey Treem. They have always been willing to encourage me to keep moving forward. I truly appreciate their wholehearted support. I am also grateful for the support that I have received from my parents and parents- in-law. Their trust always encouraged me. My most sincere gratitude goes to my family, Shinhea and Ian. With their endless love and support, I could finish my degree. In particular, Shinhea’s sacrifice provided the foundation of this dissertation and my degree. I might have to say that I really appreciate her support and I love her. v Abstract Platform Rules: A Case Study of Samsung’s Failure in the Smartphone Platform Industry Hogeun Seo, Ph. D. The University of Texas at Austin, 2019 Supervisor: Sharon L. Strover By investigating Samsung’s platform strategies, organizational culture and control mechanisms in the Android ecosystem, this research provides a balanced view on the global smartphone platform industry. In addition, this dissertation provides both empirical evidence and critical explanations by exploring the challenges of global leading manufacturer Samsung, especially Samsung’s Media Solution Center (hereinafter, MSC) which was in charge of software and platform services of the company. In the literature review and methodology chapter, this study reviews 1) how successful platform providers actually control other platform participants, 2) how they develop platform ecosystems and extend their businesses, 3) how a fast follower strategy which is considered a typical strategy of Samsung Electronics affects business performance, and 4) how cultural elements of organizations affect the performance of a company, especially an ICT firm. This research poses three research questions: RQ 1: How did Samsung’s platform strategies such as the fast follower strategy affect MSC’s platform services? RQ 2: How did the platform governance and control mechanisms in the global smartphone industry vi influence Samsung’s platform services? And RQ 3: How did the organizational culture of Samsung and MSC influence Samsung’s platform businesses? The research relies on interviews with 25 platform experts who once designed and worked on platform services such as Samsung Apps or Bada in Samsung’s MSC. This study basically explores business experiences of Samsung’s MSC whose challenges were not successful. Since Samsung’s attempts to control a platform failed, this research is in part a study of failure. In this it deviates from the typical study that pays much attention to the winner’s position or experience rather than that of a loser. Based on the interview data, this research provides significant findings. First, Samsung’s strategy of being the fastest follower generated positive network effects for the Google Play Store instead of Samsung’s platforms. Second, Google tightly controlled its competitors’ platform services in diverse (somewhat unfair) ways in order to maintain its dominance. Lastly, Samsung’s hierarchical and micromanaging organizational culture exerted negative influence on MSC’s platform services. vii Table of Contents List of Tables .......................................................................................................................x List of Figures .................................................................................................................... xi Chapter 1: Introduction .....................................................................................................1 Background .................................................................................................................7 Problem Statement ....................................................................................................15 New Perspectives on Platform Competition .............................................................23 Chapter 2: Literature Review, Research Questions & Methods .....................................27 Literature Review .....................................................................................................27 Platform Governance: Mechanisms for Control ...........................................27 Cross-side Network Effects ..........................................................................31 The Fast Follower Strategy ...........................................................................37 Organizational Culture: Hierarchy, Control and Performance .....................41 The Research Setting: Samsung Electronics ............................................................45 Research Questions ...................................................................................................47 Methods ....................................................................................................................54 In-depth Interviews .......................................................................................59 Chapter Outlines .......................................................................................................65 Chapter 3: Platform Management: Samsung’s Fast Follower Strategy & Network Effects ..........................................................................................................................68 Samsung's Fastest Follower Strategy & Smartphone Platform Business .................69 Samsung Apps, the Follower of Apple's App Store .................................................75 Network Effects ........................................................................................................84 Conclusion ................................................................................................................90 viii Chapter 4: Platform Governance: Control Mechanisms in the Android Ecosystem ......94 Architectural Hierarchy & Google's Authority to Control the Android Ecosystem ...........................................................................................................97 Behavioral Control & Norms of Android ...................................................103 Unofficial Input Control & Unfair Competition .........................................104 Outcome Control & Manipulating Competitiveness ..................................106 Hierarchical Relationship between Carriers & Manufacturers ...............................107 Conclusion ..............................................................................................................110 Chapter 5: Samsung’s Organizational Culture & Platform Business ...........................114 The Influence of Hierarchy .....................................................................................117 Micromanagement & Samsung's Gwanri Culture ..................................................127 Conclusion ..............................................................................................................133 Chapter 6: Discussion & Conclusion ............................................................................137 Organizational Hierarchy & Cultural Change ........................................................140 Network Effects & Dependencies...........................................................................143 Power Discrepancies & Control .............................................................................147 Global Dimensions .................................................................................................151 Research Significance, Limitation, & Future Opportunity .....................................153 Research Significance .................................................................................153 Research Limitation ....................................................................................154 Future Research Opportunity ......................................................................155 Appendix: Interview Protocol ..........................................................................................157 References ........................................................................................................................160 ix List of Tables Table 1: Samsung’s Quarterly Revenue per Unit .............................................................46 Table 2: Research Questions, Concepts & Interview Questions ........................................56 x List of Figures Figure 1: Global Smartphone Market Share by Vendor .......................................................6 Figure 2: Organizational Chart of Samsung Electronics ....................................................71