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Credit: Reuters/Kim Hong-Ji By Miyoung Kim SEOUL | Fri Mar 23, 2012 12:39am EDT SEOUL (Reuters) - When Samsung Electronics rushed its first smartphone to market in a panicky response to the smash-hit debut of the Apple iPhone, some customers burned the product on the streets or hammered it to bits in public displays of disaffection. Complaints ranged from dropped calls and a clunky touchscreen to frequent auto rebooting and a dearth of applications. "It was just awful," said Kim Sang-uk, 27, who bought the Omnia in late-2009 just before starting his first job. "I just wanted to throw it away, but couldn't because I was on a 2-year contract. It was the kind of phone where you'd say 'no', even if someone gave it to you for free." Samsung Mobile President JK Shin admitted it was a tough time. The company had seen a 1 trillion won ($885 million) profit in its telecom sector in the first quarter of 2010 halved in the following quarter after Apple Inc's latest iPhone took the market by storm. "We were facing a really serious crisis," Shin said later. SOAP VS PERFUME Yet on the 9th floor of Samsung Electronics headquarters in Seoul housing the mobile division's design center, Lee Minhyouk said he was not feeling the heat. Samsung Mobile's vice president for design and his team were already working on its next smartphone, the Galaxy, and this would be truly a worthy opponent to the iPhone. Samsung has sold 44 million Galaxy units since its launch in June 2010 on its way to displacing Apple last year as the world's top-selling smartphone maker. Its success evolved from the Omnia, said Lee, who at 40 is the company's youngest senior executive. "Without Omnia and Samsung's previous models, there would have been no Galaxys. There's a design link among these products," he said in an interview at his office. "They shouldn't be viewed as fragmental design. They share our deep deliberation on technology, color and design language." Samsung's chequered entry into the smartphone market is emblematic of the South Korean conglomerate's strengths and weaknesses. Its strategy has always been to be the "fast executioner", the first in the market with a copycat product when a new opportunity is presented. But it is not known as a great innovator or a company like Apple that can literally create a new market with an iconic product. To become a truly innovative company, Samsung needs to explore the art, as well as the science, of what it does, critics say. "Samsung is like a fantastic soap maker," said Christian Lindholm, chief innovation officer of service design consultancy Fjord based in Finland. "Their products get you clean, lathers well. However, they do not know how to make perfumes, an industry where margins are significantly higher. Perfume is an experience. Perfume is meant to seduce, make you attractive and feel good. You love your perfume, but you like your soap." Designing something people can love is an art, which requires risk taking and is based more on experience than data. "Samsung needs to learn to lead more. They analyze all creativity to death, they lack self confidence," Lindholm said. "Korea has to leap into the experience industry," she added. "I think they have only five years before they are the new Japan, outmaneuvered by the Chinese who are quickly learning the soap business." EVOLUTION VS CREATION Lee's office atmosphere and his comments seem to reinforce an image of a company whose culture leans more to evolution than big-bang creationism. His design sanctum looks much like any other Samsung department, a Dilbert sprawl of desks and cubicles with framed aphorisms from the founding family on the walls: "Be with Customers" and "Create Products that Contribute to Humanity" and also this one: "Challenge the World, Create the Future". The office may lack the exotic art, exercise balls and creative toys of Silicon Valley decor, but Lee and his team are borrowing some start-up techniques for tapping the design muses. Lee, who has acquired the moniker of "Midas" for his golden touch with the Galaxy series, has travelled to Brazil's Iguazu Falls and the ancient city of Cuzco in Peru for inspiration. Samsung sends the design team on such trips across the world to stoke their imaginary fires. Images or emotions they pick up on these trips can be "naturally expressed in design languages or lines and colours", said Lee, who started out designing cars for Samsung's failed auto joint venture with Renault in the 1990s. The design process can also be more mundane, he adds. "Designing is just part of your life. You study, do some research on future trends and experience stuff you haven't done before. All this stuff interacts to create a new design." If money was the answer to innovation then Samsung Electronics would certainly rank among the best in the world. Samsung spent 10 trillion won ($9 billion) on research and development in 2011. Indeed, the annual Bloomberg BusinessWeek survey of most innovative companies ranks Samsung 11th on its list of top-50 most innovative companies, though it trails local rival LG Electronics in 7th and Sony in 10th. Part of Samsung's design philosophy is to leverage the conglomerate's ability to manufacture inhouse the components in its products, including microchips and flat screens - an advantage over Apple for instance, which has to outsource most of that. Samsung readily acknowledges it has yet to attain Apple's innovative spark. And Lee concedes he is no match - yet - for Jonathan Ive, the genius designer behind the distinctive look and feel of Apple's range of phones, tablets and other must-have consumer gadgets. By most accounts, Ive's success at Apple stemmed from his close personal relationship with Steve Jobs - a classic marriage between gizmo-maker and entrepreneur. Lee, who said he has never met Ive, has a more corporate relationship with top managers at Samsung. He believes, however, that paradigmatic breakthroughs are a matter of the right product coming at the right time. "I might not be at (Ive's) level yet, but I believe Samsung will produce such iconic products one day. It's not just effort that makes it possible for a new product to be a massive hit. It also has to be timely, and technology should be ready to make a certain design a reality." APPLE APTITUDE That Samsung might eventually wind up with some Apple aptitude has to worry company executives at its Cupertino, California headquarters. Samsung and Apple are locked in an escalating global patent battle, as they jostle for top position in the booming smartphone and tablet markets. Apple fired the first salvo in April last year, arguing Samsung had "slavishly" copied its iPad and iPhone. Since then both have taken legal action against each other in several countries claiming patent infringements. Lee takes personal affront at the copycat charge. "I've made thousands of sketches and hundreds of prototype products (for the Galaxy). Does that mean I was putting on a mock show for so long, pretending to be designing?" "As a designer, there's an issue of dignity. (The Galaxy) is original from the beginning, and I'm the one who made it. It's a totally different product with a different design language and different technology infused." And a different marketing approach. While Apple has a simple product line-up for the iPhone and iPad, Samsung has bombarded the market with varieties of the Galaxy, the Wave phone, which uses Samsung's own 'bada' platform, and most recently with a phone-tablet. Lee sees no harm in this tweaking-rather-than-innovating approach, saying it plays to the company's corporate strengths. Samsung's vertically integrated structure allows it to use prototype components and new technology developed elsewhere in the company in the design lab. The company has overseas design labs to help uncover consumer trends in the various global markets in which it competes. Designers have to be integrators, researching user behavior, discovering what's happening in the market, as well as searching for a unique aesthetic, Lee says. "As a designer, my job is to blend new functions and technology with aesthetic beauty, as far as possible." "There are different teams studying new technology trends, working on future design trends and Samsung's own design identity, and they're all regularly exchanging ideas with designers." FAB-LET? Lee's latest project - a follow-up to the Galaxy model called the Note - is a mini-tablet and phone, with a throwback stylus. Although it looks huge compared with a standard phone, its pinpoint apps and high definition screen should please those using it for video and gaming. The phone-tablet - or phablet - has sold more than 2 million units since its October launch, and was a crowd pleaser at the annual Consumer Electronics Show in Las Vegas in January. Lee said the design risk with the note was "breaking a taboo" about keeping handsets small enough to fit easily in your hand. "But smartphones are more about entertainment. The Note was created by simply breaking that taboo and focusing more on the new functions that smartphones require." Handsets are now Samsung's biggest earner - bringing in 8.3 trillion won ($7.4 billion) in operating profit last year - and the group's confidence has grown in tandem with its fattening patent book - it registered over 5,000 patents last year alone. "We were told so many times until the early part of last year that Samsung is not good at software. We're not hearing that as often any more," Samsung Chief Executive Choi Gee-sung said at the CES event in Las Vegas. Late last month, Choi went further and told reporters at the world's biggest annual mobile show in Barcelona that Samsung would not unveil its new Galaxy model at the Mobile World Congress for fear of rivals copying it. Yet there's not one software engineer or designer among the 17 Samsung Fellows, Samsung Group's in-house equivalent of the Nobel prize winners to reward those making a significant contribution to its success. Lee hopes his time will come. "I'm confident that one day Samsung will make a product that defines our time, and I hope it's one of mine." ($1 = 1129.5500 Korean won) (Additional reporting by Tarmo Virki in HELSINKI; Editing by Bill Tarrant and Ian Geoghegan) Tech Media iPad Special Reports Consumer Electronics Show Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above. 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