Lessons Learned from Samsung's Struggles
Even in a world where time is money, it doesn't always pay to be first.
This past weekend, I flew out to Denver to attend a wedding, which included me harassing the live band the entire night to play "Shout." They finally complied during the encore, but not before stating that they would be charging an extra $1,500 for the song. Whoops.
I also went on a ghost tour of The Stanley Hotel, which, according to our tour guide, is the fourth-most haunted dwelling in the US by whoever deems it necessary to rank those types of things. The hotel was part of the inspiration behind Stephen King's "The Shining" and also featured, although not in name, in "Dumb and Dumber." Talk about range.
However, it wasn't my rendition of my favorite "Animal House" scene or my interaction with spirits that led me to think of the capital markets. It was during my flight back to New York that a certain announcement triggered my mind to switch back to financial services.
As the plane pushed back from the gate, the flight attendant went through the typical announcements everyone ignores as they try and get those last few minutes with their smartphones. But then she paused and made an off-script announcement.
"Excuse me, but I've just been told by the captain that those of you with Samsung Galaxy Note 7 devices should power them down immediately and please leave them off during the duration of the flight."
Hot Issue
I learned when I got home that the South Korean technology provider was in the midst of a crisis. An issue with the Galaxy Note 7's battery was causing it to catch fire while charging in some cases.
Issuing a recall is bad. Doing it immediately after the launch of one of your marquee products is worse. Having it coincide with the release of your direct competitor's new product is a catastrophe.
Samsung's stock reacted as one would expect under these circumstances, dropping significantly before slowly rallying. At the same time, Apple's stock has continued to rise.
Patience and Virtue
So what does this have to do with trading technology? As more firms develop bring-your-own-device (BYOD) policies for their employees, Samsung and Apple are keen to enter the void left behind by Blackberry. But when your company's phones start exploding when you charge them, it tends to complicate things.
There is also an important lesson to be learned from Samsung's struggles. This is a perfect example of why speed to market is not always the most important thing if it comes with a drop in quality.
This is pure speculation, but I'm sure the idea of launching the Galaxy Note 7 almost a month before the iPhone 7 was attractive. When deadlines get tight, sometimes things get overlooked. Granted, this appears to be due to default hardware, and not a bug in the code, but the need for proper quality control still remains.
Back in March 2015 our US editor, Anthony Malakian, did a fantastic piece on the nuance of patching. It is a delicate balancing act to ensure a patch is sent out quickly enough to address the issue while still ensuring that it doesn't completely corrupt the system. While Anthony's story was focused on new cyber threats, the same philosophy can be applied to vendors' product launches.
The appeal of being the first firm to release a new platform or version of a solution quickly evaporates when patches or updates need to be applied immediately. The capital markets have been built on being fast, particularly in recent years, but quality and efficiency are still important factors as well.
Just take a look at Samsung, who literally has seen their product go up in smoke.
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