—
IN THE UNITED STATES, CPSC chairman Elliot Kaye was finally able to
put his foot down and intervene after a frustrating two weeks of inaction
from Samsung, stating at a press conference on September 15, “Now it is
the time to act.”
The official replacement program, backed by the federal government,
was good to go. Harried Samsung executives raced to get out safe
replacement phones. But their haste caught up with them once again. They
sent off “safe” Note 7s to a passenger on the now-infamous Southwest
flight that was evacuated in Kentucky, to the student who came close to
setting fire to her school, and to the homeowner who vomited from smoke
inhalation and was hospitalized.
“I knew Samsung hadn’t solved it,” the battery pundit Park Chul Wan
later told me. “Samsung’s corporate culture is too rigid. This is the result
of decades of fast following with poor fundamentals.” The precise factors
that had made Samsung a runaway success—its speed and agility—had
now become a devastating liability.
It was nothing short of an existential problem for Vice Chairman Jay
Y. Lee, the crown prince of Samsung, heir to the empire and one of his
country’s most powerful men.
Traversing the United States, Jay was getting live updates from
Samsung’s “Tower” and D.J.’s task force. But Jay spent much of his time
outside the company, traveling and meeting CEOs overseas. As he spoke
with American mobile carriers, he got the clear message that the carriers
were fed up. Verizon CEO Lowell McAdam and others were urging Jay to
kill the phone altogether.
“The executives told Mr. Lee the smartphone was becoming
increasingly unsalable,” The Wall Street Journal reported.
The decision to end the Galaxy Note 7 didn’t come ultimately from
Samsung, but from its customer-minded carriers. Jay called CEO Koh and
ordered him to abort the Note 7.
D.J. sent out a memo to all employees later that day, calling this “one
of the toughest challenges we have ever faced.”
This wasn’t a second recall or a chance for redemption. Samsung had
exhausted its credibility with the Galaxy Note 7. If Samsung continued
manufacturing the Note 7, few people would trust it. The damage to the