I own a Samsung phone. Thankfully not a Note 7. My prior phone was a Samsung as well. Will my next one be a Samsung?
It’s safe to say that the Note 7 situation has been pretty disastrous. On the way back from a wedding last month, I heard an announcement made that hadn’t been made on my way out just a few days earlier. Each time passengers were boarding a flight, the gate attendants would announce that the FAA required all Note 7’s to be powered down throughout the entire flight. It’s never good when your product is suddenly singled out as being potentially unsafe for commercial flight. Samsung’s stock price promptly dropped a bit further.
The recalls were underway and replacements making their way into consumers hands. Then one of those replacements burst into flames on a plane in Louisville as the phone’s owner was powering it down. Then more stories about the replacements catching fire. Now Samsung has permanently halted production of one of its flagship phones and is working to provide either full refunds or a partial refund and a different Samsung phone.
Now it’s important to say that, of the over million Note 7 phones that have made it into consumers hands, there have been fewer than 100 fires to my knowledge. That’s not insignificant, but it is a very small percentage (on the flip side, the phone has only been out since August). And ethically, Samsung is doing the right thing. They aren’t throwing in behind Takata, Volkswagen, and General Motors in recent years.
Regardless there’s a huge cost. Not only are there roughly 2.5 million of these phones already made that will be going in the trash (hopefully they’ll be recycling as much of each phone as possible), but the brand is sure to take a hit as well. That hit is beyond just the reputational damage of selling a phone that catches fire and the incompetence (perceived or real) of issuing a replacement that catches fire.
Here are a few thoughts on why this is such a huge problem for Samsung even though they are doing their best to make things right:
Blackberry went from being a top seller to essentially nothing in the span of a few years. There’s no room to rest on your lead. The cell phone industry is notoriously cutthroat and fickle. Everything happens fast and there is not much time to recover. Going into this Samsung had the largest global market share of any smartphone company for the last three years running. That might help soften the blow, but big trees fall hard. Blackberry is a case in point.
Consumers of cutting edge tech products usually expect a few bugs and are willing to ride things out while the kinks are worked through. Spontaneous combustion usually isn’t one of the bugs you expect, but Samsung did the right thing and recalled the phones to fix the issue. A recall may be an inconvenience, but done quickly and efficiently, it may actually build credibility.
The problem is, they didn’t fix the issue. Their customers went the trouble of dealing with the recall, saving data, perhaps going without a phone for a few days, only to find the replacement was potentially just as problematic as the original.
There are obvious pressures to get the issue solved quickly, but you lose a great deal of credibility and goodwill when you say you’ve fixed the problem when you haven’t. The problem with the replacements may be the same distinct from the original problem, but that doesn’t matter when the symptom is a fireball you most likely don’t want. To the public, it looks like you were careless.
The Note 7 operates on the Android system, as do a plethora of other phones. iPhone owners purchase Apple operating system and the seamless connection to their other Apple products along with the iPhone itself. They may be more willing to wait for a solution, take an less recent upgrade, or wait for the next iPhone product release. When it comes to phones, Samsung doesn’t have that same sort of economic moat . That brings me to the next point:
Immediate Availability of Other Flagships.
Any number of flagship phones are available right now and operating the Android system. Google just announced its new Pixel phone, for one. There’s no need to wait around or take that slightly older upgrade unless you just absolutely love Samsung products, hardware, layout, etc. Just check out the competition.
Nature of the Flagships.
The R & D budget tends to focus on the flagships. The flagship phones get pretty drastic overhauls every couple of years and innovations are incorporated every year, kind of like the car industry in the 50’s and 60’s where you could tell a model year by the back up lights. The designs and innovations that make it into this year’s flagship flow down through the company’s other series in the following years.
This is a particular problem for Samsung as it appears that they can’t reproduce the problem and aren’t sure exactly why the Note 7 offers the unexpected bonus feature of also being a portable fire source. This has the potential to dam, or at least slow, that flow of intellectual property into Samsung’s other offerings. If some suspect features were already incorporated into other designs, it may halt the production of that series.
That’s more bad news because the reputational harm may not be limited to the here and now. Some of next year’s customers may choose a competitor, not for fear of their phone catching fire or a lack of faith in Samsung, but because those other phones might not get the planned upgrade, might be missing certain features that others offer, or might not be out at all.
Most people hold onto their phones for a couple of years before upgrading unless they have to have the latest or happen to drop their current phone in a puddle. These phones cost hundreds of dollars and Samsung may be missing out on a large segment of the current cycle. The flagships tend to be the real money makers too, so by pulling the flagship they’re really taking an economic hit this cycle.
Moreover, most smartphone users seem to either go for the hottest new thing or stick with brand they know and are comfortable with. They are not particularly loyal (iPhone excepted), but we are creatures of habit. Those purchasers that Samsung loses this cycle may, or may not come back next cycle. If they’re happy with whatever device they purchase, they may just buy the upgraded version next time around rather than return to Samsung. This is a huge opportunity for Motorola, Sony, Huawei, LG, Apple, etc.
I like Samsung products, and I understand that the pressures to innovate in the smartphone industry are exceedingly high. I don’t think Samsung was particularly careless, just that they pushed a little past the limit of their technology. But maybe the limit is really only clear in hindsight.
I’ve always considered my options when buying a new phone, and I will when I purchase a new one next year. I’ll consider Samsung like I have in the past. It just might be the best brand next year. I know all smartphone manufacturers will be taking second looks at their products, but I’m fairly certain Samsung will be taking fourth and fifth looks at theirs. Samsung will still be around in a year, no doubt. But they may not be at the top, and their future may be a little more questionable.