The Internet of Things: How will Samsung bring their A-game?

Samsung is one of the main competitors within the Internet of Things Space. Traditionally, Samsung has developed consumer electronics but as we move into a world of “smart” everyday objects, Samsung must be able to not only produce great hardware but also software that will bring those ordinary objects to life in a way that attracts customers away from their competitors.

     The integration of electronics into our daily lives has been moving increasingly fast thus competitors within the space must move even faster. Samsung Electronics is known for its strong presence in the consumer electronics space. Their hardware can be seen in the hands, living rooms and kitchens of customers worldwide. A benefit to developing great hardware is its endless number of possible uses. A risk is not being able to realize the hardware’s full potential. As Samsung competes within the Internet of Things it must be able to produce software that brings its devices to life in ways never before seen.[1] This is an especially appealing market for Samsung given that by 2025 about seventy-five billion connected devices are expected to be “smart” up from thirty billion in the year 2020 and twenty-three billion in 2018 (Exhibit 1).

 

Exhibit 1

Source: Statista, “Internet of Things (IoT) connected devices installed base worldwide from 2015 to 2025 (in billions),” https://www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/, accessed 2015-2016.

     Qualcomm Technologies, my previous employer, has some of the best in industry microprocessor designs in their patent portfolio. Those microprocessors are integrated into mobile device brands ranging from HTC to LG to Samsung. Therefore phone manufacturers will be selling devices with the same chip, raising questions regarding the difference in revenues within their mobile devices divisions. What makes us choose one consumer electronic device company over another? The answer is they have to find ways to get creative. “[Samsung is] very attuned to what competitors are doing and what other people are bringing to market first and observing what seems to be gaining traction, then very rapidly coming up with their own version of that innovation.”[3]  Given their position, Samsung must strengthen their product development strategy. That is where open innovation plays a large role.

     Open Innovation allows companies to have access to talent beyond their in-house R&D. Product development comes with many challenges and companies must be fully aware of the repercussions that come along with initiatives designed to give them an edge. The effectiveness of the open innovation process depends on two factors:

1) idea generation  

2) idea selection

     Regarding the generation of ideas, as we saw with IDEO, “[i]f ideas for solutions can come from anywhere, then a fundamental statistical principle is that the more ideas generated, the better the quality of the best one is likely to be.”[4] Regarding idea selection, “…opening the idea-selection process can also generate significant value. Outsiders have distinctive expertise and perspectives, which enable them to pick winning ideas. This is particularly true when it involves products that can be used in many ways…” The Internet of Things allows creativity to flow into everyday objects giving rise for a greater need for out of the box thinking.

     Samsung has introduced Open Innovation to their product development process through various ways. Relating to short term strategy, Samsung takes feedback from customers on everyday products. For example Samsung’s “smart” washing machine features were developed thanks to Australian users. “[The Australian Samsung team took Australian’s] feedback to HQ and they implemented it in [their] flagship machines worldwide.”[5] Samsung also allows communities of software developers to work on beta versions of their hardware in order to develop IoT applications. A strategy that will be beneficial in the long term comes from the understanding that others are already working on some of the problems they need to solve. “The Samsung Global Innovation Center is boosting Samsung’s software strategy in a major way. Founded in 2013, GIC’s mission is to evolve Samsung from a hardware-driven company, to one that also leads in software and services. engages with entrepreneurs in a variety of ways, offering them more opportunities than investments would alone.”[6]

     To address the need for competitive ideas, I would recommend allowing all company employees a certain amount of freedom to contribute to projects outside of assigned ones. Large companies tend to lock employees into a role ignoring a large amount of potential. I would also recommend a strategy to train managers to identify good ideas and avoid biases when reviewing those ideas given that idea selection can sometime be even more important than idea generation.

     My main concern with open innovation is related to the idea tracking practices of Samsung, because it is unclear what ideas came from where and how they go about their selection process. I would be interested in knowing if they have ever received an idea which they turned down and a competitor saw success with it. If so, could this help identify flaws within their current processes? The ability of Samsung to understand the best innovation strategy for its goals is critical to its competitive advantage within a world of interconnected objects. This means avoiding the better-than-average mindset, only then will it be able to compete with the other big players in the Internet of Things space. (791)

 

Endnotes:

The Internet of Thing refers to devices/objects that are connected to a network with the ability to provide and receive data.

2 Statista, “Internet of Things (IoT) connected devices installed base worldwide from 2015 to 2025 (in billions),” https://www.statista.com/statistics/471264/iot-number-of-connected-devices-worldwide/, accessed 2015-2016.

3 Max Nissen, “How Apple, Samsung, And Google Take Different Approaches To Innovation”, Business Insider https://www.businessinsider.com/how-apple-samsung-and-google-take-different-approaches-to-innovation-2012-11 (Nov 2, 2012).

4 Andrew King and Karim R. Lakhani, MIT Sloan Management Review, “Using Open Innovation to Identify the Best Ideas” https://sloanreview.mit.edu/article/using-open-innovation-to-identify-the-best-ideas/  (Fall 2013)

5 Business Insider Australia, “Samsung’s hugely popular washing machine innovation came from Australia”, https://www.businessinsider.com/samsungs-hugely-popular-washing-machine-innovation-came-from-australia-2016-2, February 2016.

6 Samsung Newsroom, “Startups: The Secret Ingredient of Samsung’s Open Innovation”, https://news.samsung.com/global/startups-the-secret-ingredient-of-samsungs-open-innovation, September 2015.

 

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3 thoughts on “The Internet of Things: How will Samsung bring their A-game?

  1. Great overview of opportunities in the internet of things space and the value that open innovation can bring!

    How would you structure a “20% free time” structure for employees? Specifically, how do you motivate employees to produce projects / products that will be impactful for the business, especially if there isn’t an existing culture of doing so? Also, is there any way of expanding this type of structure outside of your own employee base (therefore increasing the openness of open innovation)?

  2. First off, great piece that provided a perspective of (i) how Samsung leveraged open innovation to get feedback on their products and (ii) how they managed to channel the feedback to the HQ for product iteration and innovation. You also highlighted the imperative for Samsung to move towards software, offering potential solutions that could help that in that aspect. I found the recommendation on allowing ‘company employees a certain amount of freedom to contribute to projects outside of assigned ones’ very practical. While ‘Annonymous HBS Student’ questioned how this could be implemented if the culture doesn’t exist, I feel that it is precisely the top-down direction that would drive a change in culture, which is very necessary for Samsung. In fact, I have known that some organizations, such as J&J, do employ such models to encourage their engineers to innovate beyond their core work. That said, I would love to hear your thoughts on how to ‘train managers to identify good ideas and avoid biases when reviewing those ideas’. Having worked in innovation field, I see two common issues that would need to be balanced carefully: (i) employee’s attachment to an idea and emotional implications when ideas are rejected, (ii) finding the right threshold/criteria for elimination to pre-mature elimination of good ideas. I believe this will be a long process, and it could be more practical to start with a pilot team that is trained on these aspects.

  3. Andy Rubin first approached Samsung for funding for Android back in 2004, a few weeks before Google’s acquisition. This is an example of Samsung missing out an opportunity for innovation that another company seized and built an entire platform of technology and business. With its root in manufacturing, the entire company has been optimized for fast decision making and even faster execution based on the homogeneity of culture and strict hierarchy. The company has made a lot of effort to change its culture and become more software oriented, as opposed to hardware (manufacturing). Still, the bulk of revenue and the majority of profit comes from the semi conductor business and having lost the opportunity to become a platform player in mobile operating system, the company essentially became dependent on Google’s android. This is a major obstacle for Samsung (and similarly for LG Electronics) because despite their presence in home appliances/electronic devices they cannot take the lead on open innovation because they have to rely on other’s platform. Its own attempt to build an ecosystem largely failed to gain traction (Tizen OS) due to the oligopoly state between Google and Apple, and now Amazon.

    In the past, Samsung was known for sticking to organic growth as opposed to acquiring companies with the right set of technology. It’s acquisition of Loop Pay which became Samsung Pay about five years ago was the first instance where Samsung made a significant acquisition and integrated the technology to its product offering. Since then, it has been making greater effort to be more open to leveraging innovation opportunities outside of the company. Samsung’s GIC, now renamed to Samsung NEXT, is located in the Silicon Valley and acts as the corporate VC/incubation center, aiming for more collaboration/acquisition. Most recently Samsung has acquired the German multinational acoustics company Harman-Kardon. It aims to increase its competitiveness through M&As in the field of mobility solutions and automotive electronics.

    All these attempts are not quite open innovation in the software/service space, but today Samsung is taking a more fluid approach to innovation. In order to truly leverage the benefits of open innovation, however, Samsung unfortunately lacks the software platform to host the crowd-sourcing activities. It is a great hardware company in so many aspects, but it hasn’t made much progress in becoming a software/platform powerhouse.

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