Dancing Giants: Samsung's Open Innovation Center

By Adam L. Penenberg , written on April 22, 2014

From The News Desk

Marc Shedroff, Vice-President of Samsung's Open Innovation Center

You only need one stat to show why Samsung has been so innovative over the years: A full quarter of its global workforce works in research and development. Yet the company has been looking to in-house startups to promote new software products to work with its vast product line, which includes TVs, tablets, and cameras.

Recently I caught up with the Vice-President of Samsung's Open Innovation Center, Marc Shedroff, to find out more about the ways Samsung wants to innovate like a startup.

405x650_Homepage_Tower_DGWhat exactly is Samsung’s Open Innovation Center?

The Open Innovation Center (OIC) was created 15 months ago. The goal is to create software and services innovation on our devices. By “Open,” I mean through partnering in the broadest sense of the word. If you look at Samsung, we have 286,000 employees, approximately 25 percent of whom work in R&D. There’s a ton of technology being innovated inside of Samsung, and OIC is additive to all those efforts.

OIC has four legs to it, and it’s sort of the continuum of how you would partner with talented entrepreneurs. The first is a partnerships team -- think of commercial partnerships between us and a third party. The second is a ventures group, that is, R&D investments in startups. The third is an M&A team; we think there’s an opportunity to acquire small teams, fit them into Samsung, and have them build products as part of the company. The fourth involves accelerators, which we have opened in Palo Alto and New York City.

Let’s start with the accelerator. How does it differ from Y-Combinator-like startup support?

Unlike a traditional accelerator, these small entities are internal startups. The people who join the accelerator are exclusively funded by Samsung, but we keep them separate from the big company, both geographically and organizationally. That way they can continue to build products the way they would if they were a five- or six-person startup. Ultimately, we want those products to get integrated into the big company: Samsung.

Why would a company as successful as Samsung want to emulate startups?

I think that there is a certain nimbleness, autonomy, and risk-taking culture that exists in startups that can get muted inside a big company. Even in a corporation as innovative as Samsung, which has more than 60,000 people working in R&D alone, you have a lot of processes, checks and balances, and check-ins. It’s not unique to Samsung, of course. It’s a larger company dynamic. But if you think about software and services, especially over the past 10 or 15 years, the companies that have launched game-changing products usually began as startups. Creating a place for startups to be nurtured within the larger enterprise makes perfect business sense.

Then you add Samsung’s vast resources...

We can take a group of five or six people per team and give them the benefits of a small company, which is autonomy, nimbleness, and the freedom to build the product they want without going through the approval process. Then we give them the benefits of a big company, which provides financial support, extensive distribution, and other resources. After all, we sell 450 million phones a year and 50 million TVs. The end result, we hope, will be game-changing software products that can connect all of our devices.

What’s the process for incubating a startup with Samsung?

For this first set of people we brought in we sought serial entrepreneurs. Most of the folks in the accelerator have been founders or early employees in successful startups, and they came through personal connections. For example, Dwipal Desai was the first CEO to join us. He was the first hired engineer at YouTube. Another is John Kilpatrick, former Executive Creative Director at “The Daily,” News Corp.’s newspaper app. [Editor’s note: You’ll find a complete list Samsung accelerator members here.]

Once we have a product, we talk about how much funding it would take. Once we agree on a number they go out and build a team. The teams that have been with us the longest have been here over a year. We’re still bringing on new teams, though. In fact, a couple joined within the last four to six weeks.

In Silicon Valley, Samsung is viewed as an outsider. Are you trying to change that?

Samsung is headquartered in Korea, but we’ve had a presence in Silicon Valley for 30 years, with tons of R&D labs and people working here. One of the things that we hope the Open Innovation Center can do is help get us into the fabric of Silicon Valley, and, hopefully, over time, bring some of that culture back to Korea. The partnerships team, the M&A team, and the investments team are meant to help build that reputation for Samsung in Silicon Valley.

We’ve talked a lot about the accelerator. Tell me about the other three legs, so to speak: partnerships, M&A, and investments.

With partnerships in the U.S., we have a set of people who work at OIC and have a relationship with the developers and leading startups all over Silicon Valley to bring these startups onto our platforms, like Gear, or to work closely together to create entirely new, integrated experiences for our devices. Instead of it being a call from someone who is in a time zone 16 hours away, it’s people based here. I sit in Mountain View, so if there’s a technical question, business point, [or] you encounter a questionable legal point as you go through contracts, the team here can help.

On the investment side, we’re making early stage investments -- seed, series A, and series B, anywhere from $250,000 to $3 million. How do we build a network with talented entrepreneurs who want funding, yet also want to keep their startups independent? Naturally, our ventures group cares about investing in successful startups and that means generating positive financial returns of one, but we also care about strategic returns -- and by strategic I mean investments that evolve into commercial partnerships with Samsung. That, to us, is critical.

Our M&A team works on two types of deals. The first are those deals we execute in conjunction with one of Samsung’s business units. Last year, in conjunction with our television group, we acquired Internet/TV startup Boxee -- the Open Innovation Center acted as a corporate development group. By joining Samsung, Boxee gains access to the biggest distribution footprint in the world. We sell 450 million phones a year and 50 million TVs. The second type of M&A are companies that would join our Accelerator. Sometimes we acquire a small team with a history and rhythm of working together. We can put them in the accelerator and they continue to work on a product. If you think about it, by bringing a working team into the accelerator we’re accelerating the accelerator.

What’s your ultimate goal with the accelerator?

The very explicit goal of the accelerator, as well as the M&A team, the partnership team, and the ventures team, is to affect the core software products that are on all of our flagship devices: phones, TVs, tablets, cameras, anything Samsung makes.

[Note: The "Dancing Giants" series is being sponsored by Atlassian, so you'll only see their ads around these pieces. But the series was conceived, commissioned and edited entirely by Pando. Atlassian had no input whatsoever in the editorial. For more on our policy towards single sponsor series like this one, see here.]