When to Incubate, When to Scale? How Samsung Pinpoints the Right Moment

Organizations are often caught up in “business as usual,” missing out on the prime time for innovation. On this episode of Mastering Innovation on Sirius XM Channel 111, Business Radio Powered by The Wharton School, guest Nana Murugesan (WG’09), Vice President and General Manager for Services and New Business at Samsung, discussed the importance of taking calculated risks and knowing when to scale them.

One approach Murugasen described was rewards and loyalty programs, unusual within the technology industry. His team hopes to incentivize consumer behavior change by focusing on creating and engaging an early adopting ambassador community. Murugasen also provided more details on how to approach these changes as an individual and as an organization.

An excerpt of the interview is transcribed below. Listen to more episodes here.

Nana Murugesan (WG’09), VP and General Manager, Samsung Electronics

Excerpt

Nana Murugesan: The biggest challenge, especially in my job, is: when do you have to be in incubation mode, and when do you have to be in scale mode? It’s easier to be in incubation mode for a long time. You have a software service. It’s usually not that ready when it’s launched. We do a great job just launching a great hardware, and you have to do that — implications are pretty huge. But with software and services, it’s always never ready. How do you make the decision on when to be in incubation mode and when to grow? That’s really a science and an art. That’s a challenge, something that requires a lot of things that you need to do within the company – alignment and things like that – and it’s very important in the software service business.

Saikat Chaudhuri: That makes a lot of sense to me. There are a lot of companies — startups but also the likes of Google — who prided themselves on the incubation piece, in some sense, recreating the startup experience. But, like you’re alluding to, at some point you have to scale and make some money.

Murugesan: Otherwise someone else is going to do that. You could be in incubation mode. Someone else might show up and scale it, and they’re going to win it. In this industry, there’s a lot of winner-takes-all going on.

Chaudhuri: That’s right. How do you recognize when you move from this experimentation mode to actually, “We need to now take this and scale it?”

Murugesan: As I mentioned, it’s a combination of science and art. The science part is always easier to explain because it’s more data driven. The art part is always left to judgment and intuition. There’s lots of other things going on, and there’s no perfect mix.

Some of the things that we have to look for are, first of all, more at an industry level. Is this something that is catching up at a whole industry level? Lots of players there, getting more and more fragmented? It’s very important for you to just go big. Otherwise, someone else is going to go big. If you’re the only one doing it out there, maybe you have some more time, but if it’s getting more fragmented… That’s one thing, the market dynamics.

The second thing is about what I call power users. We pay a lot of attention to not just how many people are using the service, but is there a small segment who are passionate about it? Do we have something like a power user community developing? These folks who go to Reddit and post how much they love the service, we watch for this. We watch for this in several different ways based on data. We would go to forums and take a look at it. That is a good indicator of, “Have you at least developed a small community of extremely passionate users?” Because then, you have to get the word out, and hopefully you can get more of them. That’s another very important signal that we look for. Of course, there are lots of other things as well, but I wanted to mention these two things.

“It’s a combination of science and art. The science part is always easier to explain because it’s more data driven. The art part is always left to judgment and intuition.” – Nana Murugesan

Chaudhuri: The power user concept is a fascinating one because what we’re really talking about is: you cannot predict the future. We cannot tell what will go viral, what will not, what will make it, what won’t. In that context, you need to track something, and so you can watch market share and technological parameters. Key users become an important signal as well as a device for championing outside the firm to these different products and services and ideas that you propagate.

Murugesan: Absolutely right. That’s probably one of the most important indicators to decide whether you have to stay in incubation mode, which means you probably don’t have too much of a power user community because you’re still trying to figure it out and nobody’s really using it a lot. You have got to get it to a point where, at least, there’s some set of folks who really love it. Once you feel like there is a certain critical mass, then it’s a matter of getting the word out and scaling it. It’s a huge go-to-market and interdisciplinary growth hacking activity. The concept of growth hacking is something we do a lot.

Chaudhuri: Makes a lot of sense. Now, organizationally, how are you set up? These incubation teams, they’re separate from the scaling teams, right? How do they interface, and how does that interaction go? Oftentimes, in large companies, you’ve got different goals and priorities.

Murugesan: That’s a great question because many times, these types of innovation and incubation themes get buried in the organization, and they never get to see the prime time because most of the time, things are dictated by business as usual. It’s like, “Hey, what’re our revenue numbers today? How are we doing? What’s going on?” I’ve been fortunate in being directly organized under the North America CEO and under the global head of services under our company CEO. I’m both a global role, as well as a North America role organized directly under the CEO. That has helped a lot in helping our CEOs juggle between business as usual functions, which is obviously going to be the predominant part of their job, but also functions that are business not as usual. The fact that we are organized directly under a senior level, under a regional CEO as well as a global head level, it gives us a lot of opportunities. That has been very, very helpful to make sure that there is enough mindshare on business not as usual.

Chaudhuri: You’re clearly quite talented, and obviously, that’s why you’ve been given the chance to work so closely with these top company leaders, but it was a very inspired decision for them to also anchor a group like yours at the highest level. It may be a sensible thing to do, but it doesn’t always happen.

Murugesan: That was really from a foresight point of view, and that’s been very encouraging. That also gives you an indicator, and to the market an indicator, of how important this is for Samsung. Even though there’s not much revenue right now, this is an area that’s being incubated. It’s in the early stages of growth, but from a three- to five-year strategy, it’s right up there, and it’s a good indicator of how important this is.

Chaudhuri: Not only that, the track record of the company having been able to transform itself over time.

Murugesan: From exporting dried fish in 1938.

Chaudhuri: It’s incredible. It reminds me of Nokia. They’re no longer around in the same form. They started with lumber, I believe. But dried fish…

Murugesan: And Wipro started off with oilers.

Chaudhuri: That’s right. There are a few companies like that, but Samsung has been able to reinvent itself. I also find it fascinating because we often have heard this notion that you need to be very focused on your core competencies and be narrowly focused on your business, and that is better for you. However, companies like the Samsungs, which are conglomerates, have shown that you can actually not just financially diversify, but gain synergy benefits across the firm. Do you interact with other parts of the organization as well?

Murugesan: Increasingly so. It’s a great question because Samsung has benefited a lot by being organized as almost separate companies since it helps achieve focus. Sometimes, when you try to drive a lot of horizontal activities, you become so focused on driving synergies that you’re not driving the verticals.

We have become really good from a focus point of view. However, we have few groups like mine that are horizontal in nature, so it’s not like the entire company’s organized like that. There is a clear focus on running the businesses with GMs and CEOs, but there’s also a few groups that are responsible for driving cross-platform, cross-device experiences, because from a company’s overall value proposition, we’re trying to get to a connected world experience that’s personalized and intelligent for our users. That requires horizontal thinking.

About Our Guest

Nana Murugesan is Vice President and General Manager for Services and New Business at Samsung Electronics America. Focused on unlocking new growth and turnaround, he oversees an interdisciplinary team that combines devices with software and services into new businesses—shaping the company’s strategy, investment, commercialization, product, and monetization roadmap. Earlier, Murugesan served as Samsung’s Vice President for Strategy and Operations and Chief of Staff to the North America CEO. He started his career with Samsung in 2009 in the Global Strategy Group in Seoul, Korea. Prior to Samsung, he was with BCG (strategy consulting) and Cisco (product and engineering). Murugesan holds a MBA from The Wharton School at the University of Pennsylvania and was recently named in Wharton’s 40 under 40 list. You can follow him on Twitter, @NanaMurugesan.

Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.

Somina Lee is a Production Assistant for the Mack Institute’s radio show, Mastering Innovation. She is a junior in the Huntsman Program, concentrating in Finance and Marketing & Operations Management at the Wharton School and majoring in International Studies in the College of Arts & Sciences.

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