Samsung and the Internet of Things – Strategy with RS

Samsung fast followed (euphemism for inspiration) Apple’s iPhone & made tons of money. But business history tells us that ‘fast following’ strategy can never be sustainable in the long run. History caught up Samsung Electronics & it’s third-quarter operating profit more than halved from a year earlier.

Can Samsung achieve success without fast following? Of course it can. It will have to build a strategy by offering a ‘determinant’ benefit to its customers – benefit that customers want, competition is not giving & Samsung gives. Does Samsung have a determinant attribute? Indeed it does & it resides within itself.

Samsung, arguable the world largest appliance maker with a strong technology backbone, can build a ‘differentiated’ business strategy around Internet of Thing (IoT), where smart appliances “speak” with each other – machine-to- machine communication, over the internet. This is how it will work.

Smart homes of the future will be populated with smart appliances – air conditioning system, refrigerators, security devices, lighting system & many more.

Let’s take the example of milk stored in the smart refrigerator in your smart home. Just as the milk is about to get over, the refrigerator will sense that & send messages to 2 people: 1. You on your smart phone, informing you to pick up milk while returning from office in the evening. 2. Grocer over his smart phone, informing him to keep a carton of milk ready to be picked up in the evening.

In the evening when you set your car’s GPS to your home address, the smart phone will sense that you are headed home. It will send a reminder message to you to pick up milk on your way home & a 2nd message to the grocer to keep the milk packet ready for pick up. When you reach your gated community after buying milk, your smart car will speak to the security device to gain access inside your building compound. As you get out from your car, your smart phone will communicate with your home air conditioning system to start so that by the time you enter your home in the next few minutes, the temperature would be at 23 degrees – the temperature you like best. On reaching your main door, you do not have to fish for keys in your pocket… your smart phone will “speak” to the front door security device to grant you seamless access. The smart lighting system will sense your presence due to your body heat & will switch itself on.

By pursuing the IoT based strategy Samsung will deliver a seamless & memorable experience to its customers. This will delight them. And once that happens customers will seek out Samsung instead of the other way round. And Samsung would have realised its dream of becoming an ‘Apple’ of the appliances world! Do you agree with the strategy that I have proposed for Samsung?

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rajesh-srivastava-insideiim

 

 

In this series, Rajesh Srivastava, Business Strategist and Visiting Faculty at IIM Indore gives you a regular dose of strategy case studies to help you think and keep you one step ahead as a professional as compared to your peers. Rajesh is an alumnus of IIM Bangalore and IIT Kanpur and has over 2 decades of experience in the FMCG industry. All previous Strategy with RS posts can be found here

Comments

7 comments

ananya123

Yes, it’s a very good strategy. But will Samsung’s management have the daring and the innovative spirit required for it?

Rajesh Srivastava

Ananya when pushed to a corner then ‘daring & innovative’ spirit come to the forefront.

Rajesh Srivastava

I presume they will have the courage to pursue it. Particularly after seeing there profits plunge they cannot afford to be reactive. They have to proactive.

dd100in

Yes sir, you are right, they have to bring in value that others are not bringing in. But the strategy you are suggesting will indeed require a lot of technical investment (in terms of money and manpower), and even then may not end up giving the desired results to Samsung. It will be a huge risk, I wonder if a company with as much at stake as Samsung, or indeed a company which has as much inertia (again, by virtue of size) would be willing to take such a big risk?

Aside, I am a huge fan of your series sir. Thank you so much for such informative posts.

Rajesh Srivastava

Deepanjan they have no option but to pursue the strategy I have recommended. Remember risk is inherent in every business decision. And any other decision they take will have equal if not more risk.

gaurav_sawant

Yes Sir it is true Samsung has a great opportunity to invest in plans you recommended i.e the Internet of things..but hurdles I think will come in its way are as follows:
1. Infrastructure requirement in the form of connectivity is tremendous in such complex architecture.
2. Privacy and Security of data should be addressed, else it will again come back to haunt Samsung
3. Comfort of people in using such connected services. Samsung has to invest in changing consumer behavior to take advantage of such offering.
Sir , let me know if these issues are relevant.

Rajesh Srivastava

Gaurav Sawant all the points that you have raised are relevent. But they are not new … they have been present for some time.Take #1: All issues are comples before they are solved & then the solution looks so self evident! Take #2: Personal data is a big is a big issue. And over time a solution will emerge. It is in existance beofore IoT came int o existance. Take your point # 3. Gen Y are comfortable with IoT. Samsung will not have to change there behaviour .. it will have to launch products to suit there behaviour.