Samsung 3D-Television
A strategic plan for a technological innovation

FROM: Peter Fischer Erik Froode Alexander Johansson

TO: Anu Wadhwa

Lausanne, 2010-10-16

Table of content
Samsung 3D-Television............................................................................................................................ 1 1. Background of the innovation ........................................................................................................ 3 1.3 1.3 1.4 The background of Samsung ................................................................................................... 3 The background of 3D-Television technology ......................................................................... 5 The competition ...................................................................................................................... 5 3D-TV technology ............................................................................................................ 6 The visible entertainment ............................................................................................... 6

1.4.1 1.4.2 1.5

What kind of innovation is 3D-TV? .......................................................................................... 7

2 ................................................................................................................................. Industry description ................................................................................................................................................................. 9 2.1 2.2 2.3 2.4 Early adopters users and niches in 3D TV ............................................................................... 9 Standards and necessary industry partnerships ................................................................... 10 How will industry conditions & firm capabilities influence adoption? ................................. 11 Scenario ................................................................................................................................. 13

3. Strategy for innovation...................................................................................................................... 14 1.3 How should Samsung be organized to succeed with 3DTV? ................................................. 14

3.2 .................................................................................................. The composition of the venture team ............................................................................................................................................................... 17 3.3 An appropriate funding plan ................................................................................................. 18 The future five year funding plan .................................................................................. 20

3.3.1 3.4 4.

What is a feasible back-up plan or exit strategy? ................................................................. 21

Conclusion

Appendix A ...................................................................... Strengths and weaknesses of the competition ............................................................................................................................................................... 23

1. Background of the innovation
This report will describe one potential strategic plan for the Samsung 3D-Television. The 3D technology has been under development for decades. The method used for 3D technology comes from stereoscopic pictures, which is a way of showing an image in a two-viewed stereo representing each eye which makes the brain perceive a depth in the picture which translates to a 3D experience [I]. 3D has had two big waves of attempts to commercialize the technology in the 50s and the 80s without it really catching off [II]. 3D is now in its third wave and is trying yet again to compete against the regular 2D TV.

The success of this new wave is discussed by many, some say that it will fail as the earlier attempts and some claims that it will succeed. Some arguments for its success are; unified industry with a lot of actors in either co-development or parallel development of the technology, backward compatibility with 2D and is not predicted to experience the same standard wars as BluRay and HD-DVD. Furthermore, the previous limitations like nausea/headaches and poor color have been overcome with the a better technology and also the making of 3D content is becoming cheaper and easier with companies such as Panasonic making twin-cam recorders (“3D recorders”) etc [III].

The gaming industry is also adapting the 3D-technology. Nintendo introduced Nintendo DS with 3D-technology during the E3-convention in Los Angeles this year and announces that there will be a commercial launch in March 2011.

1.3

The background of Samsung

Samsung Electronics, founded 1965, is one of the world’s most important electronic device manufacturers and belongs to the South-Korean Samsung Group. The products of Samsung electronics vary from Semi-Conductors, Telecommunication Network, LCD and Digital Media. Revenues in these areas are hard to connect to the actual TV market alone since the LCD screens are components. Digital Media consists of various areas; digital Appliance, mobile, computers, TV etc. Revenues in Digital media are $37 billions and LCD revenues are $18,9 billions [IV].

Since 2006 Samsung Electronics has doubled its sales of TV’s and is now market leader with 23.6% market share in front of LG Electronics Inc. with 13% and Sony Corp. with 11.5% [V]. This is a big achievement since it is the first time since the beginning of TV manufacturing that a company has acquired more than 20% market share in this highly competitive market. In order to sustain this lead, Samsung puts much effort in development of complementary assets like remote control applications for Smartphones (iPhone and Samsung products so far) and ESPN Next Level to research Players Picture-in-Picture meanwhile watching a game.

24 % 39 %

Samsung Electronics Co LG Electronics Inc Sony Corp Panasonic Corp

13 %

Sharp Corp Other

5% 8%

12 %

Figure 1, Global market share TV end of 2009 source: abcnews.com [VI]

As Olivier Manuel, director of content in Samsung’s Consumer Electronics Division, puts it: “We’re the only manufacturer *of Web-enabled TV’s+ to have real applications. The rest just have widgets” *VII]. As new 3D-technology is about to evolve, Samsung was the first to be on the consumer market. Early-Adopters appreciated this move, giving Samsung a nearly 90% market share on 3D-TV’s sold so far (270.000 out of 300.000 until June 2010) reported by Chosun, a South-Korean Newspaper [VIII]. Samsung is also meeting the emerging problems of implementing 3D-technology to people’s living-rooms like the few available 3D content by developing the Samsung-Chip for real-time conversion of 2D-media into 3D [IX]. There will still be a lot to work on, e.g. shutter glasses that are compatible amongst different manufacturers and products or the know-how to

manufacture products affordable for the broad majority.

1.3

The background of 3D-Television technology

In short 3D technology is using the notion of showing frames meant for a certain eye. Showing a frame shot with two cameras distanced as the human pupils (one acting as the left eye the other as the right) gives an image with two different angles. When the frames are put together by the polarizing glass of a 3D glass for example it will use the human binocular vision making us see a depth of the image which translates in to a 3D experience [X].

There are two types of 3D-Television technology, one with glasses and one without. The technology used with glasses can be divided into two sub-categories which are both being developed independently. One is using passive (polarizing filter) glasses and the other is using active (electronic shutters) glasses. There is a price performance trade-off between these two sub-categories. The polarizing glass is cheap (similar to the ones used in cinemas) but shows a lesser resolution than the HD-TV. With the active glass you can get better resolution and an overall better 3D experience but to a higher cost [II].

The type of technology that does not require glasses is called auto-stereoscopic display which in short incorporates the filter or the glass to the TV. There are two main methods present, the parallax barrier and lenticular lens. The difference is that the parallax barrier uses a barrier (slits) to break the “left image” to the left eye etc and the lenticular lens passes the images through cylindrical lens to direct the light to a viewing zone which allows the left eye to see the different images meant for the left eye and the right eye respectively from a certain distance [XI].

1.4

The competition

The competition to the Samsung 3D-Television technology comes from both TV-producers developing 3D-Televisions and other sources of visual broadcasting and entertainment. It is thereby crucial to analyze the competitive environment taking into account both the competitors within the same technology and the players that provides substitute products.

There are of course strengths and weaknesses with all types of competing technologies. The most visible comparison to make when dealing with 3D-TV technology is to evaluate the experience watching stereoscopic, with glasses, and auto-stereoscopic televisions, without glasses. When taking substitute products into account the focus is lying on visible entertainment such as, 2D-TV, projectors, downloads, streaming and cinemas. The strengths and weaknesses for each mentioned product are to be found in Appendix A.

1.4.1 3D-TV technology
Auto-stereoscopic technology is a superior technology compared to the stereoscopic, but the present price and the lack of complementary assets (broadcasting, receivers) makes it a less attractive alternative at this time. As mentioned in the Background, there is a belief that this, glasses-free alternative, will be the more popular later on when the technology and the complementary assets have developed.

As Samsung has 90% market share, the market is not that competitive. But as other large high-tech companies are entering the market, Samsung should not slow down their development and push the technology to maintain the market position. The new Samsung 3D-Televisions are able transform the 2D signal streams into 3D signal stream with 3D content. This means that broadcasting made for 2D could be used in the 3D-television which implicates low switching costs [IX].

1.4.2 The visible entertainment
Cinema and 3D-cinema is also competitors in the visual entertainment segment. As people perceive a visit to the cinema as a social event and a possibility to see the new movies with large screens, the demand for cinema will probably not be altered due to the progress of 3DTelevison technology. Although, if the 3D-technology improves and the audience consider it to be better than 2D-technology in general, the need for 2D television and 2D cinema will of course decrease in favor of 3D-technology.

Other ways of enjoying broadcasting are e.g. through 2D TV, Internet streaming and the use of projectors. These are competitors since the consumers could use these as substitute products, in other words instead of buying a 3D TV. The old TV technology keeps developing

in order to resist the threat from the new upcoming technology, commonly described as the sail-effect.

1.5

What kind of innovation is 3D-TV?

Without doubt, the 3D TV is product innovation. Since Samsung has much experience in how to produce traditional TV’s the knowledge about the processes used today can be used for the new product. If a new competitor would enter the market for 3D television, Samsung has an advantage with the production capabilities developed for many years. New product innovations and process innovations often occur in tandem [Types and patterns of innovation, Shilling], as the new product requires new or changed production methods. The introduction of 3D-television leaves a mark in the television technology trajectory, and from now on constant development and incremental innovation is necessary for the market to implement and replace ordinary TV-sets.

The most radical change in the 3D TV is the implementation of the 3D technology as a part of home entertainment, as well as how the projection is made for the viewers. The first commercial TV sets were sold in 1928 and the commercial TV broadcasting network started 1941 under the name WNBT. The technology trajectory has been encountered with radical innovations as implementation of sound and broadcasting in color, as well as incremental and component innovations improving the overall performance. The stereoscopic 3D technology actually followed closely to the introduction of the TV technology in the beginning of the 20th century. Most of the components in the 3D TV remain as well as the exterior design. Since the degree of newness and the degree of differentness is low for the hardware, the innovation is incremental. However, the experience from the viewer’s perspective and the degree of change from the 2D image related to the technology trajectory implies that the innovation is radical. Hence, the 3D TV innovation could be explained differently for different perspectives of the product.

3D-Television is as a commercial product, a radical product innovation, offering a completely new way of digital media experience. Even though the audience was not particularly asking for 3D-Television, film makers encounter a high demand of 3D cinema, taking this opportunity to apply on home-entertainment market. This science push enhances TV

manufacturers’ competences, as well as sustaining its target costumers. For the industry itself the innovation in software is radical, bringing old technology for 3D cinema in to into home entertainment. This is also the explanation to why the innovation is competencies enhancing for Samsung. The company will still produce and develop technology within 2D TV; the 3D TV technology will be a way to enhance the overall competence of the firm, since development will be performed simultaneously.

The actual TV design, sound-system and media distribution will not be affected, but the change for the viewer is radical. The changes in software and thereby the projection are the main changes in the product. The product architecture will not be revolutionized; hence the innovation in this sense is of component character. The first 3D TV was an invention as it combined existing technologies in new ways (Home entertainment + 3D) and now continuous incremental innovations are needed to improve the products and to attract the broad market. The market for 3D TV and the market for 2D TV is indeed the same, the 3D TV is a evolutionary sustaining product since it provides enhancements and new features to the same market. The table 2 summarizes the character of the 3D TV innovation.

Invention Product Competence enhancing Component Incremental/Radical Evolutionary sustaining

Combines existing technologies Tangible outcome from Samsung Production of both 2D and 3D Software and Projection Technology/Home entertainment known technology, same market
Figure 2, Type of innovation

2 Industry description
This chapter will describe some of the behaviors in the Industry for 3D TV. The Early adopters have already started to buy the 3D TV, but what is needed for the 3D TV to become adopted and by the broad market. The partnerships needed for Samsung to provide an attractive product as well as the capabilities of the firm are also mentioned.

2.1

Early adopters users and niches in 3D TV

The early adopters of 3D TV is forecasted to be the consumers searching for that something extra when they are looking for new cultural experiences or want to watch movies and sports according to an expert panel [VII], consisting of Simon Gauntlett DTG, Mark Grinyer Sony Prossionals, Ian Trow Harmonic and Thomas Wrede SES-Astra. According to the beliefs, the first niche will be 3D production for bigger sport events for example big screens for open areas to reach the early adopters with the 3D experience. Another growing niche is 3D for music concerts, enhancing the experience of the artists for the customers. These two niches are mainly focused on spreading the experience of 3D.

In order to reach the consumers in the living rooms with a 3D set, companies such as BskyB Ltd, Discovery and different Pay operators like Chanal Plus are looking for ways to build out there HD packages and the beliefs are that they will try to expand these packages with 3D material. Also the gaming industry, as has been mentioned before, is looking for ways to incorporate the 3D technology. One such example is the new Nintendo’s game console DS, which will have a 3D screen [XII].

The problem to reach the mainstream according to multiple articles and experts is believed to be the lack of content that can be shown with 3D (or rather content that the consumer would find more appealing in 3D compared to 2D). You find the same notion with HD TV even though it has been in the market for quite some time. The content requires 3D production with a twin cam method as has been mentioned in the introduction. The technologies are there (like bandwidth, transmissions, receivers etc.) but production companies are lagging a little bit because consumers are required to change their regular 2D set to 3D. It needs positive feedback loops with more adopters who will increase the demand for 3D content. Thus it would create network externalities in that way which can help to gain further adopters to push the production of 3D content even further etc. This

parallel expansion is believed to mean that in 2015 10 % of the western European households will own a 3D set (Thomas Werde, SES-Astra) [VIII].

2.2

Standards and necessary industry partnerships

How could the new product of 3D TV, become standard in the home entertainment market? Network effects are crucial on this particular market. You need 3D content in order to make the investment pay off and experience this innovation, as well as complementary assets such as game consoles to function with it. Already in 2009 the Blue-Ray Disc Association (BDA) defined a disc standard for 3D content so consumers will be able to see all with the same machine. This is the first step to open the door for 3D movies on Blue-Ray and 3D games for consoles, which will be able to show 3D just by small software update [XII].

Furthermore the Digital Video Broadcasting consortium and broadcasting services such as Sky [XIV] decided about transmission specifications, having started with 3D broadcasting in 2010, for example the football world cup. So Samsung already created a lobby of industry partnerships to push the 3D market sector (see figure below)

Partner

Why? 3D Content on Blue-Ray DVD for home entertainment

BDA

Opportunity to run 3D content on game consoles 3D Content widely available by regular broadcasting

DVB Needed

service for everyone’s homes (e.g. Sky) Why? Luxurious versions of shutter glasses for the upper

Designers class Figure 3, recommended partnerships

One partnership that Samsung is still missing in our opinion would be designers for upper class equipment, such as fancy shutter glasses, since wealthier people will more easily tend to purchase equipment that seems to be exclusive. The upcoming 3D TV standards will also

need to fulfill the demands for a traditional 2D TV-set. With the current partnerships, work is being done on solutions to remove all possible disadvantages of 3DTVs, and then if a costumer intends to buy a new TV he might as well buy a 3D-ready one without having to waive any advantages of a regular gadget, making a high market penetration for 3DTV possible.

There is one small issue of standards in the development of the shutter glasses (the active glasses) but nothing that is believed to have an effect of a technology lock-in [XIII]. The technology lock-in issue that can appear with the 3D technology is if the stereoscopic technology (the one that needs glasses) gets a too large installed base when the autostereoscopic display is all figured out. It could then be that, what is expected to be the future of 3D technology, the auto-stereoscopic display is locked-in because consumers already have adopted the stereoscopic.

2.3

How will industry conditions & firm capabilities influence adoption?

The two main issues to consider when dealing with the innovation strategy of the 3D-TV television are first that the product is an innovation and secondly it playing on a highly competitive market. So Samsung has to both convince the market that the product is the future, and meanwhile create a product advantage towards the present players (Panasonic, LG) and the ones that will arise (Sony, Mitsubishi). It could have both positive and negative effects to be the first-mover. One must know, and handle, the market in the right way to achieve the benefits. Samsung was the first mover and put the first 3D-tv on the market. As could be seen in the diagram below this has given a strong majority in market shares of the 300 000 3D TV’s sold so far worldwide [VIII].

The sales are still low compared to the amount of TV’s sold in the world. Overall, TV makers shipped 46.1 million units, which are up 1% from a year earlier [XV]. If you look at the scurve the technology is still in its early phase since the technology is improving and the market diffusion is, as mentioned above, low. An important question is how much the common people are willing to pay for a TV with 3D capabilities and what product attributes and quality they demand.

Sales of 2D & 3D TV
2D 3D

Sales of 3D TV
Other Samsung

Figure 4, Sales and market share of 3D and 2D TV

It is hard to provide quantitative data since the product has just been on the market for so long. According to a Samsung representative on the headquarters in Sweden, the sales took off during 2010, and the yearly sales does not thereby represent a calendar year. If the technology trajectory from 2D-tv, with its continuous improvements in performance and fast rate of adoption, will be transferred on 3D TV, the sales will increase and the technology will be improved.

People seem to change television more often now than they did 10 years ago. The technology evolution pushes the demands to the strong marketing of new versions, design. Innovations in markets like these require strong marketing efforts. The brand name and the fact that Samsung was the first mover could give them advantages if they play their cards right. In order to define the kind of expectable first mover advantage, we need to take a close look at the evolving speed of both the market and the technology. As just mentioned, there is a push from the fast developing technology that provides customers with new products or features within short periods and also makes it hard for the Company to create a sustainable competitive advantage as a first mover since rivals might just join in at a later point in time without having to pay for older products support nor the risky and high R&D costs. Also the TV market evolves fast, as mentioned before the market grows rapidly as also forecast shows in the figure below. Thus this situation is likely described as “rough waters” since it is the most inconvenient one to gain a sustainable advantage and long term benefits from being a first mover [XVI]. However, most certainly Samsung will be able to gain short term advantages as the 90% market shares defiantly indicate [VIII]. Samsung will need to keep being innovative about 3DTV, to implement a kind of “brand loyalty” at customers even

when it the further generations will appear on the market and also promote those very strongly by its marketing division.

Display Search makes a quarterly TV design and features report which is an update of the rapid shifts in feature development in TV sets. They made a forecast for the next 10 years (starting 2008) on expected growth of the 3D market, as shown in the figure below. Based on this forecast, 3D TV market penetration is expected to grow from a 5% share of total flat panel TVs in 2010 to 37% in 2014.

Figure 5, 3D TV forecast [XVII]

In the highly competitive market for television, Samsung has been able to gain market shares during the last years, and are now at their all time-high at 23.6%, which imply their strong technology development and market adoptability. The prior experience and the technology base will give Samsung advantages for the future. When the market is highly competitive and the technology is evolving a company must continuously improve both products and processes in order to meet the new demands that arise.

2.4

Scenario

One possible scenario is that Samsung will leverage their lead in market share of 2D TV (cannibalize) and use their strong position of the 3D TV market to further reach revenues in the coming years. The market is forecast to have enormous value, revenues at around $12 billion in 2014 according to displaysearch, and Samsung is in the lead with vital partnerships. There are some different forecasts we have displayed, where displaysearch is the most optimistic and expert Thomas Werde is slightly less optimistic. However in the extreme case

Samsung will in 2014 still keep their 90 % market share of the 3D TV and with that market increasing to 37% of total TV market; Samsung would increase its total market share of TVs sold to 48%. That is a 100 % increase in 3 years and revenue would increase to $32 billion. A lot of assumptions are of course taken here, for example that 2D TV would render in the same sales (in revenues) despite the 3D TV cannibalization and that Samsung would keep their 90% market share.

A negative scenario is that the 3D TV stays as a niche. In that case Samsung will not experience any growth in market shares - just cannibalization from their own products. More scenarios can be expected but due to limited space this falls outside the limitations of this report.

3. Strategy for innovation
The Samsung group does not discuss their organization extensively. The information that could be found mostly deals with the products, values and goals of the different division in the Samsung group. It is thereby hard to try to see where the division dealing with development of 3D television could be located. The annual report found on the website of Samsung is from 2008, and the sales of 3D TV did not take off until early 2010. In order to describe the specific location of the 3D TV in the Samsung organization, the development team structure and how the development is financed, more information is required. The chapter below mostly explains some relevant theory around the mentioned topics, and act as guidelines for the Samsung managers when dealing with the development activities of this kind, in other words, strategy of innovation.

3.1

How should Samsung be organized to succeed with 3DTV?

One currently very discussed issue in industry is how far a company should be integrated or decentralized. More and more the Idea of bureaucracy as a burden for successful implementation of innovations arises, supposing flexibility as the key to performance. But this is unfortunately not true in all situations, because a highly decentralized company will most certainly struggle with internal communication and get into serious strategic trouble

when it comes to a special kind of innovation, which requires complementary innovations in order to be adopted[XVIII]

So what kinds of innovations in matters of required organizational structures do exist? The first kind is called autonomous and is the one that is easier to handle. It can be developed (as the name proposes) independently from any other technology. The second one, which happens to be the one Samsung is facing with the 3D TV innovation, is called systemic [XVIII]. Its benefits can only excel if complements are developed to function with it. In the case of 3DTV it is very obvious that filming technology as cameras need to be pushed to create 3D content in the first place, as well as an appropriate broadcasting network and so on (as discussed in earlier in the report).

So what exactly does this mean for the organization? Well, if you are outsourcing all your technologies you will have long and probably costly communication channels with a certain risk of loss of information amongst those since there will evolve a "competitive" atmosphere, seeking the major part of the work in other departments, not disclosing all necessary information, hence a big management challenge arises. Also you will most likely lose control over divisions, leading in a very poor and slow ability to adapt technology change as happened to GM when the car industry went (and with it the customer needs) from a drum- to disc brakes technology. GM was virtually organized and depended on its producers of the old technology who failed to change in time, thus delaying GMs ability to match the new customer needs.

So basically a market based virtual approach is predestinated to fail in implementing a sufficient coordination due to reduced or even biased information flow, which is easier to establish in one firm than across several. A systemic innovation such as 3DTV is especially hard to coordinate if there is no industry standard set yet. Samsung faces a situation like this since there are several kinds of shutter glasses, depending on the manufacturer, incompatible amongst each other.

A big integrated firm can be strong enough to pioneer a market with its version thus "dragging" customers, related suppliers and competitors with them, with the eventual

outcome of a set industry standard. A virtual organization might run into strategic problems amongst the departments and this will probably alienate costumers which might lead to a refusing of the product and a waste of potential. One example that shows this really good is the rise and fall of IBM during the 80's and 90's. It started by outsourcing all the parts of its computers, allowing them to relatively inexpensively enter the market in a very short time of only 15 months. The computer is very systemic kind of innovation that required especially hardware and software companies to create compatible products [XVIII].

The problem: all the outsourcing created an open standard that enabled competing firms to enter later and take its competitive advantage with superior and more compatible products, like Microsoft's Windows displaced the OS/2 of IBM. In order to prevent from this to happen to Samsung, it must be careful, as it is a pioneer on the 3DTV market, to keep the critical parts of the technology development internal and acquire only the less important ones from the market or by alliances. The following figure shows what organizational structure a firm should adapt depending on the type of innovation and its capabilities to produce.

Figure 6, Organization for Innovation As mentioned before, Samsung is facing a systemic innovation. Samsung already has all the manufacturing and development capabilities necessary to enter the market, thus they should not rely too much on other firms but keep it "in-house" and save intellectual property rights[XVIII].

A decentralization could be dangerous to maintain their so far achieved success (90% market share in 2009)[VIII].

3.2

The composition of the venture team

The authors of the article “The curse of too much capital” *XIX] suggest in their article some ways to organize the development without adding too much resources. The managers must focus on the context of the venture rather than the relationship between the venture and the corporation. The new venture must be organized in a way so that it can interact with both the corporation and the innovative community (e.g. cross-functional development teams, forums for generating ideas, partners). Proctor and Gamble created a corporate new ventures team, CNV Team, with the focus to come up with radical new innovations for every division in the conglomerate. The main inputs were drawn from two different sources: External consultants with extensive knowledge about markets and trends, and internal expertise from the different sectors. The purpose of the team was cross-functional with extensive information exchange, and expert contributions [XX].

Leadership team for new ventures must also be created of innovative people that have links to customers and potential partners. The quality of leadership is always crucial in development processes. Also the team individuals must be carefully selected, “many mistakes are connected to the wrong people, not the wrong idea”. The team members must be rewarded in a way that reflects the different risks involved in the work, hence both to attract talented people and to motivate performance, a suitable reward system needs to be implemented.

Since information about the specific development team of 3D TV at Samsung group is out of reach, only recommendations could be given which would follow the same direction as the examples above. Samsung Electronics division has extensive knowledge in developing and launching new products, and the knowledge the corporation has gained from earlier projects must be transferred to the 3D TV development team. A cross-functional team is needed for development projects, which acts as an innovative and competent community. And, of course, the leadership and the team members must be chosen so that they fit with the group and with the actual tasks of the project.

3.3

An appropriate funding plan

A corporate VC investment has two characteristics, its goal and to what degree the operations of the VC are linked to the investing company. The goal of a VC investment can be many, however it can often be stated as a strategic (seek and exploit synergies between venture and existing business) or a financial (seeking attractive new returns) goal. The second characteristics describe how the VC is linked to the investing company’s current operations, i.e. to what extent it can use its manufacturing plants and distribution channels, technology or brand [XXI].

Figur 7, The four types of investment (Chesbrough, 2002)

According to Chesbrough (2002) there are four types of investment and depending on what kind of innovations the VC is pursuing and the characteristics of the VC different investment plans are appropriate. Emergent investments are made in start-ups which has the described characteristics in the figure. These VC investments will initially not enhance the current strategy but the environment can shift and become strategically valuable. It offers the company a real option of a new market opportunity. Chesbrough further say that these kinds of investments are ways to experiment with new capabilities and technology that might be in conflict with existing one that could trigger new customers. In Samsung’s case this would be the most appropriate way to handle the VC investment of 3D TV since it is spot on what the 3D TV is for Samsung. It can use the operational capability of the incumbent 2D TV, the distribution channels, manufacturing plants and its brand. It might also be in conflict with the 2D TV (Samsung’s production of it, 3D TV is as mentioned before backward compatible with 2D) and it might even trigger a new customer segment (like organizing companies for music concerts etc.) which was discussed earlier in the early adopters section.

Large corporations (like Samsung for example) often finance new businesses too generously since they want them to grow fast [XIX]. The senior managers seem to believe that the more financial and technical support, the better. In fact, giving excessive amounts of resources to a new corporate venture could be fatal. Instead non-financial resources like human resources should be used more excessively, which could become reality if the corporation

gives financial resources in a way of venture capital funding. Limited resources make the venture focus on what is important [XIX]. There is a of course a possibility that Samsung spends too much money on development of 3D TV. Although Samsung is a conglomerate which has strong economy (based on the annual report of 2008 [IV]). So even if the development costs are higher than needed for 3D TV, the company does not risk heavy losses since the development of 3D television is a small part of the 252.5 billion USD asset Company.

3.3.1 The future five year funding plan
This section will consist of many assumptions which will be explained. According to Samsung’s annual report 2008, they planned to invest $70 billion in R&D in 2009, an increase of 13% from 2008. If we assume that R&D investment increases linearly we can expect a R&D investment of $145billion in 2015. According to our contact from the Samsung Sweden [XXII], around 25% of the R&D is today spent on development in 3D. Thus R&D expenses for 3D TV might be $20 billion in 2010 and increasingly linearly to $36 billion in 2015.

The cost of sales, administrative costs and general costs added up to around $40 billion in 2008 in the business area of Digital Media, an increase with around 30% from 2007 (somewhat calculated, somewhat assumed) [IV]. If we do a similar linearly assumption the costs seem to sky rocket to much so we will adjust the numbers a little bit and say that in 2015 the total costs can be expected to be $120 billion. Then it follows the already large increase of the R&D expenses better. So how much of the expenses can be assumed to be 3D TV expenses? Unfortunately most of Samsung’s competitors are also some sort of conglomerate so their cost for the 3D TV is just as easy to assume. So let’s instead assume that by 2015 3D TV are responsible for around 10 % of the total costs, $12 billion in Digital Media if we take the presumable increase of the 3D TV market into consideration. In 2010 3D TV might have been responsible for 1% of the sale cost, $500 million (or even smaller).

Thus Samsung would need to fund its 3D TV operations with around $21 billion in 2010 and by 2015 with $48 billion.

3.4

What is a feasible back-up plan or exit strategy?

With a market share of 90% Samsung has a high potential of success if the 3D TV becomes more popular, as projected. The net income of the Samsung group is over 10 billion USD, so the need for a back-up plan or exit strategy is not of great importance in the present state. If the demand for 3D TV will be insufficiently low, Samsung has shown that they can increase the market share for 2D TV meanwhile developing 3D TV hence there is low risk for fatal consequences. The development team must continuously evaluate the evolving market in order to identify segments where sufficient sales can be made. The feasible exit strategy in this situation when there exists a promising product forecast is to be pro-active.

4. Conclusion
The sales of 3D television took off in 2010. There is no industry standard yet and the technology is not mature. Currently the 3D TVs are too expensive for the broad market, but if the technology trajectory follows the one for flat screen TVs the prices will go down quickly as the market adoption and the number of producers begins to increase. The projections for the 3D TV sales promise a flourishing future, but we do not know how this new home entertainment system will diffuse the market. As 2D is very well diffused around the world, one big advantage is that existing distribution channels can be made for broadcasting, movies and complementary assets. Samsung is the first mover and needs to be really proactive to meet the threat from arising competitors. Developing the product in-house is a way to restrict others to come close to the technology and create new intellectual property. In order to sustain market leadership a strong marketing and R&D effort is necessary; the development team should be crossfunctional and centralized. The technology and Samsung have the capabilities and resources needed to make the 3D TV very successful, as proven in the market for 2D TV. But who

knows what technical obstacles and competitive rivalry Samsung will meet when trying to change the way of experience home entertainment worldwide?

5. References
[I] http://www.londonstereo.com/ [II] http://www.jvc.eu/3d_monitor/technology/video.html [III] http://www.best-3dtvs.com/10-reasons-3dtv-will-succeed/ [IV] Samsung Annual Report 2008 [V] http://online.wsj.com/article/SB10001424052748704804204575069401401404236.html [VI] http://abcnews.go.com/Technology/wireStory?id=10062630 [VII] http://technologizer.com/2010/08/13/samsung-3d-tv/ [VIII] http://www.tgdaily.com/consumer-electronics-brief/50031-samsung-owns-90-of-3d-tv-market [IX] http://www.chip.de/news/Samsung-2D-zu-3D-Fernseher-ab-Maerz-erhaeltlich_41654187.html [X] http://www.nasa.gov/mission_pages/stereo/sun/3D_Glasses.html [XI] http://www.ippglobalmarketingsolutions.com/articles-autosterescopic-displays-031072009.html [XII] http://www.nintendo.com/ds/systems [XIII] http://www.rapidtvnews.com/index.php/round-table-21-3d/presentation/3d-overview.html [XIV] http://www.samsung.com/uk/news/newsRead.do?news_group=exhibitionnews&news_seq=17194 [XV] http://www.tvweek.com/news/2008/05/worldwide_tv_sales_almost_flat.php [XVI] The half-truth of the first mover Advantage, Fernando Suarez & Gianvito Lanzolla [XVII]http://www.displaysearch.com/cps/rde/xchg/displaysearch/hs.xsl/100104_3d_display_revenue s_forecast_to_reach_22_billion_by_2018.asp [XVIII] Organizing for innovation, Chesbrough Teece [XIX] Curse of too much capital, Clayton Gambill Harned [XX] P&G Case [XXI] Chesbrough 2002, Making sense of corporate venture capital [XXII] Anders Brandt, Samsung-Sweden, Marketing Division

Appendix A

Strengths and weaknesses of the competition

Technology
3D-TV technology

Strengths

Weaknesses

Stereoscopic

Usage available broadcasting Cheaper More developed

Lower resolution than 2D TV (for polarization) expensive shutter glasses Temporary solution More expensive TV Needs development Limited viewing angle

Autostereoscopic

No glasses Good for small screens Future of 3D technology?

Other visible entertainment

2D-TV

Cheap accessible Complementary assets High resolution

Not innovative Sail-effect Technology is "good enough" for the public

Projectors

Big screen Portable

Low resolution Separate sound system Low resolution Dependent on internet connection high cost per visit Location

Internet Streaming

Cheap Available on demand

3D-cinema / cinema

Lifestyle No investment