Ep.4 - Sokwoo Rhee / LG Nova - A new kid on the busy block of Silicon Valley based corporate innovation entities

In depth interviews with the most influential innovation executives of the tech arena. Exclusive data and insights on major and emerging ecosystems all around the world. The hottest news on technology and open innovation at a global level. This and much more in every new episode. Welcome to Open Innovation Talks. Mind the Bridge chat with industry leaders. All right, welcome everybody. This is Marco Marinucci, the founder and CEO at Mind the Bridge. We are an innovation advisory firm that is based in Silicon Valley with multiple offices around the world. And welcome to the new episode of our Open Innovation Talks. The manager Bridge chat with industry leaders Today I'm sitting with Zok Vori. He's the SVP of Innovation at LG Electronics. Most importantly, the head of the LG Nova. Kind of the structure that LG has to support open innovation activities. So don't miss it. Stay with us. Good morning here with Marco Marinucci from Mind the Bridge. Today we have the great pleasure of having with us Sokwo Ri as the corporate Senior Vice President for Innovation of LG Electronics. Hi Sokwo, how are you?

How are you, Marco?

Very good, Very good to have you here for for a conversations on the NTTL LG Nova that you're leading here in Silicon Valley. And also as an extension, all the open innovation activities that LG Electronics is being running. This also falls under the umbrella of our corporate startup stars. The prices that we do annually with the International Chamber of Commerce, SEC and lg. And LG Nova is one of the recipients of those prices. So congratulations for that.

Thank you, Marco.

Right, let's start in a complex world of LG Electronics. Maybe you can mention a few areas where the group is focusing on integration, investments or partnership with the startups. And then we can focus a little bit deeper on the definition of LG Nova.

Sure. Our mission is to identify and discover and develop new businesses in future growth areas for LG Electronics. So we look at digital healthcare, we look at Energ and esg, we also look at Metaverse areas and we also look at any other innovative sectors that is emerging. Those are three or four focus areas, but we're open for any other areas too.

Within LG Electronics. I know there are also there's a corporate venture capital. Do you want to mention maybe some other entities and maybe startups would encounter in the galaxy of lg?

Yeah, of course LG Electronics is a large corporation, but LG as a LG group, meaning the LG affiliated companies, is even bigger because it's a collection of affiliated companies and LG Electronics is one of them. And there is a holding company that holds this dozens of LG affiliated companies and LG Nova belongs to LG Electronics. So we are the innovation arm of LG Electronics. Now there is also LG CVC corporate venture capital called LG Tech Ventures that reports to LG holding company itself which sits on top of LG Electronics. And their mission is to invest in future opportunities. In terms of the capital, the venture capital perspective, LG Nova is a little different. I mean what our mission is to create new businesses working with the startups. So through this process we do collaboration, partnership, joint venture. But one of the method that we use could potentially be equity investment. So we use investment as a tool in LG Nova. But our mission is is creating literally new businesses where CVC corporate Venture Capital it is actually venture capital. Got it.

Great. And so for companies startups out there now, at least they see the difference, right? That of Nova is a wider kind of umbrella with different potential opportunities. And we'll discuss those opportunities versus a pure CVC play that G Tech Ventures is focusing on. Awesome. And maybe to get started, why don't you give us a little bit of your background as a senior executive. What took you in this role at the lg? Also you had some interesting experience also in the White House and some other specific experience that I think you're bringing as part of your toolkit there. Fast mention there.

Yeah, actually that's a fascinating question because my journey as my career was sort of it was a journey to find way to make make an impact through technology. So right out of the grad school I started a company, my own startup and raised multiple round of funding, typical venture backed company and sold the company after several years. And then I was looking for what I'm going to do next. And the company was about what we called wireless sensor network. Now they call it IoT Internet of Things. That's what they call it. But back then that word doesn't exist. So we called it M2M WS, W S N and all those kind of stuff.

Much geekier.

Now I'm getting into more engineering world. By the way, I'm an engineer by training so forgive me if I'm sit here, nobody's perfect.

I'm sorry.

That's a good one. Okay, so after that a recruiter working for the White House called me and then they said White House thinks at that time there was Obama administration and they have this interesting program called the Presidential Innovation Fellow. And the whole point is bringing private sector experts in the areas that the White House thinks is going to be future defining for the United States. And then they want to help industry, work with the industry to see how they can grow overall, the level of the size of the market and level involvement from the industry. And one of the interested sectors was IoT. Okay. So they called it CPS, cyber physical systems, but it was really IoT. So. And they said, well, you've been doing IoT for a decade, so you could be a good candidate. So. Okay, sounds interesting. So what I was really interested at the time was this. So when you do startup, you are laser focused. You gotta build product and you gotta sell the product, and then you gotta create revenue and all that. So you become an expert in the narrow sector and you make an impact in a narrow sector, but you always miss the opportunity to look at broader impact, really across the industry. So this White House opportunity seemed like a complete 180 degrees from what I was doing. And I was fascinated by that. So I did a program and I worked for them for a year to create a program, an interesting program to improve the IoT landscape of the United States. And then the biggest problem of IoT even now is what I call fragmentation. So everything is so fragmented. They're like, you know, they do chip guys, they're doing their thing, software guide, they're doing things, service guide, their own thing. It's not really cohesive. So that was the problem I tried to solve. And then after the one year, I tried to apply to actual the municipalities, so it became Smart City initiative at that point. So that's done that for five years. I created the largest federal government smart city program at that point. And then I got a call from LG Electronics and said, hey, you seem to be doing something great. Pulling 500 organizations together and working with 200 companies, creating hundreds of projects. That is really changing the landscape of Smart City. And iot, why don't you apply the expertise to create new businesses in the private sector? Okay, so that's what.

Back to the private sector.

Exactly. And then LG was obviously really looking for the next big thing. So just like every company, what is the next way? What is the next growth area? So my mission became, okay, let's find the next growth engine. And not just find it, but also nurture it and also actually grow the new business. That's how I created this LG Nova.

Perfect. I think that's a perfect segue on then LG Nova, you're talking about many years ago. Just to get a little bit of a timeline here. When was LG Nova created?

Yeah, so I've Been here only a little bit over a year and a half, so less than 2 years. So LG Nova was created January last year. Okay. So literally we are about 60 months old.

Oh my gosh.

Actually, so yeah, yeah, 22 months. I'll say.

Okay, so you're starting walking before you start running. And I had the pleasure to be invited and be one of the speakers of the launch event. But to some extent it was also because of the, of the pandemic before of the innovation festival that you hosted here in Silicon Valley. And then also to clarify, LG Nova as a has a head in Silicon Valley though, as has a global view, Correct?

Correct. So we are located, our office is located in Silicon Valley, but our reach or our scope is global. Although as you can imagine, since we are in the United States, we have a lot of interactions with the North American entities and startups, much more. But I will say about half of our, our startup portfolio companies are in the North America, but the other half are coming from Europe, Asia, all the world.

Yeah. And it seems to me, I mean we've been on the receiving side and the collaboration sides of both governments and, and corporates and obviously with a direct presence in South Korea, we encounter LG as well as the Hyundai and Samsung of the world. So is the large conglomerates that are also now working on the activities of integration engagement with startups. A lot of them tend to have really still the headquarters of the main activities back to South Korea. Doesn't seem to be the case at least with the LG Nova. Why Silicon Valley? Was it already decided? It was also part of your seniority bringing on board and say this makes sense to have it and localize in Silicon Valley first.

So let me first explain why this LG Nova was created, which I already did. But the point was, okay, LG Electronics doing well in Korea, mostly in manufacturing, but they also want to look at other sectors like service platform. And if you look at all these new service and platform businesses, us still, and we may continue this way for a while, dominates new creation of this new type service businesses. So I think for LG's leadership perspective, it was natural to say, okay, we should have this kind of initiative in the United States or North America. But then the question becomes where should we put it so in the United States. And that's where I provide some input. I mean, I'm sure senior leadership already had in mind. Okay, well, there's a great clusters of innovation in the United States, multiple of them, but still we believe Silicon Valley is the center of the innovation at this point. So I suggested that and that's why we located here.

Got it. You alluded at the very beginning the areas of focus of digital health, Metaverse, gaming, electric, mobility, display, smart lifestyle.

Correct.

Tell us. So that's a focus more on the, you know, industries. But tell us how we are structured inside if you have different subset of activities. Because this is something that I think is being building as we speak, considering that most of those programs are at the first editions.

Yeah, so that is the fascinating question because if you think about it, all these sectors that I just mentioned, Digital health and Metaverse, and these things are what I call emerging new areas. And by definition you, you don't have a very structured industry perspective because that's like it's beginning. So part of our job and a part of our process of working with startups is to identify where it's going. So the basic philosophy is this. Most of the large companies probably, you know, most if not all, they use what we call inside out approach for innovation or creating new businesses. They typically spend R and D funding in a lab and they come with something interesting and they think one of them can, you know, turn to a real product and sell it. That's usually what happens. That's what I call inside out. Now the problem of that approach is that kind of inside out worked for last probably 50 years, but now there are more collaboration. I mean there are people discuss and, and collaborate to create new ideas in much more in a group setting, in a collaborative setting. So the method of production of innovation has changed a lot since the last four, five, ten years. So what we do is what you call outside in. So we bring in startups, we ask startups to tell us what they want to do with us instead of we telling them what do you want to do? So why is it effective is because in just sectors like emerging sectors like we just talking about, because we don't know everything and frankly we may know very little as LG Electronics, there are a lot of startups, hundreds and thousands of them. They work in all different kind of small sub sectors and they come to us and say, hey, I am an expert in this very small segment of digital health and I think I have an idea to work with LG Electronics. And LG Electronics has these kind of assets and they can provide and that's where we bring this together. And if you look at all these hundreds and thousands of startups that we are trying to work with and come to us, interesting trends emerge out of that. So to short Answer sorry for long as short answer is instead of us trying to define what those subsectors are, we want startups to define it for us. And not just one or two startups. We want to see the landscape and where the money is flowing, where the startups are more interested. Where do startups flow? Founders are interested. That's going to be the guiding light for us.

On practical term, if I'm a startups that I have, you know, developed products or part of it and, and they see an opportunity in partnering with LG and LG Nova in this case, what is the process? How do you accept, you know, collaboration proposals if you are expecting startups to tell you, you know what the proposal can be?

Absolutely. So that's where we, our Grand Challenge program comes in. So we have a program called the Grand Challenge program. The word challenge is a little misleading because we are not sort of like you are not doing it like challenging thing. We are essentially working with the startups to create, co create new business plans. Okay. So there's a period, typically six to eight weeks that we open up and we receive proposals from startups and they send their proposal. And it's not just startups, there are sometimes public companies, they send proposals because they, you know, they say well it's a great opportunity to work with LG Electronics. So they do that and we go through and review those proposals. You look at companies and most important thing there for us is what is the collaboration idea? What, what is the one plus one that can be three, three or four. So obviously we look at the quality of the startups themselves is very important. But what is more important for us is how can you imagine this combined business with lg? Okay, and then what do they think LG can help to make it work? Of course, in addition to capital, everybody wants capital, that's one thing. But that's not the only thing. Usually they really want to grow their business and then practically speaking when they do it, we look at it, there are certain process of reviewing and once we come up with a short list, usually dozens of startups, then our eirs, actually our employees who have been in startups, who have been venture capitalists themselves, they reach out to them and they get assigned to startups, entrepreneurs in residence, entrepreneurs are eirs and then they co create this joint business plan with the startups and the joint business plan could be simply like startup. Say I have a sensor, can I connect this sensor to your home system? Or I have a medical device, can I connect this to your medical platform? If you have for example, and then we go to market together. So that's where one plus one becomes three. Now after we go through this business planning process, if this business plan is selected, then we consider equity investment. Most of the cases once we decide, we typically invest. And then also we put our own team behind the actual development of the business. So this is where it becomes very different. Investment is a tool for us. It's just small piece of equation. What really comes is we literally create a business team in LG Nova to work on this, growing this business with a startup. That's the difference. Got it.

So let me recap the timing of how these things are consequent. So first there is a selection, there is an opening. Do you have a deadline or is that a rolling process?

So the deadline, the second year deadline just wrapped up a few weeks ago. But we also understand that once a year deadline is probably not, not applicable to many startups. So it's not a ideal. So next year we are considering making a rolling basis.

Rolling basis. Then there's an evaluation case and then as a result of this valuation, you decide a subset of companies that you want to commit. At least you commit to have an entrepreneurial residence of your own, people being associated with a company, writing a business plan together, how that collaboration can look like and can have different implementations, can be just a venture client, can be potential. So co development, I guess and then top of that maybe also some equity investments. Is there a commitment of time or can that vary based on collaboration to collaboration?

Right. Yeah. So we, we try to finish that cycle, the evalu. I. I don't want to call it evaluation because evaluation sounds like we are actually just reviewing and select. That's really not what you're doing.

We want startups is the evaluation of a collaboration, I assume.

Yes, Evaluation of collaboration opportunity. That typically takes about three months. Okay. So we are trying to finish it in three months depending on the level and the scope of the collaboration. Obviously if it's really big, then it takes more time to discuss and collaborate. So sometimes it goes up to six months. But usually we are trying to wrap up this collaboration opportunity discussion in three months.

Got it. Back at the scope of Nova, you mentioned the beginning, our scope is to create an impact. Right. And that that can be measured in different ways and maybe that's kind of related also. In which part of the organization do you report to? Who are you reporting to within LH Electronics?

Absolutely. So this. So one thing that we, I want to explain to the audience is that LG Electronics is One company. But inside of that there are four sub companies. Companies. Okay. Then each sub company keeps their own P and L. So it operates like its own company. And inside there is this C level structure, CEOs and CFOs and CSOs that sits on top of these four sub companies. And we report to CSO group, so Chief Strategy Officers group who reports directly to CEO. What is also interesting is this group, LG Nova was actually created by current global CEO who was the CSO last year. Yeah, at the time.

So you definitely have the buy in because it's something that he created. So we might as well be behind it.

Yeah. So interestingly, the reason this structure is important is because if you unless you are reporting directly into sea levels, sometimes it is hard to maintain the course of innovation. I'm not saying it's impossible, it's just that when you work with sub companies, they have their own P and L. They have to maintain every three months and then it's a hard thing to do. So many times our activities has to be measured in years, not in months. So it is, it is a very effective structure to have us reporting to sea levels in the global headquarter.

100%. And so with that said, how does success look like? What's the measure of success? What you're expecting to report to the CEO, you know, on a yearly basis with the idea that is a progress over a number of years. Yes.

So there are a couple of things I have to talk about. So the first thing is more of practical measure of success. Meaning. Okay, our mission is to create new businesses. Meaning that we have to churn out new business units or new lines of businesses in the areas that of the future for LG to grow in the future. So like digital health and ESG and all these things. So that is more of a practical measure of success. So how many businesses you create, how many startups you work with to create new businesses? Those are the ones.

When you say creating new businesses, one of the options also to create a new joint venture.

Oh yeah, absolutely. So I should have defined it a little better. So. Yes. So any collaborative business mechanism, joint venture and a major investment. We do equity investment all along. But. But let's say what about we acquire a big chunk of those company and almost become a joint venture, for example, or create a completely new entity that startup is heavily engaged in or sometimes go directly to M and A, for example. So all these options are available and in some cases it becomes a strong commercial relationship. So all these options are available. And that's our measure of success or it's outcome of the process. Now there's a little bit more of a sort of like philosophical metric too there. So meaning, okay, making money is important obviously as a business, but there are many different ways to make money. And the question is, where do you launch your business, where do you focus your business? And not sure whether you a lot of you know about this, but there's something called LG Way. So it's a LG code of conduct. And LG's vision is defined at the holding company level. Essentially what we want to do is we want to innovate for impact. We want to innovate to improve the quality of life. So that is our goal. So that's why when you choose these future areas like health or esg, and in Metaverse, which includes reskilling and training of the jobs, for example, we always pay attention to, okay, how do we, how help people, how do we improve the world and improve the quality of life? So it's not a like sort of absolute metric you can write down in numbers, but it is in our DNA.

Got it very clear. So I know that you're in the first months of operations, but maybe there are some, you know, progress or success stories that you feel like sharing in this, you know, first wave of collaborations.

Yeah, of course. So last year we started the first grand challenge program and we received about 1300 startup proposals. And I'm really grateful to the level of interest that startups and founders are paying attention to us now. We went through the process we just mentioned and we selected 10 companies. It's on our website, it's a public information to create joint business with us. So those companies include healthcare, about five of them are healthcare companies, about three of them are ESG type of companies, energy focused and couple of them are Metaverse, mostly in those training and reskilling area. So through this process, startups evolve, right? So for three to six process, seven, six month process, actually a couple of companies got acquired through this process. It happens. So it's a good thing. It's a very good thing. That means we are talking to the right partners. That's how we see it. And those startups that we are working with are strong and they are seen not just by us, but by others, really good companies to work with. So it is a little bit side story, but when I see those startups being more successful as it goes, I feel really excited about thrilled to see them. Not because we just want to work with them, it's just Because I'm just so happy to see this new startups and new innovation come, they get recognized, they become successful, they actually now become real driver of the market out there. I'm not sure I'm answering your question.

No, no, I'm thinking a little bit, but this is, there's definitely a progress. Last question here. As a serial entrepreneur and now to the other side of the table of the corporate world, do you have any specific suggestions for entrepreneurs of startups out there in how to be successful while dealing with a large corporates like yourself?

Yes, that is probably the most important question and most important answer I can give to audience. If the audience is a startup founder right now. When you are working with corporates there are upsides and downsides, okay. The upside is the potential is huge if you work with them correctly. Okay. The downside is the word that startup founders hate the most, which is patience. And many startup founders, we're going to know this because corporates do not move as fast as you want. It's not because corporate people in corporate are not interested in moving fast. It's just the system was designed to be slow. Okay? So we as LG Nova recognize that. I was a startup founder, I worked with a lot of larger corporations and I know exactly what it feels like. Sometimes you feel like you are jumping into the sector that you are a small kid and there is this 800 pound gorilla out there and you are sometimes a little afraid to work with them. I completely understand that because I it's on that side. So my advice to them is when you are work with a corporate, please think about what they will be looking for. And now a lot of different corporates look for different things. Some corporates, I'll say 99% of the corporate collaboration is going to focus on, okay, how do we create revenue right away, how can I get your thing into mine and you know, do the thing if, but if that's the type of corporate you are working with, you have to figure out how to meet their requirements, how to work with them. If the startups are working with a different organization like us, LG Nova, we are more of a long term business growth organization. We are not looking for the revenue next quarter, that's not what you're doing. Then they have to work with us to paint the picture of the vision of how these two organizations come together in next coming years, not just a month. And what can we build together? It's not about, oh please invest into my company, then I, I'll do whatever you want to that's not what you're looking for. Okay, we are trying to say it's a partnership. Okay, startups, please work with us to create and illustrate the vision what we can build together next five years hopefully can grow to billions of dollars business together. That's what you're looking for. So going back to your question, what should startups pay attention to? Usually it's very easy to be hogged down into their own thing. So okay, I need money today, so I have to get money. I mean, yeah, understand I have to get my products out today. So understandable. But when you are working the corporate, my advice is please try to talk to them and see what they want, what they need. And in case of us, we are trying to really build business together, then they should be able to talk to us us and discuss how to build that thing together. I think that is the problem, the most important, most advice I want to give. And if that happens, money comes and typically it follows like us, we are willing to invest too.

So basically, yes, patience is a word that is goes typically against the DNA of a startup. But patience if, if there's a route to extremely effective growth together. And also I think the fact that you commit to associate the fact that also do you nominally call them entrepreneurial residents rather than account managers of a corporate I think is already an express communication that, that you want to deal entrepreneurially with.

And then Marco, that is by design. Okay, so I knew I was on the startup side. So when I talk to large corporates I typically meet this corporate corporate. Nothing against the corporate because I'm the corporate too who's been there for a long time and doing account management as you just mentioned, not very effective because they don't understand what startups are facing. So that's why I literally recruited this new eirs and they're full time employees in lg but they are new employees that have background of startups and venture capital. So they understand what startups are facing as much as I understand they've been there.

Excellent Soko, Listen, thanks again for the insights and the presentation. Congratulations again in your progress and looking forward to see where LG Nova is going to.

And Marco, great Marco, I really appreciate this opportunity and then it's awesome and I really want to build new businesses. Excellent and awesome business with the startups. That's our goal. Perfect.

Take care.

Thank you.

All right, hope they have enjoyed this conversation. Next episode we'll have my partner Alberto Netti that will be having a discussion with Joachim Von Goetz of SAP IO don't miss it and follow us on our channels. Thank you for being with us today and see you in the next episode of Open Innovation Talks. Mind the bridge Chat with industry leaders.