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This article by Kathleen McGinn Spring was prepared for the October 23, 2002 edition of U.S. 1 Newspaper. All rights reserved.

What’s Up for Sarnoff? Questions for a New CEO

<d>Satyam Cherukuri took the reins at the Sarnoff

Corporation less than five months ago, at a time when the harsh economy

just kept getting worse. In addition to operating in a time of uncertainty

and austerity, Cherukuri inherited a contentious dispute over his

organization’s plan for a major expansion.

So, how is he coping? And where is Sarnoff, which has had to downsize

its staff, heading? Which projects are underway? Which are waiting

in the queue for funding? How are the tech innovator’s spin-offs doing?

Cherukuri talks about Sarnoff’s future on Monday, October 28, at 5

p.m. at "The Edison Innovators: An Evening at Sarnoff" sponsored

by the New Jersey Technology Council at Sarnoff. Cost: $100, including

dinner. Call 856-787-9700.

On Monday, October 21, just ahead of Cherukuri’s talk, Sarnoff announced

progress on two initiatives — both defense-related — which

indicate a timely niche for the company. In the first, Sarnoff joins

United Defense Industries in demonstrating its See-Through Turret

Visualization (STTV) system. SSTV is a palm-sized vision system that

provides soldiers with a 360-degree view of the battlefield under

closed hatches. The device consists of eight cameras fixed on the

exterior of the vehicle. Video images from the cameras are blended

by an on-board computer to create a seamless panoramic view of the

surrounding area.

In the second initiative, Rosettex Technology & Ventures Group —

a joint venture of SRI International and Sarnoff Corporation —

has been awarded a five-year contract from the U.S. Army Communications-Electronics

Comman at Fort Monmouth to develop and prototype advanced technologies

and systems in military communications, command and control, intelligence,

surveillance, and reconnaisance applications. The agreement has a

potential value of $24 million.

Initial development projects include satellite-on-the-move communications,

mobile ad hoc wireless networking, and visualization technology.

The country’s increased emphasis on internal security, along with

the possibility of war — and maybe more than one war — plays

to Sarnoff’s strength in developing surveillance, communication, and

identification technologies. With venture capitalists clutching

their purses with a determination reminiscent of a Depression mentality,

technologies of the sort that government and the military look for

could help lift Sarnoff fortunes, which dipped along with the tech


It is up to Cherukuri to lead the proud innovator — involved in

tech since before anyone thought to call it that — into its future,

whatever that may be. In an interview with U.S. 1’s Barbara Fox last

spring, Cherukuri, who succeeded James Carnes, talked about his

life, his family, and his vision for Sarnoff. Here are excerpts from

that interview.

"What Jim Carnes accomplished was to take a bunch of researchers,

in many respects arrogant and self-absorbed, coming from a captive

research lab where they didn’t have to worry about the money of clients,

and transformed that organization into one that worried about the

money of clients and one that worked in a context created by somebody


Cherukuri has taken these lessons to heart. "Where the context

was created by our clients, we have succeeded," he says. "Where

the context was created by ourselves, we have not succeeded. If we

are chasing 100 different business activities, 15 will be based on

context created by our clients, and 85 will be based on what we think

is the right thing for them to do. Those 85 will fail, but they will

help us understand the context a little better next time. By understanding

where we succeeded, we want to move that balance to 50-50."

Cherukuri also says that Sarnoff has tried to be thrifty with its

funds: "Fail early, fail cheap," has been a useful mantra.

And "most of our learning came from mistakes, from not succeeding,"

he points out. "We have done a good job where we have failed early

and cheaply."

Early successes lured Cherukuri into thinking he did not need to heed

that "fail early" dictum, and he admits to an expensive mistake.

At one point he and his team spent two years and a quantity of resources

on a project they were passionate about. "We were not creating

in the context of a client’s vested interest — we conjured up

the context ourselves. We were absorbed with the idea that, someday,

someone would come to their senses and see the real value in our work."

"The first client, a Fortune 100 company, turned it down. We thought,

the client doesn’t get it. The second client turned it down. They

still didn’t get it," says Cherukuri. "Then the third client

rejected it. And we had to make a decision to hang it up. It was painful,

and we felt terrible. It was a very harsh lesson."

That a couple of researchers refused to admit defeat and tried to

continue work surreptitiously was another bitter lesson in "when

to hold and when to fold." Cherukuri attributes such misplaced

persistence to standard business folklore about individuals who keep

on going and, despite all odds, achieve spectacular success. "In

a business context we use those anecdotes to misguide us," he

says. "There is so much of this `conventional wisdom’ that it

is hard to break through it."

Fifteen years ago Sarnoff was launched with almost no cash, and now

Sarnoff has little cash. But Cherukuri, undaunted, looks forward to

continuing "innovation." "We learned many things, and

we are going to build on what we learned. It has been a tremendous

success in many respects. We have products that changed the quality

of our lives and will continue to do so."

"What we did for the last 15 years and what we will continue to

do for the next 15 years is to keep getting better at the process

of innovation," says Cherukuri.

Innovation is not the same as R&D. R&D is subjective, he says, and

innovation is not. "Inventing something does not mean we have

`innovated’ or proven its usefulness. The market and the client tells

us whether we have been innovative. The result of innovation is the

introduction of a new product or service into the market."

Introducing a new product requires many steps: conceptualizing what

will make an impact in the marketplace, making it in small quantities,

taking it to third-party manufacturing, distributing it, and marketing

it. Sarnoff can work on most of these steps: feasibility studies,

R&D, engineering, tech transfer, and manufacturing. "We can help

with any or all stages of it," says Cherukuri. "There are

not that many companies that can do that."

A good example is Songbird Hearing, the hearing aid

spinoff. Cherukuri tells how Sarnoff’s clients, venture capitalists,

had identified the hearing aid market as likely to boom with aging

of the baby boomers, but Siemens already had a big share of the market

for traditional hearing aids. "The question was, how do you position

them? Should we compete with Siemens to make a better $2,000 hearing


The solution that Sarnoff came up with was not what the VCs had imagined:

Sarnoff was able to tap its own patent portfolio to invent a disposable

hearing aid. "The positioning answer is not obvious if you are

looking only at market forces. You have to look at technology forces,"

says Cherukuri. "If you bring us the market information, we add

our element that isn’t obvious to others. We consider the dynamics

that come from invention."

The potential market for innovation, he claims, is $300 billion a

year, the amount that Sarnoff’s competitors and its potential clients

invest to come up with new products. This client/competitor pool includes

inhouse departments of corporations, the federal government, and academe.

"It is a huge market, larger than pharmaceuticals, a $300 billion

market where there are no clear winners, no companies that have a

market share." Someone will be the world leader, says Cherukuri,

and he plans for it to be Sarnoff. "Innovation is a horizontal

market, much like financial services and management consulting. And

it is our core competency."

Early in life, Cherukuri learned to propel himself over amazingly

difficult obstacles. He grew up in Andhra, a small village in South

India where the Telugu language is spoken. He was the youngest of

two brothers, and his parents were farmers; his father and grandfather

were literate, and they provided his early schooling, because the

village had no school.

But if, as experts now say, effective learning depends on emotional

intelligence, the village gave him a excellent start. In an environment

where children are highly valued and everyone is related to everyone

else, the phrase "it takes a village" takes on renewed meaning.

"Growing up in a village is an amazing thing," says Cherukuri.

"We were materially really poor by any standard, but I never felt

that. It was a very warm atmosphere. And my father and my grandparents

had an appreciation for education and learning."

Cherukuri had to learn quickly. At age eight he started school in

a nearby village — at the sixth grade level, because that is where

that village’s school began. Then, by doing well on a national examination,

he was admitted to Banaras Hindu University, where he earned a bachelor’s

degree in ceramic engineering in 1978. Why that subject? "I thought

it sounded cool."

When he came to the United States for graduate study, the obvious

choice was Alfred University, the college in upstate New York that

receives much of its funding from Corning and is a hotbed for ceramics

and glass research. He earned a doctorate in glass science, then did

post-doctoral work at Siemens in Cherry Hill and Germany. (Two years

ago he and his wife moved from Cranbury to Hopewell, where they

live with their eight-year-old daughter and their newborn son.)

"My first real job was at Olin, where I developed expertise in

electronic packaging and silicon devices," he says. "But after

five years I was bored. In 1989 Sarnoff was looking for an individual

to help start its packaging thrust. It intrigued me to check it out."

He taught himself the basics,and became managing director of the Life

Sciences and Biotechnology business unit at Sarnoff. His study and

energy paid off, most notably with four spinoffs. A bioinformatics

company, Locus Discovery, was successfully sold and has moved to Philadelphia.

Delsys Pharmaceutical, with electrostatic deposition technology for

making and delivering drugs, was sold to Elan and is operating at

Princeton Corporate Plaza. Orchid BioComputer has gone public and

is operating at Route 1 North and Forrestal Drive. Songbird Hearing,

at Cedar Brook Corporate Center, is manufacturing and shipping inexpensive,

replaceable hearing aids.

Because he is only too ready to speak out, Cherukuri has been, as

he describes himself, a difficult employee. "I joined here as

a staff member and have always aggravated my supervisor about the

tone and direction of where we have to go," he says. "It helps

if you turn out to be right."

Carmen Catanese, his boss most of the time, was an early mentor. "I

learned some things from him that were not obvious to me — how

to create value for the client. Earlier than others, he learned the

art of listening to a client, to piece together the `ecosystem’ of

the client." The ecosystem, he explains, is how the client works

with the dynamic of the market, including its competition, and how

the client responds to the environment that shapes individual decisions.

"What we have been doing in the last 15 years," says Cherukuri,

"and especially in the last seven years with our spinoffs, has

given me the conviction that we are one of few companies in the world

that can claim innovation as core competency and take that to the

next level of sophistication. As as I look at my own experience and

that of my peers, that is the most compelling lesson: If we are creating

in the context of the client we are 85 percent successful. Otherwise,

success is almost nonexistent."

At the time of the U.S. 1 interview last spring, Cherukuri predicted

that Sarnoff would be a "billion dollar company in eight years,

and we will achieve that growth by homing in on the practice of innovation.

We will still use the genius of individuals, but in the context of

the client. For most companies, client context is still an abstract

notion. If there is one leverage point for us to go the next level,

it is that leverage point. The genius is always there."

Whether or not the past six months of continued hard times has changed

that timetable is another matter — and perhaps a question to be

asked at the October 28 dinner.

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