Transcript Why Strategic Technology Management Matters

Why
Strategic Technology Management
Matters?
Rev: Sep, 2014
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT: http://posmit.postech.ac.kr)
Dept. of Industrial & Management Engineering
POSTECH
Importance of Technological
Innovation
• Technological innovation now the single
most important driver of competitive success
in many industries
• Many firms earn over one-third of sales on
products developed within last five years
• Product innovations help firms protect margins
by offering new, differentiated features.
• Process innovations help make manufacturing
more efficient.
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Product Development Life Cycle
Life-Cycle Phases
Full-Scale
Production
Raw Idea
Conceptualization
(Scientific Approach)
R&D
Production
Pilot
Logistics
Delivery to Customers
A Traditional View of Product Cycle
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Importance of Technological
Innovation
• Advances in information technology have
enabled faster innovation
• CAD/CAM systems enable rapid design and shorter
production runs
• Importance of innovation and advances in
information technology have lead to:
• Shorter product lifecycles (more rapid product
obsolescence)
• More rapid new product introductions
• Greater market segmentation
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Impact on Society
• Innovation enables a wider range of goods
and services to be delivered to people
worldwide
• More efficient food production, improved
medical technologies, better transportation, etc.
• Increases Gross Domestic Product by making
labor and capital more effective and efficient
• However, may result in negative externalities,
• E.g., pollution, erosion, antibiotic-resistant bacteria
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The pace of technological
innovation
Photography (112 years)
Telephone (56 years)
Electronic Engine (65 years)
Radio (35 years)
Vacuum tube (35 years)
Television (12 years)
Radar (15 years)
•Moore's Law : the power consumption of computer
nodes doubles every 18 months
•Metcalfe's Law: the value of a telecommunications
network is proportional to the square of the number of
connected users of the system
•Hwang’s Law: the memory capacity of chips could be
doubled every 12 months by Chang-gyu Hwang, former head
of Samsung Electronics’ semiconductor business
Nuclear reactor (10 years)
Atom bomb (6 years)
Transistor (3 years)
Solar battery (2 years)
IC (1 years)
Pentium Chip (6 months)
iPod (3 months)
1720
1740
1760
1780
1800
1820
1840
1860
1880
1900
1920
1940
1960
1980 2000
Impact on Society
• Timeline of some of the most important
technological innovations in the last 200 years
Year
Technological innovations
1800 - 1820
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Electric battery
Steam locomotive
Internal combustion engine
Telegraph
Bicycle
1821 - 1840
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Dynamo
Braille writing system
Hot blast furnace
Electric generator
Five-shot revolver
1841 - 1860
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Bunsen battery (voltaic cell)
Sulfuric ether-based anesthesia
Hydraulic crane
Petroleum refining
Aniline dyes
1861 – 1880
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Gatling gun
Typewriter
Telephone
Phonograph
Incandescent light bulb
1881 - 1900
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Light steel skyscrapers
Internal combustion automobile
Pneumatic tire
Electric stove
X-ray machine
Year
Technological innovations
1901 - 1920
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Air conditioner (electric)
Wright biplane
Electric vacuum cleaner
Electric washing machine
Rocket
1921 - 1940
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Insulin (extracted)
Television
Penicillin
First programmable computer
Atom fission
1941 – 1960
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Aqua lung
Computer
Nuclear reactor
Transistor
Satellite
Integrated circuit
1961 – 1980
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Portable hadheld calculator
ARPANET (precursor to Internet)
Microprocessor
Mobile (portable cellular) phone
Supercomputer
1981 - 2000
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Space shuttle (reusable)
Disposable contact lenses
High-definition television
World Wide Web protocol
Wireless Internet
2001 - 2020
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Map of human genome
Smart phone / Tablet PC
Electric car
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Impact on Society
• GDP per Capita for the world, US, etc. from 1970 to
2008
GDP (Gross domestic Product)
: The total annual output of
an economy as measured by
its final purchase price
• The average of GDP per capita has risen steadily
 Because of Technological Innovation
(By Economist Robert Merton Solow)
※ GDP converted into U.S. dollars and adjusted for inflation
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Innovation by Industry:
The Importance of Strategy
• Successful innovation requires carefully crafted
strategies and implementation processes.
• Innovation funnel
• Most innovative ideas do not become successful new
products.
1-9
Research Brief
How long does new product development
take?
• Study administered by the Product Development and
Management Association found:
• Length of development cycle varies with
innovativeness of project
• Incremental projects took 6.5 months from concept to
market introduction
• “More innovative” projects took just over 14 months.
• New-to-the-world products took 24 months.
• On average, firms reported 12% to 40% shorter cycle
times than they reported in 1995.
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INNOVATION + STRATEGY
■ Old:
■ New:
– God helps those who help themselves!
– God helps those who have strategies!
– INNOVATION alone works???
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Namyang Dairy
 Result
 100 million packs sold in 100 days after Launching

The most sold milk in a day (1million packs a day)
Criteria
White Milk
Functional/Processed Milk
Advantage
Stable market
Low production costs
Well-being trend
Higher profits
Disadvantage
Strong competitors
Lower profits and Customer’s needs
High elasticity of demand
High production and development costs
All the main competitors focused on
Functional & Processed milk
Namyang focused on white milk
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The VCR Battle (Betamax vs. VHS)
SONY: Betamax, 1974
Panasonic: VHS, 1976
≪
95% of the VCR market, 1988
SONY: The biggest loser of standards war?
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PC - Apple vs. IBM
VS.
Closed Platform
Open Platform
■ Apple had better quality with a higher level of technology
 Due to its closed platform, less technical supports were provided
■ IBM made bigger profits than Apple, relying on the compatibilities with other software
and hardware providers (e.g. Microsoft Windows)
 Even though Apple’s technology was better than IBM’s,
IBM beat Apple because of their high compatibilities
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Game - Atari vs. Nintendo
High quality games
Low quality games
VS.
■ Atari released the first successful video game console
using plug-in cartridges, instead of having built-in games
 Because Atari accepted both low-quality games and high-quality games,
the Atari’s customers who played low-quality games were unsatisfied
with their products
■ Nintendo controlled video game manufacturers and constructed library containing
only qualified games
 This strategy insured that Nintendo remained profitable and achieved remarkable
success in video game market
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Game Console - Playstation vs. Wii
VS.
■ Playstation 3 has more excellent graphics and outstanding processing power over
Nintendo Wii
■ The advantages (e.g. gesture based control, availability to everyone, lower price,
family-friendly image) of Wii lead itself to a big success in the game market
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MP3 player - Zune vs. Ipod
VS.
■ Zune and iPod provide their own music management software;
Zune: Zune player, iPod: iTunes
■ Zune player only supports the songs purchased in Zune market
while iTunes supports any songs
 Even though Zune’s spec is better than iPod’s, iPod have more compatibility
and convenience
 iPod got an overwhelming victory over Zune
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Spreadsheet - Lotus 1-2-3 vs. Excel
VS.
■ Lotus 1-2-3 (1983) and Microsoft Excel (1985) have similar functions in both quality
and efficiency perspectives
■ Lotus only focused on OS/2 while MS Excel could be compatible with Window
 As Window had became more and more popular,
MS Excel beat Lotus 1-2-3, even though they have no big differences.
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Beverage - Pepsi vs. Coca-Cola
VS.
■ Pepsi Cola is a much sweeter beverage than Coca cola
■ The popularity of Coke's brand image misleads people to think Coca-Cola itself tastes
better, even though it really doesn't taste very different from Pepsi
 First-mover Advantage
VS.
 815 Cola (Released in 1998)
– Customers didn’t tell 815 Cola from Coca-Cola in blind test
– At first, it was successful, occupying 13.7% of market share
– However, 815 Cola went bankrupt in 2007
because of major cola companies’ product flooding
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VESS Cola vs. Coca-Cola
VS.
■ E-Mart developed VESS Cola with Cott, a beverage company in U.S. (OEM)*
– Lower price than cola from major companies
(66% lower than convenience store price, 37% lower than supermarket price)
■ In domestic cola market, Coca-Cola occupies 75-80% of market share
and Pepsi cola occupies the remaining market share
– Some brands have developed cola products but they failed due to the reputation of Coca-Cola
■ VESS Cola is developed through about 40 times of blind tests
 What would be the result?
* OEM: Original Equipment manufacturer
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