Why Strategic Technology Management

Matters?Rev: Sep, 2012

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

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Importance of Technological In-novation• Technological innovation now the single

most important driver of competitive success in many industries• Many firms earn over one-third of sales on prod-

ucts 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

Raw Idea Conceptualization(Scientific Approach)

R&D Produc-tion

Pilot Delivery to Cus-tomers

Full-Scale Produc-tion

Logis-tics

A Traditional View of Product Cy-cle

Life-Cycle Phases

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Importance of Technological In-novation

• Advances in information technology have en-abled faster innovation• CAD/CAM systems enable rapid design and shorter

production runs

• Importance of innovation and advances in infor-mation technology have lead to: • Shorter product lifecycles (more rapid product obsoles-

cence)• 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 medi-

cal technologies, better transportation, etc.• Increases Gross Domestic Product by making la-

bor and capital more effective and efficient• However, may result in negative externalities,

• E.g., pollution, erosion, antibiotic-resistant bacteria

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Impact on Society• Timeline of some of the most important technologi-

cal innovations in the last 200 yearsYear Technological innovations

1800 - 1820

• Electric battery• Steam locomotive• Internal combustion engine• Telegraph• Bicycle

1821 - 1840

• Dynamo• Braille writing system• Hot blast furnace• Electric generator• Five-shot revolver

1841 - 1860

• Bunsen battery (voltaic cell)• Sulfuric ether-based anesthesia• Hydraulic crane• Petroleum refining• Aniline dyes

1861 – 1880

• Gatling gun• Typewriter• Telephone• Phonograph• Incandescent light bulb

1881 - 1900

• Light steel skyscrapers• Internal combustion automobile• Pneumatic tire• Electric stove• X-ray machine

Year Technological innovations

1901 - 1920

• Air conditioner (electric)• Wright biplane• Electric vacuum cleaner• Electric washing machine• Rocket

1921 - 1940

• Insulin (extracted)• Television• Penicillin• First programmable computer• Atom fission

1941 – 1960

• Aqua lung• Computer• Nuclear reactor• Transistor• Satellite• Integrated circuit

1961 – 1980

• Portable hadheld calculator• ARPANET (precursor to Internet)• Microprocessor• Mobile (portable cellular) phone• Supercomputer

1981 - 2000

• Space shuttle (reusable)• Disposable contact lenses• High-definition television• World Wide Web protocol• Wireless Internet

2001 - 2020 • 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

• The average of GDP per capita has risen steadily Because of Technological Innovation (By Economist Robert Merton Solow)

GDP (Gross domestic Product): The total annual output of an economy as measured by its final purchase price

※ 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 prod-

ucts.

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How long does new product development take?

• Study administered by the Product Development and Management Association found:• Length of development cycle varies with innovative-

ness 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.

Research Brief

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INNOVATION + STRATEGY

■ Old:– God helps those who help them-

selves!

– INNOVATION alone works???

■ New: – God helps those who have strategies!

The VCR Battle (Betamax vs. VHS)

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SONY: The biggest loser of standards war?

≪SONY: Betamax,

1974JVC: VHS, 1976

95% of the VCR market, 1988

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■ 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

PC - Apple vs. IBM

Open PlatformClosed Platform

VS.

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Game - Atari vs. Nintendo

■ Atari released the first successful video game consoleusing 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 con-taining only qualified games This strategy insured that Nintendo remained profitable and achieved re-markable success in video game market

VS.

High quality games

Low quality games

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Game Console - Playstation vs. Wii

■ 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

VS.

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MP3 player - Zune vs. Ipod

■ Zune and iPod provide their own music management software;Zune: Zune player, iPod: iTunes

■ Zune player only supports the songs purchased in Zune marketwhile 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

VS.

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■ 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.

Spreadsheet - Lotus 1-2-3 vs. Excel

VS.

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Beverage - Pepsi vs. Coca-Cola

■ 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

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

VS.

VS.

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■ 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 shareand 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

VESS Cola vs. Coca-Cola

VS.