Why Strategic Technology Management Matters - POSMIT

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      Strategic Technology Management
                           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 Engineering
Importance of Technological
 • 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.

   Product Development Life Cycle

     uLife-Cycle Phases


Raw Idea     Conceptualization     R&D   Production         Pilot      Delivery to Customers
           (Scientific Approach)

                                              A Traditional View of Product Cycle

Importance of Technological
  • 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
    • More rapid new product introductions
    • Greater market segmentation

Impact on Society

 • Innovation enables a wider range of goods
   and services to be delivered to people
   • 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

  Impact on Society
      • Timeline of some of the most important
        technological innovations in the last 200 years
   Year                   Technological innovations      Year                    Technological innovations

              •   Electric battery                                  •   Air conditioner (electric)
              •   Steam locomotive                                  •   Wright biplane
1800 - 1820   •   Internal combustion engine          1901 - 1920   •   Electric vacuum cleaner
                                                                    •   Electric washing machine
              •   Telegraph
                                                                    •   Rocket
              •   Bicycle
                                                                    •   Insulin (extracted)
              •   Dynamo                                            •   Television
              •   Braille writing system              1921 - 1940   •   Penicillin
1821 - 1840   •   Hot blast furnace                                 •   First programmable computer
              •   Electric generator                                •   Atom fission
              •   Five-shot revolver
                                                                    •   Aqua lung
              •   Bunsen battery (voltaic cell)                     •   Computer
                                                                    •   Nuclear reactor
              •   Sulfuric ether-based anesthesia     1941 – 1960
                                                                    •   Transistor
1841 - 1860   •   Hydraulic crane                                   •   Satellite
              •   Petroleum refining                                •   Integrated circuit
              •   Aniline dyes
                                                                    •   Portable hadheld calculator
              •   Gatling gun                                       •   ARPANET (precursor to Internet)
              •   Typewriter                          1961 – 1980   •   Microprocessor
1861 – 1880   •   Telephone                                         •   Mobile (portable cellular) phone
              •   Phonograph                                        •   Supercomputer
              •   Incandescent light bulb                           •   Space shuttle (reusable)
                                                                    •   Disposable contact lenses
              •   Light steel skyscrapers             1981 - 2000   •   High-definition television
              •   Internal combustion automobile                    •   World Wide Web protocol
1881 - 1900   •   Pneumatic tire                                    •   Wireless Internet
              •   Electric stove
              •   X-ray machine                                     •   Map of human genome
                                                      2001 - 2020   •   Smart phone / Tablet PC
                                                                    •   Electric car

Impact on Society

 • GDP per Capita for the world, US, etc. from 1970 to

                                                  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
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

Research Brief

  How long does new product development
  • 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.

■ Old:                                           ■ New:
   – God helps those who help themselves!         – God helps those who have strategies!

   – INNOVATION alone works???

The VCR Battle (Betamax vs. VHS)

   SONY: Betamax, 1974                                 JVC: VHS, 1976

                         95% of the VCR market, 1988

       SONY: The biggest loser of standards war?
PC - Apple vs. IBM

         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

Game - Atari vs. Nintendo
                                    High quality games

                                    Low quality games

■ 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
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

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 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

Spreadsheet - Lotus 1-2-3 vs. Excel


■ 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.

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

v 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

VESS Cola vs. Coca-Cola

■ 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

                             è What would be the result?
                                                                       * OEM: Original Equipment manufacturer

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