Why Strategic Technology Management Matters?

1. 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

2. 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. 1-2

3. Product Development Life Cycle • Life-Cycle Phases Full-Scale Production Logistics R&D Conceptualization (Scientific Approach) Delivery to Customers Raw Idea Production Pilot A Traditional View of Product Cycle 1-3

4. 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 1-4

5. 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 1-5

6. Impact on Society Timeline of some of the most important technological innovations in the last 200 years 1-6

7. 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 1-7

8. 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. 1-8

9. 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. Research Brief 1-9

10. INNOVATION + STRATEGY • New: • God helps those who have strategies! • Old: • God helps those who help themselves! • INNOVATION alone works???

11. 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?

12. 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

13. Game - Atari vs. Nintendo High quality games Low quality games VS. • 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 containing only qualified games This strategy insured that Nintendo remained profitable and achieved remarkable success in video game market

14. 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

15. 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 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

16. 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.

17. Beverage - Pepsi vs. Coca-Cola VS. 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 • 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 2007because of major cola companies’ product flooding

18. 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 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