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Why Strategic Technology Management Matters? 2011. 09. 01. Prof. Euiho Suh Dept. of Industrial & Management Engineering POSMIT Lab. (POSTECH Strategic Management of Information and Technology)

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Why strategy matters? 2 New Paradigm: God helps those who have strategies, not those who just work hard without strategies! Old Paradigm: God helps those who help themselves!

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CLASSIC COKE vs. NEW COKE 3 vs.

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ASIANA AIR vs. KOREAN AIR 4 We are young, too !

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STARBUCKS SYNDROME 5

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The VCR Battle (VHS vs. Betamax) 6 SONY: Betamax, 1974Panasonic: VHS, 1976 95% of the VCR market, 1988 SONY: The biggest loser of standards war?

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UP-SELL & CROSS-SELL 7

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QWERTY TYPEWRITER 8

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1800s Underwood TYPEWRITER 9

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10 APPLE has good quality with a higher level of technology Due to its closed platform, less technical support is provided IBM makes better profits in its own way, relying on the compatibilities with other providers of software and hardware (e.g. Microsoft Windows) Even though APPLEs technology is better than IBMs, IBM beats APPLE because of their high compatibilities PC - Apple vs. IBM Open PlatformClosed Platform VS.

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11 Game - Atari vs. Nintendo Atari release the first successful video game console to use plug-in cartridges instead of having one or more games built in Because Atari accept Low quality games as well high quality games, they make the customers who played the poor games unsatisfied with their products Nintendo controls who could and could not manufacture video games for their system to assure only quality games were in their library The self-regulated scarcity and licenses in this way insured that video game market remained profitable, and achieved remarkable success VS. High quality games Low quality games

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12 Game Console - Playstation vs. Wii When it comes to graphics, the Playstation 3 is going to win hands down; its processing power is far superior to that of the Nintendo Wii The advantages (e.g. gesture based control, everyone can do, less expensive, family friendly) of Wii lead to a success in game market VS.

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13 MP3 player - Zune vs. Ipod Ipod and Zune provide the Music Management Software, iTunes and Zune player, respectively Zune player only support the songs which are purchased by Zune market while iTunes can support any songs Even though Zunes spec is better than Ipods, Ipod shows a big advantage in compatibility and convenience, thus give a successful fight against Zune VS.

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14 Beverage - Coca vs. Pepsi 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.

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15 Upon their release in the early 80's Microsoft Excel and Lotus 1-2-3 offered similar products measured by both quality and efficiency Lotus only focuses on OS/2 while MS Excel can be compatible with Window As Window become more and more popular, MS Excel beats Lotus 1-2-3, even though there are not so many differences between them Spreadsheet - Lotus 1-2-3 vs. Excel VS.

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Change the rule of competition! Good Taste Milk, GT

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0) About The competitive domain, Milk Industry Divided into White milk, Functional milk, Processed Milk White milk : a fresh milk that is not added any ingredients or taste. Functional milk : a milk that is strengthened or removed specific ingredients. Processed milk : a milk that is processed to add some taste or fragrance.

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0) About the competitive domain Michael Porters 5 force model The degree of existing rivalry : Seoul Milk as s traditional market dominator (market leader) Maeil milk as a competitor that competes with Namyang to get 2 nd market position. (ESL) Many other competitors, like Yunsei, Denmark. The degree of potential entrants : The high entrance barrier. Agriculture departments of Universities as a potential entrants. Bargaining power of suppliers. : Suppliers demand for 20% increase of raw milk price. => 13% increase since Sep. 2004

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0) About the competitive domain Michael Porters 5 force model Bargaining power of buyer : 21.7% rise in the consumer price index (107 -> 130.2) => increase the price => 10 % reduction in consumption The change of Customers needs/wants to processed or functional milk because of Well-being movement The industry changing to Customer-driven industries from Capacity-driven industries. Threat of Substitutes : The growth of functional milk and processed milk markets. White milks loosing its market.

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0) About the competitive domain Trends of milk market before GT The State of white milk market : Decrease in White milks growth ratio. White milk market on the matured stage of the S-Curve Rule of competition : Brand image as Rule of competition in White milk market. ex) Brand power of Seoul : Processed milk in whole milk market ex) Banana milk, Strawberry milk, Chocolate milk, Green tea milk, peanut milk

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0) About the competitive domain Namyangs Decision Pros. And Cons. I.White milk Pros : Stable market. (school,..) Low Cost. Cons : Strong competitors. Customers needs/wants. I.Functional & Processed milk Pros : High quality. High price. Well-being trend. Cons : Unstable. (depending on trend.) High Cost. High Sugar content Change the Rule of Competition to White Milk !!! All the main competitors focused on Functional & Processed milk

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1) Good Taste Milk, GT Market research MaleFemale 10s20s30s40s50s10s20s30s40s50s 50.358.951.447.542.856.375.889.987.579.1 Target 20~ 30s !! Target white milk !! Focus on better Taste !!

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1) Good Taste Milk, GT About Gook Taste Milk, GT High Price Success : 100 million milks (200ml) sold 100 days after launching. Why ? Good Taste !!!

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1) GT Technology About Gook Taste Milk, GT What is Good Taste ? : From Research, true taste of raw milk, sweet taste, flavory taste smooth taste, freshness, end taste True taste and freshness of raw milk !! Good Taste Milk, GT A white milk with true taste and freshness of raw milk and no crude taste without any artificially adjusting components. How ? GT Technology !!! Bad tastes are from bad smell

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2) GT Technology What is GT Technology? Key technology of Namyang. The result of Product Innovation A technology that makes the white milk with better taste than processed milk : Removing crude and unpleasant taste and smell, & Maintaining good taste of raw milk for long. 3 Steps of GT Technology 1.GT1- Good Taste process 2.GT2- Nitrogen filling process 3.GT3- New milk process Compatibility with existing values, but having Relative advantage in taste Technology Integration & Market-Pull Innovation

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2) GT Technology Overall Process

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2) GT Technology GT1, GT2, GT3 ? GT1- Good taste Process : Eliminating oxygen dissolved in raw milk. Eliminating bad taste and smell components from Pasture and Feed smell. Using GC/MS and detectors. GT2- Nitrogen filling Process : With filling Nitrogen, Eliminating dissolved and free oxygen, bad taste, bad smell perfectly. Maintaining the taste until drinking A Patent application GT3- New milk Process : Finding the secret of milk taste, and Improve the taste without artificially adjusting components.

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2) GT Technology Namyangs Technology Management (Problem recognition -> Technology Selection) Scanning & Forecasting : To Catch the market needs. Using questions and customers feedback. Catching the technological opportunity and Decision to technology appropriation : Technological opportunity not derived by technical feasibility but also by marketplace needs. The market need is TASTE. Taste is the technological opportunity !! Convincing that white milk can be competitive again.

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2) GT Technology Namyangs Technology Management (Solution development) Developing Technology Strategy : Choosing Technology Leadership Strategy. - Get out of competition functional & Processed milk market. alter the rule of the competition (->taste) Decision to In-house Development Adopting Differentiation Strategy - Good taste but higher price. White milk can be tasty !! Satisfying Resources and Collateral Assets : Investment in Plant & Equipment, and R&D (more than 100 billion won.) A good R&D Center. approved as KOLAS.

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2) GT Technology Namyangs Technology Management (Commercialization/Implementation) Diffusion : Developing new products, Good Taste Milk, GT Adopting this technology to other products. Whole Products to be Good taste. : Marketing with Emphasis on its competitive advantage, Good Taste. Ex) Naming the product as Good taste milk, GT Emphasis on the good taste in CF. Free Sampling party. (80% answered delicious) Removing other white milk products

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2) GT Technology Three major milk companys Decision Seoul Milk 1 st Grade Raw Milk No technology development Depending on Brand image Namyang Market research Technology development GT Technology Leadership Strategy Focusing on Taste Adopting to other products Maeil Milk Technology development ESL Focusing on Health & expiration date Depending on Brand image

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3) The Effect of GT Success in the Competitive Domain 100 million packs sold in 100 days after Launching The most sold milk in a day. (1million packs a day)

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3) The Effect of GT Success in the Competitive Domain BCG Matrix StarQuestion Mark Cash Cow Dog GT Milk Bulgaris 17 I,O 3.4 Milk Market Growth 10X 1X0.1X Market Share Einstein Milk

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3) The Effect of GT Change the Rule of Competition => Induced Change Breaking the fixed idea that White milk is not delicious. : 80 % of participants in the sample party answered delicious Change the rule of competition to taste of white milk from processed milk. Disruptive technology to Processed Milk, But, Sustaining technology to Functional Milk. : 40% increase in sales of Calcium and vitamin Milk (2005~2006)

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3) The Effect of GT Expanding Adopting GT technology to other Products : Improve the taste of other milk Increase the competitive power of whole products Globalization : Pass PMO (Pasteurized Milk Ordinance) Supply Good taste milk, GT to US army

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3) Future Challenges Protection From Imitation : Protect the key technology and Differentiation from imitators. Developing new technology : To make Product life longer (ESL of Maeil) Offensive Marketing for differentiation Globaliztion To make Products more nutrious

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3) Conclusion Success factor of Namyang Market research and get the Market needs/wants Developing new technology, GT Diffusion Strategy Investment, and having its own R&D Center.