Innovation, not Imitation

Sung Joo Bae Associate Professor of Technology Management

A new era for innovation in Korea

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Recent Research Projects

■ Product Development/Evaluation/Use

"Different Routes to Metacognitive Judgments: The Role of Accuracy Motivation," (with S. Park) Journal of Consumer Psychology, 2014 “New Product Development with Facebook Fans: Idea Contest Experiment,” (with A. Oda and S. Park), under review, Journal of Engineering and Technology Management, 2014 “The Effects of Motivation to Control Consumption on Tariff Preferences for Vice versus Virtue Goods,” (with Y. Kim, D. Park, and S. Park), under review, Telecommunications Policy, 2013 “Buffering against Jolts: Resource Arrangements and Organizational Learning,” (with M. Rhee and D. Yang), under review, Journal of Management Studies, 2014 “Standing on the Shoulders of Giants: Art Marketing Effects on Consumer Response, Brand Attitude, and Purchase Intention,” (with J. Ko and E. Ko), under review, Journal of Business Research, 2013 “Learning at the Boundary of the Firm: What Happens between Learning-by-Doing and Learning-by-Using” (with M. Rhee) “How does Product Innovation Enhance Firm Performance?: The Moderating Role of Process Innovation, Organizational Innovation and Marketing Innovation,” (with S. Oh and S. Han), Journal of Korea Technology Innovation Society, 2013 “Creativity in Groups Based on Problem-Solving Perspective: An Empirical Study,” (with K. Lee and S. Park) East and West Studies, 25(2), 2013 “Problem-Solving Process with the Users: An Exploratory Case Study in the Early-Stage Game Company,” (with A. Oda and S. Park) Yonsei Business Review. 50(1), 2013

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■ R&D Management/Policy

“Internalization of R&D Outsourcing: An Empirical Study,” (with S. Han) International Journal of Production Economics, 2014 "Evaluation and Arrangement: The Role of Government in R&D Consortia Formation," (with J. Kim and J. Yang), Technological Forecasting and Social Change, 2014 “The Role of Diversity in Internalization of R&D Outsourcing: An Empirical Study" (with S. Han) “Categorization of R&D Collaboration Based on Problem-Solving Perspective and its Implication,” (with Y. Ko) Korean Journal of Production and Operations Management, 24(2), 2013

■ Organizational Learning / New Media “Optimizing the Effectiveness of Online Banner Ads: How Repeated and Spaced Exposures Affect Message Recall,” (with J. Lee, D. Briley, J. Oh, and S. Park), ready for submission, Journal of Advertising Research, 2014 “The Expansion of User Forums: Longitudinal Social Network Analysis of the Growth of User Forums” (with M. Rhee) “The Effect of Self-Presentation on SNS to Interpersonal Relation and Intention to Use,” (with E. Ma and S. Han) Knowledge Management Research, 14(2), 2013

Recent Research Projects

Current status of South Korea

Korea, No. 1 in global market share in 143 products

143

2008 2009 2010 2011 2012

131

119 121 113

Source : Korea Ministry of Trade, Industry and Energy(2013)

Smartphone 30.2% (Samsung Elec.)

Flat Panel TV 27.7%

(Samsung Elec.)

D-RAM 41% (Samsung Elec.)

Liquid Crystal Panel 24.6% (LG Display)

Current status of South Korea

Source : Bloomberg(2011)

Operating

Profit (2009.7~2009.9)

Samsung reached the largest sales in the world for all of digital products market

Aggregate value

of listed stocks

Current status of South Korea

Source : Bloomberg(2011)

Name Sales (Bil.

USD) Variation(%)

Operation Profit

(Bil. USD)

Ratio of profit

(Bil. USD)

Toyota 122 -13 11.8 9.6

GM 76 1 2.7 3.6

Volkswagen 76 1 4.4 5.9

Ford 73.9 12 4.7 6.4

Hyundai & KIA

60.3 4 5.4 8.9

Honda 56.3 -7 3.2 5.8

Nissan 51.5 -11 2.8 5.5

Daimler 42.9 -3 - -

BMW 28.5 -4 3.2 11.1

PSA 21.3 -6 -0.27 -0.1

Hyundai and Kia is global top 5 in 2013 1st half(Sales)

Current status of South Korea

Desalination No.1 in the world

- Produce water that can supply

2.2 mil. population a day

Global companies in Korea

Biosimilar: biologic medical products whose active drug substance is made by a living organism or derived from a living organism

Current status of South Korea

Korea Aerospace Industries, Ltd

South Korea Launches Rocket in

Space - Naro Rocket(KSLV-I) -

Aerospace in Korea

Imitation to Innovation

Model of Technology Development between 1960 and 1990

Technologically advanced countries

Rate of Innovation

Product Innovation Process Innovation

Time

Fluid (Emergence) Transition (Consolidation) Specific (Maturity)

Technology Transfer Technology Transfer Technology Transfer

Acquisition

Acquisition

Assimilation

Assimilation

Improvement

Improvement

Generation

Time

Catching-up countries

Technological Capability

New Era of Innovation in Korea (2010 ~)

Building the capability for a new era of innovation

Cultural Development Creative Minds

Social Atmosphere

Innovation

Aesthetic Design

Technology

Entrepreneurship

Research & Development

Organizational Culture

Culture Development

Global views of K-pop videos on You Tube(2011)

Source : Reorganized based on “Youtube video clicks for K-pop reach 2.3 billion from 235 countries “The JoongAng Ilbo, 2012.1.2”

Culture Development

Success factor behind K-pop : Cultural Diamond Model

Distribution Method

Creators

Contents

Consumers

Active use of

Social media

Tech-savvy and

active fan base

Triple combination of vocal and

dance skills and attractive looks.

Systemized production

- Casting & training (5y)

- Globalized sourcing

Well-planned promotion

- Cooperation with local partners

Source : CEO Information, No. 841, February 15, 2012, published by the Samsung Economic Research Institute

Girls’ Generation’s song “Genie” (Sowoneul malhaebwa) was composed by Design Group from Europe with lyrics and arrangement by Yu Yeong-jin in Korea, and choreography by Rino Nakasone Razalan, a Japanese-American.

Culture Development

Commercial application of K-pop

1) Production Inducement Effect of K-pop for other

industries

2) Industries expected to benefit from K-pop boom.

Source : CEO Information, No. 841, February 15, 2012, published by the Samsung Economic Research Institute

Entrepreneurship

Various start-ups covering broad industries and social problems.

CEO of ‘add2paper’ Haena Jeon(25)

- The company’s employees are all

recent college graduates.

CEO of social venture ‘delight’

Jeong Hyun Kim(27)

-The company produces ‘hearing aid’

-Awarded for ‘Beloved Korean Company’

Organization culture

Case 1

Flexible

Organization

Organization structure can be very flexible due to the project-

oriented approach

Free

Communication

Discuss and exchange ideas via Kakao Azit which is closed

community between employees

The horizontal structure is wide-spread in organization

New Era of Innovation in Korea (2010 ~)

Interaction of different aspects of innovation

Cultural Development Creative Minds

Social Atmosphere

Innovation

Aesthetic Design

Technology

Entrepreneurship

Research & Development

Organizational Culture

Organization culture

Remove the position(rank)

Staff Assistant Manager

Manager Deputy

Manager General Manager

General Manager

Manager

Open Idea Contest

Using idea contest, some business units are established

Case 2

Increasing the horizontal structure in organization

Product design

Hyundai’s strategies to accelerate design innovation

“Hyundai was a fast follower, now we are becoming a leader in the industry,”

Source : http://www.smartplanet.com/blog/design-architecture/how-hyundais-design-strategy-has-paid-off/6168

Promote “Quality” among managers

Hold monthly meetings “relentless about quality”

Use consistent design language across its product range

Use top-down management structure – quicker decision making on design

Learn from competitor

Product design

Hyundai’s Design strategy

“IDEA festival” – internal contest for the future design.

-Enhance and expand the R&D staff’s creativity

-Discover fresh ideas for future mobility

Source : Hyundai Motor’s New Thinking for Future Mobility

Product design

The iF Design Award 2013 in Munich, Germany awarded Samsung Electronics a grand total

of 39 awards, including 2 iF Gold Awards

- iF Gold Award Products - CLP-415 and CLX-4195 Color Printer Series & twin tub washing machine

Twin tub washing machine – designed for Southeast Asian users

Source :http://global.samsungtomorrow.com/?p=23236#sthash.XuQx4E4p.dpuf

Recent Changes in Korea

• Development Focus Engineering oriented Design Oriented Integrated Thinking

• Product Focus Function Aesthetics (Form)

Concepts (e.g. eco-), Balance between form & function

• Product Strategy Single product Product groups Platform (ecosystem)

Design

Function

Form

User Use Environment

Friction

Concept

Definition?

• Design vs. Engineering

• Industrial Design vs. Design Engineering

Definition?

• Industrial Design (ID) is an applied art whereby the aesthetics and usability of products may be improved. Design aspects specified by the industrial designer may include the overall shape of the object, the location of details with respect to one another, colors, texture, sounds, and aspects concerning the use of the product ergonomics. Design Engineering (DE) is a discipline that creates and transforms ideas and concepts into a product definition that satisfies customer requirements.

Source: Wikipedia

Distinction Symbolic Goods

Material Goods

Expression

(or meaning)

Form Function

Art Engineering Industrial Design

(Interior+Exterior) Styling

Crafting

Graphic Design Fashion

Ergonomics Engineering Design Component Design

Source: Design Inspired Innovation

Switch focus from function to form: Samsung Electronics

How did Samsung work?

• Internal (Domestic) Market-base • Risk-taking Late-comer Strategy

– Large investment + Timely decision

• Brand-image revamping – Sponsoring Olympics + Large ad-campaign

• Focus on Execution (Quality manufacturing) – Long experience of OEM manufacturing

– Price, quality, customer satisfaction

• Radical organizational changes + Reorientation – The role of leadership

How did Samsung work?

• Investment in R&D – Overseas Design and R&D Centers

• Design Oriented Product Development – Separate entity: Samsung Corporate Design Center (CDC) & Value

Innovation Program (VIP) Center

– More freedom + Strong culture

– Strong internal education system

• Innovative Design Lab (since 1996)

– Art Center College of Design, Pasadena

• Design Power Program (since 2003)

– High-level continuing education for in-house designers

– Strong external education system

• SADI since 1995

– Modeled after Parsons

• Design Membership Program (since 1993)

– Competitions (Internal & External)

– Global Design Centers (Milan, Shanghai, SF, London, Tokyo, LA)

Design Oriented Product Development Design concept: “thin” and “glossy” in an organic design that made the TV seem to be of one piece – front, back and stand

VIP Center: Developed the product concept - Emotion and lifestyle - Room decoration - Picture & Sound etc. (functional)

Engineering Challenges 1. Slimmer, Glossy throughout 2. Speaker holes 3. High glossy finish Solution: • Reducing the size of printed circuit board • Integrated frame (speaker holes into the frame) • New injection molding technique

Samsung’s Design

Samsung’s Design

Samsung’s Design

Samsung’s Design

Samsung’s Design

Source: Businessweek

Samsung’s Design

Product design

Collaboration with foreign designers

KIA motors - Peter Schreyer KIA motors – Christopher Chapman

Product design

Collaboration with foreign designers

Samsung electronics – Chris Bangle Hyundai motors- Karim Rashid

Design Oriented Product Development

Jochen Backs

Bang & Olufsen’s Design Oriented Product Development Process

Bang & Olufsen

75% from Designers

IDEAS

25% fill holes in catalog

2 or 3 ideas, model iterations

Concept

With Substance

Thesis

Antithesis

Thesis

Antithesis

Synthesis

More models, increasingly detailed & complete

Designer-driven No market researchy

Integration of form and function in the organization

Function

Form

User

Use Environment

Friction

Concept

• Integration is like a seeding process - Seed it and let it grow - Rather than design and implement the perfect system

• Seed What? - Leadership - Principles & structure - Incentive system (rewards) - Culture & consensus (people)

• Integrate Early in the Process

Deep Structure of the Organization

Leadership

Formal Structure/Process

Incentives/Political Structure

Culture/Mental Models

What can be done? • Lead:

– Develop a clear strategy, generate energy: communicate the strategy, allocate resources

– Low key: Create the stage upon which NPD team leader can play the leading role

• Structure: – Explore transitional and intermediate forms, small units (team-

oriented), flat hierarchy, diversity in teams

• Incentive: – Explain “just what’s in it for me?” & Manage the balance between:

individual outcomes and team/firm outcomes

• Build: – Lay the foundations for a new culture, new expectations

– Simple rules (e.g. fail often to succeed sooner, stay focused & one conversation at a time, enlightened trail and error, child-like playfulness )

Why Early in the Process? Development Funnels

(Wheelright and Clark, 1992)

New Product Development Process

Planning Concept

Development System-level

Design Detail Design

Testing & Refinement

Production Ramp-up

1. Define the scope 2. Gather raw data from customers (interviews, focus groups, observation) 3. Interpret the raw data in terms of customer needs 4. Organize the needs into a hierarchy of primary, secondary, and tertiary needs 5. Establish the relative importance of the needs 6. Reflect on the results and the process

(Source: Ulrich & Eppinger)

Identify Customer

Needs

Establish Target

Specification

Generate Product Concepts

Select Product Concepts

Test Product Concepts

Set Final

Specification

Plan Downstream Development

Benchmark Competitive Products

Perform Economic Analysis

Build and Test Models and Prototypes

Timing and Impact of Management Attention and Influence

(Wheelright and Clark, 1992)

Types of Development Teams

Lightweight (limited) vs. Heavyweight (extensive)

• Span of coordination responsibilities

• Duration of responsibilities

• Responsible for specs, cost, layout, components

• Working level contact with engineers

• Direct contact with customers

• Multidiscipline skills

• Role in conflict resolution

• Concept championing

• Engineering/marketing/manufacturing influence

New Era of Innovation in Korea (2010 ~)

Interaction of different aspects of innovation

Cultural Development Creative Minds

Social Atmosphere

Innovation

Aesthetic Design

Technology

Entrepreneurship

Research & Development

Organizational Culture

Technology Development and R&D

1963

45,016(6th)

1997 2011

12,810

4

4.03% (1th)

2.48%

0.25%

National R&D investment Ratio to GDP(%)

National R&D

Investment (Bil. USD)

Ratio to GDP(%)

USA(‘09) 401.6 2.90

Japan(‘10) 178.8 3.26

China(‘10) 104.3 1.77

Germany(‘10) 92.6 2.82

France(‘10) 57.8 2.25

Korea(‘11) 45.0 4.03

Source : OECD MSTI(2013)

Increasing the R&D investment and ratio of R&D to GDP

The Role of Government in Korea

In developing countries, government and its research laboratories play an

important role in guiding the direction of technology development at national level.

4M/16M DRAM

1980’s

CDMA

In the early 1990

64M/256M DRAM

Private R&D

1990’s

Technology push

Expanding the market

Government Driven

1970’s

Increasing the private lab.

Engineering tech.

Private Investment

1980’s~90’s

40.4%('06)

World No.1 M/S

2000’s

MS10.2%('13)

World No. 1 M/s

2000’s ~

MS 37%('13)

2000’s

Shipbuilding

Semiconductor

Government Driven

In the later 1990

Government Driven World No. 1 M/s

Cellphone

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Government as a selection mechanism

In the case of national R&D of latecomer countries, government works as an

important selection force.

Government drives selection-variation mechanism, the reverse evolutionary

process that is the opposite direction of natural evolutionary process (variation-

selection-retention).

Kim, Bae and Yang (2014)

Innovation as a social evolutionary process

• Variation: Creation of a novel technical or institutional forms

• Selection: Occurs principally through competition among the alternative

novel forms

• Retention: Involves the forces that perpetuate and maintain certain

technical elements selected in the past

(Campbell, 1965; Van de Ven and Garud, 1994)

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• The selection force at the initiation of technology development is especially

prevalent in ‘latecomer countries’ such as Korea and Japan (Cho et al., 1988; Choi,

1986; Lee, 1988).

• Several benefits of selection force (Kim et al., 2014)

- time saving to develop technology at certain level.

- reduce competition and redundant investments in the market.

- reduce the failure from overlooking promising innovations.

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Governmen

t

Government selection

ETRI (Government research lab)

Qualcomm

Standard

The role of government in developing country

01. Introduction

Northrop case

• Development of retractable landing gear following the process of variation-

selection model of technical change (Vincenti, 1994).

• Interdependence matters – performance, weight, initial cost, reliability, and

maintenance

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Trouser landing gear Wheel pants Retractable gear

Disadvantages of Selection-Variation-Retention (SVR)

Two dimensions of variation-selection process

• Selection occurs in the market (Nelson and Winter, 1977 & 1982)

• Technology selection occurs through trial and error to find the best solution

(Vincenti, 1994)

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When selection comes first…

• In market side, evaluation process is omitted

• In technology side, learning process is skipped with additional advantages

We concentrate on technology side, where artificial selection(National

Technology Road Map) by government occurs without variation procedure.

Evaluation and Arrangement:

The Role of Government in R&D Consortia Formation

• Has to artificially create VSR process SVR

• Important technological breakthroughs from government-initiated R&D consortia

– HDTV by NHK, Japan (1990, Office of Technology Assessment)

– Development of VLSI in Japan (Sakakibara, 2001; Sakakibara & Cho, 2002)

– Development of CDMA in Korea

• Role of government studied so far – Funding

– Preventing opportunistic behaviors (Tripsas et al. 1995)

• Other potential roles:

– Evaluating and determining participants

– Arranging the structure

– Knowledge exchange arrangement

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"Evaluation and Arrangement: The Role of Government in R&D Consortia Formation,"

(with J. Kim and J. Yang), Technological Forecasting and Social Change, 2014

Timing of Evaluation

• Timing of evaluation matters (Levinthal and Posen, 2007)

– Early: May select out firms with long-term superiority (e.g., temporal

balancing between exploration-exploitation)

– Late: Less efficient (Not relevant in the R&D consortia context)

– Alternative: Continuous evaluation

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Inverse Pyramid

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Upstream

Downstream

Organizing Arrangement

Mimicking VSR

Inverse Pyramid

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Upstream

Downstream

Organizing Arrangement

Pyramid

Mimicking VSR Inversed VSR = SVR

R&D Consortium in US & Japan

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• Activities pursed by a consortium

(adopted from Aldrich & Sasaki, 1995)

Model of R&D consortium

• Collaborative innovation efforts of bounded individual entities

– Directional knowledge transmission

• Evaluated by a single (best, final) output

Modeling Platform: (Modified) Genetic Algorithms (Goldberg 2000; 2002)

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Pyramid vs. Inverse

0 2 4 6 8 10

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5Continuous

Early

Ma

x P

erf

orm

an

ce

Generations

Random

0 2 4 6 8 10

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5Continuous

Early

RandomMax P

erf

orm

an

ce

Generations

Pyramid Inverse Pyramid

m=10; G=N=10; P0=0.5; Average from 10,000 independent runs 66

Summary of the Main Results

• Perf (Continuous) > Perf (Early)

• Interaction

• R&D consortia as an artificially created innovation ecology

– Open type R&D consortia is superior

Evaluation

Early Continuous

Arrangement

Pyramid 3 2

Inverse Pyramid 4 1

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Attraction & Engagement:

Dual Mechanism in National Collaborative R&D Projects

Research model

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Attraction & Engagement: Dual Mechanism in National Collaborative R&D Projects (with

Hyeonsuh Lee), Accepted at Academy of Management Annual Meeting 2015, Vancouver,

Canada

Methods

Data

- Project-level data from ‘The survey and Analysis on National R&D Programs’

- 5,428 National R&D projects in year 2008 (total 22,223 patents generated).

Variables and Measures

Variables Measurement

Leadership of government

research laboratory

Government research leads the national R&D project

Selection force of

government

Projects belong to National Technology Road Map assigned by government

University and industry

involvement

Form of collaboration whether each entity(firm and university) involves

Distribution of effort Distribution of patentee among patents in each project

Industry funding Industry funding / total fund

Project performance Number of domestic patent applications in 2008

• Control variable

- Technology characteristics : Technology life cycle, Technology category (T6), Stage of

development

- Project characteristics : Duration, Social and Economic objective, Total fund, Number of

researchers 69

Results

Descriptive analysis – National R&D in Korea

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Results

Descriptive analysis – National R&D in Korea

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Results

Descriptive analysis – Project characteristics based on project leadership

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Results

Descriptive analysis – Project characteristics based on project leadership

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Results

Descriptive analysis – Project characteristics based on project leadership

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Results

75

Results

Summary of results

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Discussion

• Theoretical implication

- In the perspective of technology evolution, selection force of technology development

at initial stage can be effective in the attraction period.

- Industry effect also kicks in at the later stage of engaging other entities.

- In this dual mechanism, government research laboratory works as a mechanism of

engaging rather than that of signaling for attraction.

• Implications for technology policy.

1) In latecomer countries, the force of government in selecting technology to be

developed is persistently effective .

2) In order to accelerate involvement of various entities, use of the selection force of

government is preferable.

3) Government can take advantage of government research laboratory to increase the

engagement of participants.

4) Attraction of various entities from academia and industry and engagement of

participants should be followed in order to make collaborative R&D projects

successful.

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