Motivations (Sources) of Innovation with The Discipline of Innovation by Peter F. Drucker Rev: Sep, 2012 Euiho (David) Suh, Ph.D. POSTECH Strategic Management of Information and Technology Laboratory (POSMIT: Dept. of Industrial & Management Engineering POSTECH

Contents 1. Unexpected occurrence 2. Incongruities 3. Process Needs 4. Industry & Market Change 5. Demographic Changes 6. Changes in Perception 7. New Knowledge Within a company/industry Social and Intellectual Environment

3 Motivation Of Innovation - Unexpected occurrence (1/3) ■IBM –In the early 1930s, IBM developed the first modern accounting machine, which was designed for banks But banks in 1933 did not buy new equipment –Unexpected success ! The New York Public Library wanted to buy a machine Business unexpectedly showed an interest in a machine that could do payroll  IBM redesigned what was basically Univac’s machine for such mundane applications as payroll, and within 5 years became a leader in the computer industry

4 Motivation Of Innovation - Unexpected occurrence (2/3) ■Influenza A(H1N1) –Occurred unexpectedly & diffused rapidly. –Demand of hand sanitizer, which help preventing Influenza A, increased extremely Influenza A Sales of Hand sanitizer Unexpected Occurred !

5 Motivation Of Innovation - Unexpected occurrence (3/3) ■Ford Edsel (unexpected failure) –The biggest new-car failure in automotive history –The most carefully designed car to that point in American automobile market all the planning, market research, and design had gone into it  Unexpected failure! Something happened in the automobile market that ran counter to the basic assumptions on which GM and everyone else had been designing and marketing cars –Market was segmented primarily by income groups, with a new principle “lifestyle”  Introduced Mustang afterwards

6 Motivation Of Innovation – Incongruities (1/4) ■The cataract operation (Incongruity in the logic of a process) –During the past 300 years, doctors systematized it to the point that only step left was the cutting of a ligament. But it was so different a procedure from the rest of the operation, they often dreaded it –An enzyme could dissolve the ligament without cutting  Just by adding a preservative to this enzyme that gave it a few months’ shelf life  Alcon found itself with a worldwide monopoly

7 Motivation Of Innovation – Incongruities (2/4) ■Mini mills (Incongruity between economic realities) –1950 – 1970, in steel industries of developed countries –Whenever an industry has a steadily growing market but falling profit margins !  The innovative response: mini mills

8 Motivation Of Innovation – Incongruities (3/4) ■Ocean shipping (Incongruity between industry’s assumptions and its realities) –For 50 years after the turn of the century, shipbuilders and shipping companies worked hard both to make ships faster and to lower their fuel consumption –The real cost did not come from being in the sea but from not sitting idle in port  The innovation: the roll-on and roll-off ship and the container ship  Ocean shipping turned to be one of the major growth industries of the last 20 to 30 years

9 Motivation Of Innovation – Incongruities (4/4) ■Matchmaker –In past, there were many matchmakers offline Not enough information or options to meet right people –Online matchmaker company Connect many couple with optimized data from large information pool Fast! Optimized! More Chance!! Matchmaker offline Matchmaker online

10 Motivation Of Innovation - Process Needs (1/3) ■Reflectors on highway –Japan had no modern highway system, its roads still follow the paths laid down for-or by-oxcarts in the tenth century  Adaptation of the reflector used on American highways since the early 1930s The reflector lets each car see which other cars are approaching from any one of a half-dozen directions  Enabled traffic to move smoothly and with a minimum of accidents, exploited a process need

11 Motivation Of Innovation - Process Needs (2/3) ■Highway –Inter change in highways There were many traffic problems because we should pay money just one by one –By using high pass technology We do not have to stay in front of interchange to paying money Inter change in highways High pass technology

12 Motivation Of Innovation - Process Needs (3/3) ■The media –Had its origin in two innovations developed around 1890 in response to process needs –Ottmar Mergenthaler’s Linotype Made it possible to produce newspapers quickly and in large volume –Modern advertising Made it possible for them to distribute news practically free of charge, with the profit coming from marketing “When it rains it pours”; Morton Salt, 1912

13 Motivation Of Innovation - Industry & Market Change (1/2) ■Brokerage firm of DL&J in 1960 –they realized that the structure of the financial industry was changing as institutional investors become dominant  lead the move to negotiated commissions and one of Wall Street’s stellar performers

14 Motivation Of Innovation - Industry & Market Change (2/2) ■Floppy Disk vs. CDs –The Floppy Disk was popular portable storage hardware CDs can contain much more data compare to Floppy Disks with better durability –Demand for Floppy Disks Decreased Rapidly Floppy DiskCDs

15 Motivation Of Innovation - Demographic Changes (1/2) ■Robotics in Japan –1970, a ‘baby bust’ and ‘education explosion’, young people were staying in school beyond high school  The number of people available for traditional blue-collar work in manufacturing was bound to decrease and become inadequate by 1990  Japan pay attention to demographics and now have a ten-year lead in robotics

16 Motivation Of Innovation - Demographic Changes (2/2) ■Mobile game –The size of mobile phone market Increased rapidly since the demographic size of mobile phone user enlarged –Demand for Mobile game Increase as the population using mobile phone increase People can enjoy mobile game wherever and whenever they want to Mobile game The Global Mobile Game Market Size

17 Motivation Of Innovation - Changes in Perception (1/3) ■Cosmetic surgery –People felt ashamed having cosmetic surgery –The perception has been changed  People are rather confident with cosmetic surgery nowadays  The market of the surgery enlarged! The market of the surgery enlarged! More confident with cosmetic surgeryPeople felt ashamed having cosmetic surgery

18 Motivation Of Innovation - Changes in Perception (2/3) ■Food –Fast food, junk food Overweighting –Green food Vegetables, fruits Fast Fast food Green food

19 Motivation Of Innovation - Changes in Perception (3/3) ■Health care –In the last 20 years, collective hypochondria grips the USA, everything seems to cause cancer or degenerative heart disease of premature loss of memory  Rather than rejoicing in great improvement in health, Americans seem to be emphasizing how far away they still are from immortality  Health care magazines, exercise classes, jogging equipment, and all kind of health food

20 Motivation Of Innovation - New Knowledge ■J. P. Morgan & Company in New York –J. P. Morgan, put together the French theory of entrepreneurial banking and the English theory of commercial banking to create one of the first successful modern banks