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. Technology-push - New Knowledge 3. Demand-pull - Incongruities - Process Needs - Industry & Market Change - Demographic Changes - Changes in Perception

3 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 Unexpected occurrence (2/3) ■3M Post-It –Failed glue which is super weak instead of super strong  Glue which can be lifted off without damaging the papers

5 Unexpected occurrence (3/3) ■Oil shock in 1970s  Rapid growth of solar industry to reduce energy consumption Oil Shock Solar Collector

6 Technology-push - New Knowledge (1/2) ■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

7 Technology-push - New Knowledge (2/2) ■Wingless Fan –Principle of jet engine: Sucking air to the lower side using built-in fans and electric motors –Bernoulli’s Principle: Pushing air to the inside wall of the ring  String air flow Wing Motor Air Suction

8 Demand-pull - Incongruities (1/3) ■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

9 Demand-pull - Incongruities (2/3) ■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

10 Demand-pull - Incongruities (3/3) ■French Door Refrigerator –Refrigerator applying the principle of air circulation (Hot air rises and cool air goes down) : Inconvenience caused by more frequent use of refrigerator than freezer  Bottom freezer refrigerator

11 Demand-pull - Process Needs (1/3) ■FINEX Process –Lack of Raw Material & Fuel with High Quality –Strict Environmental Regulation –Increase of Investment & Operating cost Needs to use fine material without sinter & coke process

12 Demand-pull - Process Needs (2/3) ■High pass –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

13 Demand-pull - Process Needs (3/3) ■Steam Iron –Spraying water separately to protect the cloth while ironing  Equipping a steam spraying function in the iron

14 Demand-pull - Industry & Market Change (1/4) ■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

15 Demand-pull - Industry & Market Change (2/4) ■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

16 Demand-pull - Industry & Market Change (3/4) ■Hybrid Vehicle –Vehicle that combines an internal combustion engine and one or more electric motors –Era of High Oil Price, Culture that concerns environment  Increasing purchase of hybrid vehicles despite of their high price and poor efficiency

17 Demand-pull - Industry & Market Change (4/4) ■Personal Printer –Introduce of digital camera  Decreasing use of film  Using personal printers, rather than using photo studios to print photos Photo studio Film Camera Digital Camera Personal Printer

18 Demand-pull - 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

19 Demand-pull - Demographic Changes (2/2) ■Adult Diaper by Unicharm (Japan) –Expanded silver industry as entering to an aging society Most adult diaper products which are difficult to be changed by the wearer alone Launching a diaper product for the elderly, “Lifree Rehabili-Pants ( ライフリーリハビリパンツ )”  Replaceable diaper without taking the outer pants off by the wearer alone

20 Demand-pull - 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

21 Demand-pull - Changes in Perception (2/3) ■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

22 Demand-pull - Changes in Perception (3/3) ■Smart TV (Connected TV/Hybrid TV) –Technology convergence between computers and television sets –Increasing use of smartphone : People accustomed to using applications and integrated technologies  Television where applications can be installed and which can be used with other equipment