Motivations (Sources) of Innovation with The Discipline of Innovation by Peter F. Drucker

1. 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: http://posmit.postech.ac.kr) Dept. of Industrial & Management EngineeringPOSTECH

2. Contents 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) Unexpected Occurred ! Influenza A Sales of Hand sanitizer • Influenza A(H1N1) • Occurred unexpectedly & diffused rapidly. • Demand of hand sanitizer, which help preventing Influenza A, increased extremely

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 marketbut 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 offline Matchmaker online • 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!!

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) High pass technology Inter change in highways • 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

12. Motivation Of Innovation - Process Needs (3/3) “When it rains it pours”; Morton Salt, 1912 • 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

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 CDs • 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

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 manufacturingwas 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 Global Mobile Game Market Size • 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

17. Motivation Of Innovation - Changes in Perception (1/3) The market of the surgery enlarged! People felt ashamed having cosmetic surgery More confident with cosmetic surgery • 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!

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

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