Disruptive IT in Korea: Pitfalls and Potential

Disruptive IT in Korea:
Pitfalls and Potential
Heeseok Andrew Lee, Ph.D.
College of Business
KAIST
Prof Heeseok Lee College of Business KAIST– Help People Grow
Mind boggling Question
IT iis an di
disruptive
ti infrastructure
i f t t
in
i Business
B i
Innovation
I
ti
How to trigger Innovation in IT Service?
What is the situation in Korean IT Service sectors?
Prof Heeseok Lee College of Business KAIST– Help People Grow
A Case
Korean Telecommunication Service
Prof Heeseok Lee College of Business KAIST– Help People Grow
[Confidential] Saturated Market in Telecommunication Service Sector
ARPU in a Korea Company
구분
분
2004
2005
2006
2007
2008
2009
가입자수 (천 명)
36,131
37,701
39,468
41,129
42,691
43,912
매출액 (백만 달러)
13,152
13,677
14,153
14,707
15,219
15,646
ARPU
38000
37100
36700
36500
36300
36100
244
228
229
229
230
232
573
573
579
585
612
674
가입자수 (천 명)
29,976
32,084
34,474
36,761
38,590
40,140
매출액 (백만 달러)
2,406
3,093
3,461
3,695
3,765
3,744
ARPU
8500
10000
10400
10400
10000
9500
음성 (Voice)
기업 음성 매출액
(백만 달러)
음성 부가서비스 (Voice value-added service)
매출액 (백만 달러)
데이터 (Data)
ARPU = Average Revenue per User
Prof Heeseok Lee College of Business KAIST– Help People Grow
Trend in Core Business – DoCoMo
From Wireless infrastructure to Life infrastructure
Prof Heeseok Lee College of Business KAIST– Help People Grow
Mobile Felica – Historyy
[Question] Felica is a g
great technology?
gy
SSony developed
d l
d contactless
l
smart chip,
hi FeliCa,
F liC activated
i
d by
b radio
di wave sent by
b
reader/writer
Transaction speed: 0.1 sec
Ideal for fast processes,
processes e
e.g.,
g “electronic
electronic money”
money
HK adopted Felica for ‘Octopus’ card on transport system in 1995
Sony tried Felica as employee ID/e-wallet, ‘Edy’, in 2001
F li was adopted
Felica
d t d by
b JR East
E t as ‘Suica’,
‘S i ’ in
i 2001
Conducted market trial using 5,000 FeliCa phones, Dec. 2003~Jun.2004
Sony/Docomo/JR East formed Felica Networks in May 2003
Launched Mobile Felica embedded with Sony’s RFID smart chip in July 2004
ISO/IEC 18092 inter-device communication standard
Became a standard in Jap. adopted by KDD I (EZ Felica) and
Vodafone (S! Felica).
10 mil. of i-Mode FeliCa devices sold in Japan as of Jan. 2006.
Prof Heeseok Lee College of Business KAIST– Help People Grow
Mobile FeliCa – Creating New Values
[Subscribers, mil]
Churn reduction/acquisition
30.0
Felica License Fee from rivals.
25.0
Platform Management Service
20.0
T
Transaction
ti Fee
F
15.0
10 0
10.0
‘08
8.01
‘077.10
‘077.07
‘077.04
‘077.01
‘06
6.10
‘06
6.07
‘06
6.04
‘06
6.01
‘05
5.10
‘05
5.07
‘05
5.04
‘05
5.01
‘04
4.10
‘04
4.07
5.0
Prof Heeseok Lee College of Business KAIST– Help People Grow
Ironically,
A Korean Company
Tried
Even Earlier
B t
But
Failed
Why?
Prof Heeseok Lee College of Business KAIST– Help People Grow
Mobile Payment Business Model Comparison: DoCoMo vs. S Company
Did Korea begin “Felica”first? Did it succeed? Why or why not?
Is DoCoMo a Telecommunication Company or Financial Service Company?
Which triggers innovation in the open market? Company? Or customers?
Prof Heeseok Lee College of Business KAIST– Help People Grow
Disruptive Innovation
Open – Less regulation
Customers
An example: Open Business
Global IT company
Prof Heeseok Lee College of Business KAIST– Help People Grow
Open Strategy for Value Capture – Weakening the Appropriability Regime
Weakening the Appropriability Regime Strategy
:Open-oriented organization needs to build co-specialized asset position
Open Source Software
[Company Characteristics]
Strong downstream asset position in middleware
middleware, applications
applications, hardware,
hardware and service
[Strategy]
IBM adopt weakening the appropriability regime strategy
[Why?]
Because IBM had built strong downstream asset position. IBM can damage firms like MS
with strong position in OS
In essence, as the server OS becomes a commodity, the locus of value capture in the
innovation chain shifts downward
Prof Heeseok Lee College of Business KAIST– Help People Grow
Serious Dilemma
Is there some Korean Companies that are capable to accommodate
Open innovation like IBM?
Yet Korean companies do not seem to have core capabilities here
Yet,
here.
What is happening for Korean IT Service sectors?
Innovation possible?
Several large inbreed IT service companies: Pitfalls
Samsung Electronics vs. Samsung SDS
Rewards for Value Creation in IT Service
Intangible values
Prof Heeseok Lee College of Business KAIST– Help People Grow
Two Types of IT Service
Infrastructure
Winner takes it all
DBMS - Database Management System
ERP – Enterprise Resource Planning
Brand – Non commodity
Role of Korean government should differ in each sector
Prof Heeseok Lee College of Business KAIST– Help People Grow
A success story: E-Government
A global Grand Prize from the United Nations
over its electronic government system for the second straight time
time,
the latest sign of Korea's top status in electronic public administration systems
Prof Heeseok Lee College of Business KAIST– Help People Grow
How about Brand Type IT Service
Lessons from
f
the
h success off Korean IT companies
What are “sort of” key core capabilities
behind the success stories of Korean companies?
p
Innovation based on Korean companies’ s unique core capabilities
Prof Heeseok Lee College of Business KAIST– Help People Grow
S Group – Chairman Lee
Stretch Goal ?
New
Product
Development
Time
KPI = Key Performance Index
Prof Heeseok Lee College of Business KAIST– Help People Grow
Innovation - Six Sigma Case
World Best Process through TDR Activities
Problem Solving Teams
Knowledge Integration
[Cross Functional Team]
Product
Marketing
Customer
TDR Activities
M
D
A
I
C
Knowledge Creation
Quality
Procurement
Development
Technology
Manufacturing
Stretch
Goal
Knowledge
Use
Business
• TDR (Tear Down & Redesign)
• DMAIC:
Define/Measure/Analysis/Improvement/Control
y
p
Fragmented Knowledge
Product
Process
Quality
Development
Function Oriented Ogranzation
Marketing
Procurement
Manufacturing
Technology
Source: KAIST AIM Seminar – L Electronics
Prof Heeseok Lee College of Business KAIST– Help People Grow
Then, is this core capability sufficient for future innovation and growth?
If not, from where further innovation, disruptive innovation possible?
Business Survival Inequality
C = Cost
P = Price
V = Value (Whose value is this?)
P>C
V>P
C < P <V
Prof Heeseok Lee College of Business KAIST– Help People Grow
Another IT Service Sector:
Social Networking Sites
Prof Heeseok Lee College of Business KAIST– Help People Grow
What kind of Business Model ?
What is Google’s Core Capability?
Prof Heeseok Lee College of Business KAIST– Help People Grow
Overture - Ad evaluation point * Bidding price
Extremely expensive CPC?
G
Google
l iis d
doing
i fine?
fi ? Any
A competitor?
i ?
Prof Heeseok Lee College of Business KAIST– Help People Grow
Facebook - the new wave of worldwide social network
How is Facebook different from Google?
800M
No.1
6:02:59
48%
48% of 18 to 34 year olds check Facebook
right after they wake up in US
Sean Parker ((born in 1979)) – Napster
p
Founder
Prof Heeseok Lee College of Business KAIST– Help People Grow
Google 은 정보 내가 찾기
Search information yourself
Facebook 은 정보 서로 나누기
Share information together
뭐가 더 “사람다움”
사람다움 인가
인가요??
Prof Lee does NOT do Facebook. Why?
Prof Heeseok Lee College of Business KAIST– Help People Grow
Alone Together by Sherry Turkle – MIT Professor
We expect more from technology and less from each other
Why do so many of us prefer simulated relationships to real ones?
Is reliance on technology altering what it means to be human?
Prof Heeseok Lee College of Business KAIST– Help People Grow
R-square=0.095
R square=0 176
R-square=0.176
Actual Selfpresentation
0.095 (n.s.)
-0.001 (n.s.)
Possible Selfpresentation
Perceived
Usefulness for
Self-presentation
0.267***
0.307***
0.154*
0.287***
0.265**
0.152*
0.066 (n.s.)
0.080 (n.s.)
Commitment to
IT
0.449***
0.602***
Emotional
Attachment to IT
0.481***
0 569***
0.569***
R square 0.269
R-square=0
269
R-square=0.38
R-square=0.340
R
square=0 340
R-square=0.437
Above digits indicate coefficients for blog
Below digits indicate coefficients for SNS
i ifi
t att p<0.05.
<0 05
* significant
significant
at
p<0.01.
**
*** significant at p<0.001.
Prof Lee’s Research on Social
Network Service
Cognition vs Emotion
Publishable in MIS Quarterly
Prof Heeseok Lee College of Business KAIST– Help People Grow
Future of business?
Prof Lee does Not do Facebook? Why?
Cloud Computing
Is there LOVE in the telematic embrace?
Meaning - 사람 냄새 나는 IT
Roy Ascott 1990
Prof Heeseok Lee College of Business KAIST– Help People Grow
A Failure Case:
Three Doctoral Students
at KAIST Business School
I 1999
In
Do you remember iloveschool?
Three Doctoral Candidates
김영삼 이충석 최병구
– KAIST CIS Lab (CISers)
by Prof Heeseok Lee
Was iloveschool successful?
Why Yahoo tried to buy
iloveschool rather than Daum
(500억원, $ 40 million)?
Did iloveschool fail? Why?
Prof Heeseok Lee College of Business KAIST– Help People Grow
[Remember this] Alexa World Ranking - 2000년 9월
1. msn.com 9,889,102
(1,000 page view / month)
2. yahoo.com 8,065,279
3. aol.com 2,819,273
4. daum.net 2,797,694
5 yahoo.co.kr
5.
yahoo co kr 2,054,202
2 054 202
6. iloveschool.co.kr 1,927,986
7. microsoft.com 1,716,282
8 yahoo.co.jp
8.
yahoo co jp 1,640,789
1 640 789
9. excite.com 1,492,617
10. weather.com 1,293,800
11. ebay.com
b
1,195,649
[Current Ranking] 1. Facebook
2. Google 3. Yahoo 4. Youtube 237. Naver
330. Daum
29
Prof Heeseok Lee College of Business KAIST– Help People Grow
Potential for Korean IT Service
Lesson From the success of Gangnam Style
Dress Classy
Dance Cheesy
Prof Heeseok Lee College of Business KAIST– Help People Grow
Appendix
Prof Heeseok Lee College of Business KAIST– Help People Grow