technology strategy in korean leading edge companies · strategy production strategy technology...

Technology Strategy in Korean Leading Edge Companies

- Survey & Interview

2002. 11

Jong Guk SONG and Jung Won LEE(e-mails: [email protected] ; [email protected])

Science and Technology Policy Institute (STEPI)

Korea

14-Sep-2004 Mid-Term 2

Business Strategy Production

Strategy

Marketing Strategy

Technology Strategy

International Economic & Technology Environment

Domestic Economic & Technology Environment

PolicyImplication

Best Practice of Business Technology

Strategy

Financial Strategy

Research Framework

The OtherStrategy

Questionnaire Survey and Statistics Analysis

Interview Analysis

Econometric Analysisfor Policy Impact

Comparative Analysisfor Policy Implication


Changes in Business Environment

International environmentsAcceleration of globalizationRapid development of new technologies(IT, BT, NT etc.)Rapid growing of business R&D expenditureRising of R&D outsourcingShortening time to market

Domestic environmentsForeign financial crisis in 1997Changes in the direction of economic policy

• Antitrust, unfair trade, etc.Changes in corporate governanceChanges in industrial structure


The Tr end of R&D Expendi t ur es i n Kor ea

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Year s

bi l l i on won(const . Won i n

1995) Tot al Gov' t Pr i vat e


Survey on technology strategy of Korean Firms

Survey objectives:Identify the changing technology strategy of Korean firms in response to changing business/technology environment such as undergone foreign exchange crisis, globalisation, emerging technologies

Sample size of Survey firms:Pick 828 firms (450 large firms, 205 SMEs, 173 venture firms) based on a set of selection criteria (R&D institutes/units, sales volume, R&D manpower)

Questionnaire retrieval rate:Total 199 firms(24.0%) : LF 127(28.2%), SMEs 42(20.5%), start-ups 30(17.3%)


Posi t i on of CTO

Pr esi dent / Vi ce

Pr esi dent

16%

Execut i ve Di r ect or

77%

Gener al Manager

7%

CEO' s I nvol vement i n Technol ogy St r at egy

8. 2% 7. 5% 6. 7%

13. 7%

21. 5%

33. 3%

78. 1%

71. 0%

60. 0%

0. 0%

10. 0%

20. 0%

30. 0%

40. 0%

50. 0%

60. 0%

70. 0%

80. 0%

90. 0%

Leadi ng Company Nor mal Company I nf er i or Company

Sel dom Of t en

Regul ar l y


Economi c Env i r onment I nf l uenci ng Technol ogy St r at egy

5. 1%

29. 3%36. 4%

63. 6%

79. 8%

58. 1%

22. 7%

0. 0%

20. 0%

40. 0%

60. 0%

80. 0%

100. 0%

Agi n

g Pr

oces

s

Stan

dar d

i zat

i on

Envi

r onm

ent

Prob

l em

Rapi

d De

vel o

pmen

t of

IT

Mar k

et G

l oba

l iza

t ion

Fir m

' s R

est r

uct u

r ing

Chan

ge o

f Li

f e S

t yl e

Technol ogy Env i r onment i nf l uenci ng Technol ogy St r at egy

21. 3% 24. 9%

75. 6% 75. 6%

51. 8%45. 2%

0. 0%

20. 0%

40. 0%

60. 0%

80. 0%

Grow

t h o

f Go

v't

. ..

Grow

t h o

f Bu

sine

. .

Glob

ali z

ati o

n of

. ..

Tech

nol o

gy C

ompl

...

Rapi

d Gr

owt h

of

I T

I PR

Prot

ect i

on


Change i n r el at i ve i mpor t ance of St r at egi es

41. 7%

10. 9%

45. 3%

60. 4%

41. 1%

28. 3%

5. 6%

71. 7%

27. 3%

66. 2%

0. 0%

10. 0%

20. 0%

30. 0%

40. 0%

50. 0%

60. 0%

70. 0%

80. 0%

Fi nanci al

St r at egy

Per sonnel

St r at egy

Mar ket i ng

St r at egy

Pr oduct i on

St r at egy

Technol ogy

St r at egy

1997 Year Cur r ent ( 2001)

Rel at i onshi p bet ween St r at egy

3.15 3.29 3.33

3.82 3.81 3.87

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Cor por at e Busi nessSt r at egy - Copor at i veTechnol ogy St r at egy

Cor por at e Technol ogySt r at egy - Busi nessTechnol ogy St r at egy

Busi ness St r at egy -Busi ness Uni t

Technol ogy St r at egy

1997 Year Cur r ent


Strategy Documentation

173

128

163

180

25

70

35

18

-

20

40

60

80

100

120

140

160

180

200

Corporate Bus inessStrategy

CorporateTechnology Strategy

Bus inessTechnology Strategy

R&D Strategy

Yes No

Met hodol ogy used t o bui l d Technol ogy St r at egy

134

94 97

185

56

95 95

5

0

40

80

120

160

200

Technol ogy

For ecast i ng

Technol ogy

Por t f ol i o

Technol ogy

Roadmap

Technol ogy Tr end

Yes No


Changes i n St r at egi c Focus of CTOs

43. 8%

57. 8%

39. 5%

45. 4%

24. 3%

46. 5%

18. 4%

8. 6% 8. 1%6. 5%

65. 5%

30. 5%

51. 3%

19. 8%

35. 0%

12. 2%

27. 9%

5. 6%

43. 1%

7. 6%

0. 0%

10. 0%

20. 0%

30. 0%

40. 0%

50. 0%

60. 0%

70. 0%

Appl i cat i on of

Tech. I nnovat i on

I nnovat i on f or New

Domi nant Pr oduct

Har moni zat i on

bet ween Long-t er m

and Shor t -t er m R&D

Goal

I nt er gr at i on

bet ween Technol ogy

Pl an and Busi ness

Pl an

R&D Leader shi p Shor t eni ng Lead

Ti me

R&D Resour ces

Al l ocat i on

Gl obal R&D

Management

Technol ogy Sal es New St ar t -up

Busi ness

97 Year Cur r ent


Change of Lead Ti me t o Mar ket

3.50%5.10%

13.10% 14.20%

20.20%

26.40%

42.40% 41.10%

20.70%

13.20%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

Ti me t o Mar ket Ti me t o Maki ng Pr of i t

Ver y Del ayed

A Li t t l e Del ayed

No Change

Degree of Satisfaction for Gov ' t R&D P rogram

19.40%

34.90%37.50%

34.20%36.50% 36.00%

28.90%

23.90%27.10%

14.50% 13.80%10.30%

0.00%

10.00%

20.00%

30.00%

40.00%

Gov't R&D Program Tax Program Financial Program Infras tructure

Program

V ery Low A little LowAverage A Little HighV ery High


I n-house R&D / Out sour ci ng Gr owt h Rat e

11. 7%

3. 3%6. 2% 6.3%

36. 4%

20. 7%

-2. 6%

24. 0%

-5. 0%

0. 0%

5. 0%

10. 0%

15. 0%

20. 0%

25. 0%

30. 0%

35. 0%

40. 0%

Leadi ng Company Nor mal Company I nf er i or Company Tot al

I n-House R&D Gr owt h Rat eOut sour ci ng Gr owt h Rat e

Joi nt R&D

0.1990.185

0.225

0.186

0.2180.204

0.282

0.218

0.000

0.050

0.100

0.150

0.200

0.250

0.300

Joi nt R&D wi t hUni v.

Joi nt R&D wi t hGRI

Among Busi nessSect or

Cont r act -out

97 Year Cur r ent


Unit: billion Won

contents company

operating results (SV,

EX,OP)

R&Dexpenditure & long-term R&D ratio

Remarks

Hyundai Heavy 7404, 6135, 535 R&D: 89 (1.2% of SV), long-term R&D: 10% of total R&D

Fund source: corporately funded

Hyundai Motor22505, 10400, 2097

R&D: 1020 (4.5% of SV), long-term R&D: 6.2% of total R&D


Samsung Electronics

32380, 21870, 2295

R&D&E: 2,400(7.5% of SV), long-term R&D: total R&D

SAIT(Fund source: 50% from corporately funded, 40% contract

LG Chemical 3616, 1508, 269R&D: 115(3.2% of SV), long-term R&D: 15% of total R&D


LG Electronics 16601, 10517, 796R&D: 759(4.6%of SV), long-term R&D: 3%-4% of total R&D


Hyundai Mobis 2965, 1194, 357R&D: 21 (0.7% of SV), long-term R&D: 20% of total R&D


Iljin 221, 122, 1R&D: 0.6(0.3% of SV) long-term R&D: 20% of total R&D


Case Study on Technology Strategy of Korean Companies1. Operating Results & R&D(2001년)


contents \position Position & Role of CTO

Hyundai Heavy President, Member on board of directors, participate executive meeting

Hyundai Motor Executive of Vice President, No, participate executive meeting

Samsung Electronics President, Member on board of directors, participate executive meeting

LG Chemical President, No, participate executive meeting

President, No, participate executive meeting,

Authority of R&D personnel management

Hyundai Mobis President(both R&D and Marketing), Member on board of directors,

Iljin Executive director, No, participate executive meeting

LG Electronics


Hyundai Heavy

To increase Value added of current business sectors and Produce world best products

Acquire core technology in main products. Direction of R&D is more important than speed (regards to industrial characteristics)

Hyundai Motor

Focus on future technology development such as environment related technology

Direction of automobile technology: Auto and Environment, Auto and Human, Auto and Society, Deal with Environmental issues in development of engine and transmission

Samsung Electronics

Take international leadership with own technology, basic technology patents, and international standardization

Advancement of technology management(6 sigma), advance research in strategic technology, accelerate 3P (people, process, product) innovation

LG Chemical

Keep leadership to find new business fields (R&D driven business development)

To find new business, focus on R&D in future competence of information-electronics materials and bioscience fields, Develop high value added products and process

LG Electronics

Innovation for the competence of current business and develop future complex fields products by researching new technology

Strengthen the relationship with business unit, Executing technology leadership 2005 innovation program

Hyundai Mobis

Shift aim from intergrated technology to source technology, accumulate self capability in new business (aerospace)

Leadership create in frontier technology, Focus on mechatronics tecnology, Acquire own technology in current business

IljinFocus on new business fields such as optical fibre, ceramics

R&D is creating new future customers


Contents Company

Main organizational sub-unit Role of sub-unit Globalization of R&D

Hyundai Heavy

R&D Headquarters, Shipbuilding & Ocean Research Institute, Industrial Research Institute, Machine-Electricity Institute, Techno Design Institute

Under the Headquarter 4 institutions are working independently

Local research institute in Hungry & Russia. Employ foreign manpower in drawing unit

Hyundai Motor

Planning & Coordination Office, Automobile development Institute (3 locations), Powertrain Development Institute, Design & Test Institute; in L.A., Detroit, Chiba in Japan, Germany, Sweden,

Manage and Coordinate domestic and abroad institutions, R&D priority setting,

No foreign researcher in domestic insitute

Samsung Electronics

Samsung Advanced Institute of Technology(SAIT), Samsung Semiconductor Research Institute, and 41 business unit research Institute, Abroad Institution in Japan, Britain, Germany, and Russia

Operating Technology Group in matrix system and Project team. Process infra team is consist of a special technician group of infra maintenace (reduced R&D cost 20-30%)

Joint Lab abroad. Researchers from Russia and China in domestic research institute. Establish 24 hours cyber research system world wide. Increase R&D outsourcing up to 30%

4. Organizational Structure for Research


ContentsCompany

Main organizational sub-unit Role of sub-unit Globalization of R&D

LGChemical

In LG Chem Research Park, Corporate R&D(NewBiz Incubation Unit, Core Technology Platform,Process Innovation) and Business UnitInstitute(Information Electronic Materials, BatteryTech Center, Industrial Material, Petrocemicals)

Direction of Business UnitInstitute(Cash Cow role): In houseR&D and Joint Venture. CoporateR&D Institute: Find New BusinessSeed, Acquire World Best CoreTech

Local research institute andoperation Satellite lab in theUSA Liason office in Russia &Europe. 10 foreign researchersin domestic institute

LGElectronics

LG Electronics Institute of Technology as a centralResearch institute and several Culture Unit(CU) inseveral business units

Cash cow business(Homeappliances): Business relatedInnovation, LGEIT: Future orientednew business

Local research institute in theUSA & India. M&A or estblishlocal start-up company. Fewforeign researchers

HyundaiMobis

Technical Research Institute consist of 20 teams

Research activities of 20 teamscomprise development of core parts,engineering analyses, and test &evaluation.

Utilize HMC Relationship

IljinOptical communication Research Institute andCeramic Research Institute

To find new business field Strategic alliance.

continued


Contents

Decision Process of Strategy Project Management

Hyundai Heavy

Make a Long-Term business Forcast in each business unit every later half of the year. Decide corporate level strategy in technology policy meeting(with the review of the council of Technology Development, members are CTO, busuness unit technology executive directors, president of each institute).

20% of projects are from researchers' free idea, by strategic planning is the rest.

Hyundai Motor

Set up corporate strategy for 10 years and revise it each year. After completion of long-term products planning, make a development plan, and make a plan of each research institute's role and function

Select development model through various process including a review of deliberation of products council. Under the authority of project manager prjects of each development stage are managed comprehensively and systematically.

Samsung Electronics

Long term technology startegy document exsists. Select research topic from new technology (or product) map. For the selection of project related to current business, discuss topics with business unit every 3 month. For basic research, researchers hand in self-report and checked by self-control inside of institute.

Apply stage gate method to project management. Invite business unit persons to take design review in each stage.

5. Decision Process of Strategy and Project Management


Contents

Decision Process of Strategy

LG Chemical

Make an alignment process of corporate strategy on corporate level. Reflect technology starategy in Corporate strategy to develop new technology and new market opportunity. Use scnario planning method, technology road map, technology portfolio

LG Electronics

Long term technology strategy and a year plan is decided by business technology strategy meeting every year. Concesus building process by regular meeting with business unit

Hyundai Mobis

Set up target technology by top-down and bottom up process. Focus on building up core technology capability in automobile module business and aerospace business.

IljinOn the criteria of customer needs and opportunity of future value Strategy is decided by investment council consists of executive directors.

(Continued)


contentscompany

Methodology

HyundaiHeavy

Technology tree, Technology tree, negative to use TRM

HyundaiMotor

TRM

SamsungElectronics

Technology tree, Technology tree, TRM, and Design for 6 Sigma

LG Chemical TRM, QFD, Tech tree, TRIZ, DOE etc.LGElectronics

TRM, AHP

HyundaiMobis

utilize TRM

Iljin -

6. Methodology of Setting up Technology Strategy


Contents Company

Foci of Performance Measurement

Free Research TimeMobility and Technology

Transfer

Hyundai Heavy

Incentive on royalty within a certain amount of revenue. Reports or papers are in difficulty of evaluation as an

Not officially approved free research, give an opportunity to carry out a research project by researcher's idea

Recently pursue co- works between researcher and engineer in production line. Technology development in major business products form

Hyundai Motor

Operate patents management team. Incentive on royalty within a certain amount of revenue.

Give free research opportunity and reward for excellent paper

Operate start-up business plaza inside firm

Samsung Electronics

Operate patent council to manage and evaluate patent. Individual knowledge capability is the most important factor in evaluation. Patent, technology transfer, royalty are important measures.

10% of total R&D is allocated to the free theme research

Researcers often move out to production field case by project and usually return. Estabish commercialization architecture for timely technology transfer and shortening time to business.

7. Human Resource Management


ContentsCompany

Foci of Performance Measurement Free Research TimeMobility and Technology

Transfer

LGChemical

Evaluate both work ability and individualqualifiscation. Promote researcher's technologytransfer to business sector not businessincubating.

Operatingresearch informalsystem. Support research fund foran informal research actitvities onnew technologies(30 researchinformal is organized now).

2% of mobility(quit) every year.Shortening time from R&D toBusiness. Strengtheningrelationship with business sector.

LGElectronics

Measure technological and business wiseachievement in concensus meeting with manager.Incentive on royalty

Cash cow business(Homeappliances): Business relatedInnovation, LGEIT: Futureoriented new business

Successful technology transfer,Dispatch researcher or researchteam to business unit

HyundaiMobis

Consider patent, papers, report, and the otheractivity in research

not officially approvedTechnology research inAerospace unit directly related toindustry, mobility low

IljinFocus on team evaluation. Check Researchmilestone and New products sales volume in 3years. Stock option when spin off the business

not officially approved. Participatinin out side seminar

Technolgy trnasfer is focusing onnew business sectors

(Continued)


contents company

Direction and Evaluation on Government S&T Policy

Hyundai Heavy Tax incentive scheme is effective. Most of Gov't R&D program is not matched with business sector needs. Develop a long term basic technology research. Not participate in Gov't R&D program

Hyundai MotorParticipated G7(Highly Advanced National Prjects) Program. Too extreme air polution regulation in Diesel automobil engine

Samsung Electronics

Gov't R&D program is not much effective. Participate just for cooperation among GRI, University, and business sector

LG ChemicalGov't R&D program is not much effective. Support fund for a project consortiumed among businees sectors or single company. Incremental tax incentive is not much effective in recent business fluctuation environment.

LG ElectronicsParticipating in Gov't R&D rpogram now. Not directly effective to business sector, only networking effect

Hyundai Mobis Participate Aerospace launching project.

IljinHas been successfully utilize Gov't R&D program. Now participate in Gov't R&D project.

8. Direction and Evaluation on Government S&T Policy

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