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[Korea Herald] `Korean firms need disruptive innovation`
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 작성일 10-01-20 16:38
 조회 : 9,848
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[Korea Herald]2010-01-20
The acclaimed author of "The Innovator`s Dilemma" yesterday urged Korean companies to refurbish their entrepreneurial spirit and apply the "disruptive innovation model" to pull ahead in their race with China and India.
"Leaders of Samsung, Hyundai and LG need to understand the disruptive innovation model and think about what made them so great in the beginning to create the next wave of growth," said Harvard business professor Clayton Christensen.
In a speech sponsored by the Institute of Global Management in Seoul, Christensen explained the concept of disruptive innovation -- a business model he engineered -- as a process by which a company starts producing simple products and then relentlessly moves "up market" to displace established competitors.
Take North America`s steel industry as an example.
A mini-steel mill, as opposed to a vertically integrated steel mill, was a secondary steel producer which obtained most of its iron from recycled automobiles in the 1970s.
Small in scale, mini-steel mills were more cost effective and produced low-quality products such as rebar.
They were welcomed by integrated mills` sheet-steel makers at first as profit margins for sheet steels were 25 to 30 percent, when it was only was 4 to 7 percent for rebar makers.
But using its low-cost strategy and low-labor cost, mini-mills slowly entered the angle iron and structural steel market and eventually pushed out integrated mills` steel makers. Today, mini mills control 60 percent of the market.
"Giants actually want to drop out rather than fight you -- this is when disruptive innovation is happening," Christensen said.
He pointed out a problem for Korea in doing this -- the lack entrepreneurial culture and spirit. When Japan disrupted the U.S. market in 1980s, America`s employees started ventures and the survivors are those who ventured out. However, research has concluded that the majority of start-up ventures in Silicon Valley were not launched by Americans, but by Indians, Chinese and Koreans who went to Stanford University and UC Berkeley.
"Silicon Valley was successful not because they had more ideas but because it provided a daring and encouraging environment for ventures to grow," the professor said.
Starting simple in every market is important, Christensen added. He claimed that the rechargeable electronic car capable of speeding up to 330km from BYD Company in China must be a "scam" at its present level, and that electronic cars must start at the golf-cart level first.
Experts were generally in agreement with Christensen.
"Korean companies brought in state-of-the-art technologies, catered to the Korean customers, and also exported to developing countries. Entrepreneurs here need to practice more these innovation and evolve further, but from the basics," said Shin Cheol-kyun, a research fellow at the IGM.
(cynthiak@heraldm.com)
By Cynthia J. Kim
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