Why Strategy Matters?

Euiho Suh

POSMIT Lab.POSTECH Strategic Management of Information and Technology

Why strategy matters?

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■ New Paradigm: – God helps those who have strate-

gies, not those who just work hard without strategies!

■ Old Paradigm:– God helps those who help them-

selves!

CLASSIC COKE vs. NEW COKE

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vs.

ASIANA AIR vs. KOREAN AIR

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We are young, too !

STARBUCKS SYNDROME

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The VCR Battle (VHS vs. Betamax)

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≪SONY: Betamax,

1974Panasonic: VHS,

1976

95% of the VCR market, 1988

SONY: The biggest loser of standards war?

UP-SELL & CROSS-SELL

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QWERTY TYPEWRITER

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1800s Underwood TYPEWRITER

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IT Management Case 1 : Asiana Airlines (1/6)

IT Management Case 1 : Asiana Airlines (2/6)

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ButTracking and managing passengers’ bag-

gage has always been important to successful airlines

RFID-enabled air baggage tracking and control systemSolution

Use barcodes to implement a loss-free system

Problem

Whether the person picking up baggage at the destination matched with the barcode information of the baggage

Higher likelihood of terrorist attacks

IT Management Case 1 : Asiana Airlines (3/6)

■ RFID?

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RFID Radio Frequency Identifi-cation

Automatic identification method, rely-

ing on storing and remotely retrieving data using devices called RFID tags or transponders

No contact or line-of-sight required Short time to read the data of the tagSimple maintenance, no other cost to preserve un-

likely barcode system Ability to read multiple tags simultaneously

(faster, efficient) Information gathering can be 100% automated

and in real time

Character

IT Management Case 1 : Asiana Airlines (4/6)

■ Position of using RFID

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Check-in counter Security check point

Baggage handling system

Baggage sorting and loading sys-

tem

Save baggage numbers to baggage tag’s barcode in the RFID tags

Affix tags to the baggage

Checked-in baggage is inspectedResult are linked to passenger information

in real time

By using the tag information,Sent the baggage to the correspondingbaggage sorting area

Sort pieces of baggage according to theirdestination and flight number

Load baggage onto the aircraft

IT Management Case 1 : Asiana Airlines (5/6)

■ Position of using RFID (Cont’d)

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Check and send “passenger on-board informa-tionto the transportation system

RFID tags carried by passengers are distrib-uted

Carry out final checksHandle the baggage of any passenger

not on board

Reads the affixed RFID tag“Wrong destination baggage” check

Check whether the baggage information matches the passenger tag information at exit

Cross-pickup check

Boarding gate reader

Baggage reconcilia-tion system

Carousel

■ Results

IT Management Case 1 : Asiana Airlines (6/6)

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The development project was completed in April 2005 as scheduled

The demonstration was carried out for about eight months, from May to December 2005Results

Tracking baggage in real time Preventing the miss-loading of baggage & baggage loss Preventing baggage cross-pickup Minimizing sorting errors by the baggage handling system Minimizing the time needed to match passengers and bag-

gage Checking passenger information regarding

dangerous baggage in real time Displaying information about arrived baggage to baggage

handlers

IT Management Case 2 : Shinhan Bank (1/5)

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IT Management Case 2 : Shinhan Bank (2/5)

■ Characteristics of Financial Product

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Financial Product

Intangibility

Inseparability

Lack of SpecialIdentity

GeographicalDispersion

Balancing Growth

with Risk

IndividualMarketing

System

(Source: Arthur Median)

IT Management Case 2 : Shinhan Bank (3/5)

■ Shinhan Bank’s CRM

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SRMS(Shinhan Relationship Management Sys-tem)

• introduced in early 2000 SRMS

Catching Symptom of Customer Secession

Scheduling for Sales-

people

Customized Portfolio

IT Management Case 2 : Shinhan Bank (4/5)

■ Structure of SRMS

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Back-end Office System Middle Office System Front Office System

Data Collecting and Auditing Mining

DB

AnalysisCRM Mart

CRMDB

InternalData

ExternalData

Visualized Answer tool

Visualized Campaign Evaluating tool

Visualized Cam-paign

Design tool

Data MiningSystem

OLAPSystem

CampaignManagement

System

Call Center

Branch

Internet Banking& Tele-Banking

CD / ATM

Tele-marketer

DMI

Customers

CustomerInformation

CampaignInformation

SamplingTransformationTransmission

IT Management Case 2 : Shinhan Bank (5/5)

■ Results

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(Source: http://www.shinhanbank.com)

(Source: 성공적인 CRM 추진전략과 구축 방안에 관한 연구 )

0

50

100

150

200

250

300

350

400

450

500

2001 2002

Net profit of Shinhan Bank

• Staff can focus their original task

• Target marketing is available

• United customer managing is avail-able

Results of Shinhan’s CRM

• United performance of evaluation is available

• Establishing strat-egy in customer’s view is available

347 billion won

457 billion won

IT Management Case 3 : Namyang Daily (1/4)

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IT Management Case 3 : Namyang Daily (2/4)

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■ White milk : a fresh milk that is not added any ingredients or taste

■ Functional milk : a milk that is strengthened or removed specific ingredients

■ Processed milk : a milk that is processed to add some taste or fragrance

■ Namyang’s Strategic Choice

IT Management Case 3 : Namyang Daily (3/4)

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White Milk

Stable marketLow production costs

Functional/Processed Milk

Well-being trend Higher profitsAdvantage

Disadvantage Strong competitorsLower profits and Customer’s needs

High elasticity of demandHigh production and development costs

All the main competitors focused on Functional & Processed milk

Namyang focused on white milkStrategic

Choice

GT Technology!!!

■ Results

IT Management Case 3 : Namyang Daily (4/4)

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100 million packs sold in 100 days after Launching

The most sold milk in a day (1million packs a day)Results

Change the Basis of Competition

Differentiate from other white milk through its “tastes” (Breaking the fixed idea that “White milk is not delicious”)

Success Factor

90%

10%

Market Share in Milk BusinessSales Volume Compared with

other Hit Product

맛있는 우유 GT 바나나맛 우유 검은콩 우유

1,000,000

700,000

300,000

Other milk brand

맛있는 우유 GT

(Source: 2004.10.17 – 제일경제 )