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Kenichi Ohmae

Wednesday, 26
th
April, 2006
Taipei International Convention Center Taipei, Taiwan
@copyright: no quotes without written consent of the speaker
Text is developed to assist the speech, and not meant to stand on its own
INNOVATION
Key to the Future
~the concern of the current situation
and challenge of Taiwan ~
Necessity is the mother of
invention
---Thomas Edison
J apan could survive only through
innovation
Trade War with the US for over 20 years
Patent law suits
ITC anti-dumping suits
Yen appreciation:36084 yen/$
Cut-throat domestic competition
Wage hikes ( now highest in the world)
Lower cost imports
Luckily, I have been involved in
assisting clients to transform
From copy cats to
innovative companies
From OEM/ODM to
own global brands
Business
process/system
Blue Ocean, or
pioneer into a new
territory
Ten approaches to innovate and to
breakthrough the wall
1.The strategic degrees of freedom (SDF)
2.Arbitrage
3.The new combination
4.Maximize the marginal contribution to fixed cost
5.Expand the digital continent
6.Fast forward
7.Utilize the underutilized
8.Real-time online case study, or What if?
9.What does this all mean?
10. (kousou ryoku
1.Strategic Degrees of Freedom(SDF)
1.Strategic Degrees of Freedom(SDF)
What is the customer looking for
What are the ways in which you can deliver
them(along how many axes)?
What specific things can you do?
What are the most cost effective ways to deliver
the value?
Examples
Camera
Coffee percolator
Air-conditioner
Laundry machine
Camera

DPE

lens

film

shutter



film film

2.Arbitrage
Take advantage of information gap
Bypass existing business system and
protocol
Offer better/cheaper products and services
Arbitrage:examples
Business system:Ciscos Connection online
SPAs such as Uniqlo and Inditex(Zara)
X-BPO/offshoring
Taylor-made commodities
Taylor-made housing in Australia using Adobe
CAD/CAM
Professional advice online
VoIP language lessons direct from the naives
Disappearance of the

s
A call centre operator sells
A customer orders direct
A wholesaler designs
A customer designs
e-bank,e-brokerage
e-travel agent
Dell=(CRM+SCM) on
ERPsudden death of IBM PC
Bypass,
Jump & Skip
Ciscois a Virtual Single Company(VSC)
Customer
Order
Ciscos
Procurement/Delivery
Direct Fulfillment
from Supplier
Sub Assembly
Component Procurement
D
i
s
t
r
i
b
u
t
i
o
n

C
h
a
n
n
e
l
Plan
Purchase
New product
Improvement
Development/Design
Product Information
BOM Information
Design Change
Order
Demand Forecast
Test/Quality Data
C
u
s
t
o
m
e
r
Marketing
Demand
/Forecast
information
ERP System
Manufacturing Control System
Autotest
Direct Fulfillment
Cisco Connection
Online
New Product
Introduction
D
y
n
a
m
i
c

R
e
p
l
e
n
i
s
h
m
e
n
t
S
i
n
g
l
e

E
n
t
e
r
p
r
i
s
e
3.New Combination
3.New Combination
Schumpeter: die neue combination
Most new things are combination of old things
Clock,camera, and credit card on cell phone
Microwave oven in traditional oven
Built-in dishwasher under kitchen counter
Remove redundancy in a living room:component
AV system
Shampoo and linse
Mobile auction ( Ms.Tomoko Namba)
Online dictionary:WikiPedia and Keijiro(by Alc)
3Cs:
What is a mobile phone?
Portable telephone
Internet device(mail,
search, address book,etc)
GPS
Tickets
Electronic wallet
Railway season tickets
Automobile key
Personal ID (voice)
Camera
i-Pod
TV(FOMA)
Game player
4.Contribution to the fixed cost
4.Contribution to the fixed cost
Maximize the marginal contribution to the fixed cost
Marginal contribution=price-variable cost=profit +fixed
cost
Variable pricing/real-time pricing
Hotel
Amusement parks
Theaters
Narrow-casting and point-casting
Supermarket
reataurants
Lastminute.com
Industrial machineries;communal utilization as in Mishima
5.Digital Continent
5.Digital Continent
Digital islands are now coalescing into a gigantic
continent
Mobile phones/Pucket network
PC
TV
Car/GPS/ETC
Internet/BB
Non-contact IC ships
Digital continent examples,,,
Use mobile phones as the key to a car
Combine with GPS
Public assessment
Remove toll gates, and pay later
Alzheimer/pets/kids
M2M
Security alarms using image sensor and
pucket network
Innovations in IT are creating
sudden death of old industries
Down loading music by iPODsCD in trouble
VTR DVDHDD or Blue rayBlock Buster
Payment with non-contact ICEDY prepaid card
Collaboration with mobile phone (e-wallet, e-tickets)
-chips to revolutionarize logistics
Integrated communication platform(VOIP,FAX, mail
and DB, etc. are to be integrated on browser)
How to cope with the rapid
structural change?
Directionally, always forecasted that the days
of IT will come, but speed was not clear
There will be clear winners and losers within a
few years
Excellent companies, in the old world, face
more difficulties to transform themselves
Few, if any, will be able to excel in the new
era:Kodak, Fuji, ATT,,,
Self-denial seems the key---but corporate
chemistry makes it difficult to change
Can not define even a product---
What is a PC?

MOBILE
WEARABLE
Cellular phone
i-MODE
PDA
e-WALLET

X-BOX
STB
TiVo
Movies and video contents
A major battle ground for key media/platform
BB-casting (VOD)
DVD R/W (4.7G)
Blue Ray(23G)---Majority:Sony, Samsung
HD DVD(20G)---Standard:NEC and Toshiba
SD---Matsushita
TPO( time , place , and occasion) needs to be
defined
Perhaps, two survivors
Home HD server (240-300 giga bites)
Portable player( DVD or SD)
VTR & DVD shipments in Japan
(thousand)
0
2000
4000
6000
8000
91 93 95 97 99 ' 01 ' 03
DVD
VTR
BBT Research Institute All Rights Reserved.
Source: Data on household electronic appliances 2003 J apan Electronics and Information Technology Industries Association (J EITA)
Tube TV & flat screen TV shipments in Japan
(million)
0
2
4
6
8
10
12
80 85 90 95 ' 00
Tube TV
Flat screen TV
(LCDPDP)
BBT Research Institute All Rights Reserved.
Source: Data on household electronic appliances 2003 J apan Electronics and Information Technology Industries Association (J EITA)
Camera Industry
No longer an industrycomponent, as in
mobile phone
Sudden death of
Film industry
Mini-labos
Emergence of micro-labos at home ( i.e. printer)
Camera is an input device to PC and printer is an
output device to PC
Profitability of camera manufactures is declining,
while that of lens manufacturers( like Tamron)
and ink-jet printer makers (like Epson) soaring
What is a camera?
Component of mobile
phone
I/O device of PC
Paper is reusable
Mini-lab is a printer at
home
Pictures are electronically
transmitted
Copies are almost free
So, the industrys fate???
World shipments of Digital cameras & film cameras
(million)
BBT Research Institute All Rights Reserved.
0
10
20
30
40
50
60
70
' 00 ' 01 ' 02 ' 03 ' 04
Source: Camera & Imaging Products Association
(est.)
Digital cameras
Film cameras
BBT Research Institute All Rights Reserved.
Source:J apanese Camera Industry Association
4.48
3.70
3.25
2.82
2.66
4.23
99 ' 00 ' 01 ' 02 ' 03 ' 04
Average Price of Digital Cameras
(ten thousand yen)
41
1-6
Digital Camera Shipment
10,000 units
BBT Research Institute All Rights Reserved.
Source Tokyo Shinbun 04/4/9
860
1000
740
550
630
280
310
1500
1500
1100
860
850
450
310
Canon
Sony
Olympus
Nikon
Fuji Photo
Casio
Konica-Minolta
03
04(plan)
Telephony
VOIP
Ubiquitous---i.e., integration of mobile, GPS, PHS,
fixed line,BB and wi-fi
Seamless with business environment
Decline of ATT
No clear winner as of now
Mobile phone as an integrating device for internet,
GPS, ticketing and settlement( electronic wallet)
Telephone to emulate mobile phone, or FMC
PC to replace, or merge with, telephone
Phone subscribers in Japan
(million)
0
20
40
60
80
100
92 94 96 98 ' 00 ' 02 ' 04 ' 06
Fixed phones
Mobile phones
IP phones
ISDN included
ISDN excluded
Est.
BBT Research Institute All Rights Reserved.
Source:Ministry of Public Management, Home Affairs, Posts and Telecommunications
Chips/displays
Felica/EDY(Sony)
IC tags---Chip(Hitachi):@\5
TRON chip---@\1
Organic EL(organic electro luminescence
display---Canon)
SED(Surface-conduction Electron-emitter
Display)
6.Fast-Forward
6.Fast-Forward
All new things have buds and seeds
You have to look around and see what is
coming
Early indications are somewhere in the
world
Get some hints from, e.g.
Fast growing companies in key countries
List of companies growing over 10,000% pa
Aging in Europe:sure to come here some day
Yamahas music schools
Exercise:5years out
Mobile phone
Living room electronics
Indias west coast
Your own company
Your own Family
Your price tag
Where are we going from here?
Home server
240 G and over
Family members to share the capacity
Movies, music, pictures and important
family records
Data Center to keep the back up
Access from PC or mobile
7.Utilize the underutilized
7.Utilize the underutilized
PDC of a bull dozer
iModedata communication using
underutilized pucket network by NTT
DoCoMo
School teachers and bulidings
Fishing harbors:convert them into pleasure
boat marinas
8.RTOCS(How to get out of gutter)
8.RTOCS(How to get out of gutter)
Real time online case study
What if you were XXX ?
50 times a year of hypothetical role playing
Kenichi Ohmae Graduate School of
Business in Business Breakthrough
UniversityJ apans first accredited MBA
AirCampus:cyber university
9.What does this all mean?
9.What does this all mean?
Integrate fragmented phenomena and observations and ask
What does this all mean?
Then you can see a much bigger picture, e.g.
Radio stations and TV stations are becoming iputsto a portal in a
digital broadcasting era
Convergence of telecom and broadcasting is actually the
absorption of broadcasting by telecom/network
Always ask, So what?
...migrating toward a Web-shaped corporation
The 20th Century Company
Overseas operations
Corporate functions
A 21st Century Corporation
-Rigid Business System
with equity-links
Marke-
ting
Sales
Manu-
fac-
turing
Service R&D
$bill
collection
R&D
Engi-
neering
in
Bangalore,
Hyderabad,
Pune
in Silicon
valley
Telco
Sales Service
in Vietnam
(Outsourced)
Marke-
ting
Cus-
tomers
Internet
Out-
source Major markets
$
-Networked functions outsourced
with key levers at hand
"The
Company"
Manu-
fac-
turing
Major changes taking place in
consumer electronics market
----Everything is emerging as I/O
device to PC
10.(Kousou)
10.(Kousou)
is level of thinking above
Concept and vision
Strategy
Business plan
Always comes up in one individuals mind
Triad Power
The Invisible Continent
Multimedia Super Corridor-A country in the country
Cyber Law of 1998
PETALING J AYA
KLCC
KLANG
PELABUHAN
KLANG
KLIA
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SEREMBAN
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SOUTH KLANG VALLEY EXPRESSWAY
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PULAU CAREY
KAJ ANG
SEMENYIH
SEPANG
SALAK
BANTING
TELOK DATOK
TELOK
PANGLIMA
GARANG
DENGKIL
BERANANG
PORT
DICKSON
AIRPORT CITY
SHAH ALAM
BANDAR BARU
BANGI
COUNTRY
HEIGHTS
BANDAR BARU
NILAI
BANDAR BARU
SALAK TINGGI
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PUTRAJAYA
PULAU INDAH
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MSC boundary*
KL Tower
* Includes KLCC and KL Tower
Ten approaches to innovate and to
breakthrough the wall
1.The strategic degrees of freedom (SDF)
2.Arbitrage
3.The new combination
4.Maximize the marginal contribution to fixed cost
5.Expand the digital continent
6.Fast forward
7.Utilize the underutilized
8.Real-time online case study, or What if?
9.What does this all mean?
10. (kousou ryoku
The developed countries,
including Taiwan, must excel in
The Fourth Wave
First wave:Argentine and Australia
Second wave:China
Third wave:India
Conceptual thinking, a la Daniel Pink
High touch/high concept
Right brain
Sense as opposed to functions and cost
Individuals, above nations and companies, to
create wealth
Innovate, innovate, innovate to keep good life!
Thank you for your attention!
To continue the tour of the world
Contact the premium tour guide:
Kenichi Ohmae
Fax:81-3-3239-0339
secretary@work.ohmae.co.jp
HP:http://www.bbt757.com
HP:http://www.kohmae.com
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http://www.cw.com.tw/ohmae.htm