1
00:00:00.306 --> 00:00:01.156
Hello

2
00:00:01.456 --> 00:00:03.956
In this session, we're going to talk about

3
00:00:03.956 --> 00:00:06.006
corporate entreprenuership

4
00:00:06.006 --> 00:00:11.506
Corporate entrepreneurship is
special type of entrepreneurship

5
00:00:11.506 --> 00:00:15.706
So, why we care for corporate entreprenuership?

6
00:00:16.056 --> 00:00:19.456
In order to understand corporate entreprenuership,

7
00:00:19.456 --> 00:00:22.256
we need to understand history

8
00:00:22.256 --> 00:00:26.656
and philosophical reason behind corporate entreprenuership

9
00:00:27.306 --> 00:00:33.656
Let's go through philosophical
and historical reasoning

10
00:00:33.656 --> 00:00:36.506
why we care for corporate entreprenuership

11
00:00:36.506 --> 00:00:38.556
Are you ready?
Let's begin

12
00:00:38.906 --> 00:00:41.156
Do you remember this guy?

13
00:00:41.156 --> 00:00:43.556
He is very famous economist

14
00:00:43.556 --> 00:00:45.506
His name is Schumpeter

15
00:00:45.506 --> 00:00:52.556
He published one of the famous book
in 1934 in english

16
00:00:52.556 --> 00:00:56.406
The book is
The theory of economic development

17
00:00:56.406 --> 00:01:00.656
In his book, he emphasize entreprenuers

18
00:01:00.656 --> 00:01:03.506
as the primary engines of innovation

19
00:01:04.206 --> 00:01:06.506
He said that, entreprenuers

20
00:01:06.506 --> 00:01:10.956
drive economic development
by introducing innovations

21
00:01:10.956 --> 00:01:13.806
Do you remember 5 different types of innovation?

22
00:01:13.806 --> 00:01:17.206
For example, new product, new market,

23
00:01:17.206 --> 00:01:21.256
new organization, new material,
new method of production

24
00:01:23.156 --> 00:01:27.706
According to him,
key to success of economic development is

25
00:01:27.706 --> 00:01:31.339
entrepreneur innovation

26
00:01:32.948 --> 00:01:33.998
No argument

27
00:01:33.998 --> 00:01:37.098
Everyone was impressed by his idea

28
00:01:37.489 --> 00:01:38.489
Then, what happened?

29
00:01:40.666 --> 00:01:42.416
Ten years later,

30
00:01:42.416 --> 00:01:44.216
he published another book

31
00:01:44.216 --> 00:01:48.766
which is
Capitalism, Socialism, and Democracy

32
00:01:48.766 --> 00:01:52.816
In his book, he argued that

33
00:01:52.816 --> 00:01:58.116
large companies surpass entrepreneurs

34
00:01:58.116 --> 00:02:00.066
in innovation capacity

35
00:02:00.066 --> 00:02:04.266
Because large companies have

36
00:02:04.266 --> 00:02:09.566
resources, money, manpower, and the others

37
00:02:10.266 --> 00:02:12.516
So, he said that

38
00:02:12.516 --> 00:02:17.316
corporations internalize R&D, financing,
and management

39
00:02:17.666 --> 00:02:22.216
So, the companies
exploit economies of scale

40
00:02:22.716 --> 00:02:25.416
Basically, he said that

41
00:02:26.316 --> 00:02:30.166
big company generate innovation

42
00:02:30.316 --> 00:02:31.916
Not entrepreneur company

43
00:02:32.216 --> 00:02:35.016
It is totally opposite

44
00:02:35.016 --> 00:02:37.166
Ten years ago, he argued

45
00:02:37.166 --> 00:02:40.266
he emphasized on entrepreneurs' role

46
00:02:40.266 --> 00:02:43.066
But 10 years later, he changed his mind

47
00:02:43.066 --> 00:02:46.889
From my study, I'm wrong

48
00:02:49.076 --> 00:02:50.876
According to my recent research,

49
00:02:50.876 --> 00:02:56.326
I found that big corporations produce more innovations

50
00:02:59.276 --> 00:03:02.676
There is two phases of his argument

51
00:03:02.676 --> 00:03:07.376
Phase one, in early phase,
he argued that entrepreneurs drive innovation

52
00:03:09.476 --> 00:03:13.026
10 years later, phase two,
he said that

53
00:03:14.276 --> 00:03:16.726
large company dominate innovation

54
00:03:16.726 --> 00:03:22.326
because they have money, knowledge,
manpower, and resources

55
00:03:24.126 --> 00:03:29.126
Small company cannot compete with large company

56
00:03:29.876 --> 00:03:31.576
Look at this picture

57
00:03:31.676 --> 00:03:35.476
In the middle, this guy is
Lee Jae-yong

58
00:03:35.476 --> 00:03:39.176
He is the CEO of Samsung Electronics

59
00:03:39.176 --> 00:03:44.376
Left is former president, Moon Jae-in

60
00:03:44.376 --> 00:03:47.576
Lee Jae-yong introduced new building to

61
00:03:48.676 --> 00:03:50.176
president Moon Jae-in

62
00:03:50.176 --> 00:03:51.376
And he said that

63
00:03:51.376 --> 00:03:53.426
Look at this building

64
00:03:53.426 --> 00:04:00.076
This building cost 3 times more than
Incheon Airport

65
00:04:01.426 --> 00:04:04.276
Samsung Electronics invested

66
00:04:04.276 --> 00:04:07.276
tons of money to build up

67
00:04:07.276 --> 00:04:10.826
new semi conduct building, factory

68
00:04:11.016 --> 00:04:12.766
How much?

69
00:04:12.766 --> 00:04:16.766
3 times expensive than Incheon Airport

70
00:04:16.966 --> 00:04:20.516
Incheon Airport is really big airport

71
00:04:21.266 --> 00:04:23.116
It's world-class airport

72
00:04:23.116 --> 00:04:29.116
But Samsung Electronics spent 3 times more
than Incheon Airport

73
00:04:29.866 --> 00:04:31.116
Another one

74
00:04:31.116 --> 00:04:36.266
This is the CEO of Hyundai Car Group,
Hyundai Motors

75
00:04:36.266 --> 00:04:41.066
Hyundai Motors announced to invest $16B

76
00:04:41.066 --> 00:04:45.466
$16B in Korea's next generation mobilities

77
00:04:46.116 --> 00:04:49.616
Where's the money coming from?

78
00:04:49.616 --> 00:04:56.116
Hyundai Motor Group invest $16B to do something

79
00:04:57.466 --> 00:05:01.566
How can we compete with this big corporation?

80
00:05:01.566 --> 00:05:03.266
If you are startup owners,

81
00:05:03.266 --> 00:05:06.966
if you are future startup founders,

82
00:05:06.966 --> 00:05:08.516
can you compete with them?

83
00:05:08.716 --> 00:05:12.866
And who produce innovation?

84
00:05:12.866 --> 00:05:16.989
You or Hyundai Motor Groups or Samsung Electronics?

85
00:05:17.366 --> 00:05:21.866
Of course, Samsung Electronics
or Hyundai Motor Group will generate

86
00:05:21.866 --> 00:05:25.266
much more innovation than you

87
00:05:25.266 --> 00:05:29.066
Than just a small and no-named entrepreneur company

88
00:05:30.016 --> 00:05:31.166
What do you think?

89
00:05:31.616 --> 00:05:35.766
Let's go back to Schumpeter's change
in his hypothesis

90
00:05:35.916 --> 00:05:40.016
His change sparked decades of debate

91
00:05:40.016 --> 00:05:44.216
Then later, we could expand our perspective

92
00:05:44.466 --> 00:05:49.866
So, we got more nuanced realites

93
00:05:50.216 --> 00:05:51.166
What is it?

94
00:05:51.166 --> 00:05:54.366
Large companies dominate innovation

95
00:05:54.366 --> 00:05:57.966
But these innovations are incremental innovation

96
00:05:58.516 --> 00:06:00.116
On the other hand,

97
00:06:00.116 --> 00:06:05.366
small companies excel in radical innovation

98
00:06:05.966 --> 00:06:08.366
Basically, there are two different types of innovation

99
00:06:09.966 --> 00:06:11.366
In most case,

100
00:06:11.366 --> 00:06:13.366
large companies dominate innovations

101
00:06:13.366 --> 00:06:15.466
But their innovations are based on

102
00:06:15.466 --> 00:06:17.816
incremental innovation

103
00:06:18.016 --> 00:06:20.816
But, sometimes,

104
00:06:20.816 --> 00:06:23.866
small companies generate innovations

105
00:06:23.866 --> 00:06:26.905
But these innovations are radical innovation

106
00:06:26.905 --> 00:06:31.505
Radical innovation means
a little bit like game changing innovation

107
00:06:32.905 --> 00:06:36.105
So, it looks like this

108
00:06:36.255 --> 00:06:39.455
There is David and Goliath

109
00:06:39.455 --> 00:06:41.405
You know the David and Goliath

110
00:06:41.405 --> 00:06:44.055
if you are Christian and you know the story

111
00:06:44.055 --> 00:06:46.655
Although I'm not a Christian,
I knew the story

112
00:06:46.655 --> 00:06:49.555
Because it's pretty famous story

113
00:06:49.555 --> 00:06:53.455
Anyway, Goliath, who is giant,

114
00:06:53.455 --> 00:06:55.705
and David, who is a boy

115
00:06:57.355 --> 00:06:58.905
Who won the game?

116
00:06:58.905 --> 00:07:00.855
David won the game

117
00:07:00.855 --> 00:07:02.305
because David

118
00:07:03.755 --> 00:07:08.105
had unique weapon, which is rolling stone

119
00:07:08.905 --> 00:07:12.355
With this stone,

120
00:07:12.355 --> 00:07:15.055
David successfully killed Goliath

121
00:07:15.055 --> 00:07:16.455
What do you think?

122
00:07:16.455 --> 00:07:20.105
Goliath represents big companies

123
00:07:20.105 --> 00:07:23.205
Big companies that dominate innovation

124
00:07:23.205 --> 00:07:26.705
But these innovations are incremental innovations

125
00:07:26.955 --> 00:07:29.355
But at the same time,

126
00:07:29.355 --> 00:07:32.905
David is less likely to innovate the situation

127
00:07:32.905 --> 00:07:36.655
But if he generate innovation,

128
00:07:36.655 --> 00:07:39.416
this type of innovation would be radical innovation

129
00:07:39.666 --> 00:07:42.316
Very dangerous and change the game

130
00:07:43.216 --> 00:07:45.916
This is kind of relationship between

131
00:07:45.916 --> 00:07:49.766
big company
and small and entrepreneur company

132
00:07:51.266 --> 00:07:55.666
Again, why do we care for

133
00:07:56.066 --> 00:07:57.466
this relationship?

134
00:07:58.766 --> 00:08:00.966
This is traditional watch

135
00:08:01.416 --> 00:08:05.316
Traditional watch is run by spring

136
00:08:07.316 --> 00:08:10.566
Then, in 1969, what happened?

137
00:08:10.566 --> 00:08:14.866
One of the Japanese company
invented new types of watches

138
00:08:15.116 --> 00:08:20.116
This watch is called
Quartz watch

139
00:08:20.116 --> 00:08:23.166
Quartz watch is operated by

140
00:08:23.166 --> 00:08:25.016
a battery

141
00:08:25.016 --> 00:08:27.366
Inside a watch, there is battery

142
00:08:27.366 --> 00:08:30.016
It's kind of electronic watches

143
00:08:30.466 --> 00:08:31.266
Then what happened?

144
00:08:31.266 --> 00:08:34.466
This Quartz watchs cost downd

145
00:08:34.466 --> 00:08:35.916
It's very cheap

146
00:08:35.916 --> 00:08:38.266
And mechanical watches were expensive

147
00:08:40.666 --> 00:08:45.516
Switzerland watch industry collapsed

148
00:08:45.966 --> 00:08:47.066
Dramatically

149
00:08:47.666 --> 00:08:51.066
Later on, we call this Quartz Crisis

150
00:08:51.566 --> 00:08:54.216
In Switzerland, employment of watch making

151
00:08:54.216 --> 00:08:59.816
fell from 90,000 to 28,000 people

152
00:09:00.416 --> 00:09:04.566
Also, Switzerland's global watch production shares

153
00:09:04.566 --> 00:09:08.466
fell from 95% to 15%

154
00:09:10.516 --> 00:09:12.416
80% were gone

155
00:09:16.505 --> 00:09:19.105
So, U.S. brands like

156
00:09:19.105 --> 00:09:23.205
Hamilton and Waltham collapsed

157
00:09:26.555 --> 00:09:28.705
So, that's why we should care for

158
00:09:28.705 --> 00:09:31.905
the relationship between
big company and small company

159
00:09:31.905 --> 00:09:34.105
And we should keep eye on

160
00:09:34.105 --> 00:09:38.105
the behaviors of small company
or entrepreneur innovation

161
00:09:38.105 --> 00:09:40.705
Because this entrepreneur innovation

162
00:09:40.705 --> 00:09:42.555
will be dangerous

163
00:09:42.555 --> 00:09:45.205
and they will change the game

164
00:09:47.327 --> 00:09:49.027
Hollywood studio

165
00:09:49.777 --> 00:09:50.727
It's a movie

166
00:09:50.727 --> 00:09:52.977
and also, there's a TV

167
00:09:54.477 --> 00:09:55.727
Then, what happened?

168
00:09:55.727 --> 00:09:59.027
Once TV was introduced in the market,

169
00:09:59.027 --> 00:10:03.127
then, TV's adoption

170
00:10:03.127 --> 00:10:04.977
was so fast

171
00:10:07.677 --> 00:10:10.277
Movie industry wene in trouble

172
00:10:10.277 --> 00:10:15.127
Box office receipts decreased by 45%

173
00:10:16.777 --> 00:10:17.927
Half gone

174
00:10:17.927 --> 00:10:20.277
50% gone

175
00:10:20.577 --> 00:10:22.027
Because of TV

176
00:10:22.977 --> 00:10:27.927
So, if there's new innovation,
radical innovation,

177
00:10:27.927 --> 00:10:29.777
then the existing company

178
00:10:29.777 --> 00:10:34.127
suffer from those kind of radical innovation

179
00:10:34.671 --> 00:10:35.971
I will give you another example

180
00:10:35.971 --> 00:10:37.421
This is Kodak

181
00:10:37.421 --> 00:10:42.021
Kodak was originally
number one player in film industry

182
00:10:42.021 --> 00:10:45.071
Kodak, number 1 filmmaker in the world

183
00:10:45.071 --> 00:10:49.771
But this Kodak filed for bankruptcy in 2012

184
00:10:49.771 --> 00:10:51.421
Look at this picture

185
00:10:51.871 --> 00:10:54.671
Kodak announed the backruptcypan

186
00:10:54.671 --> 00:11:00.821
and reporters are taking picture
and look at this camera

187
00:11:00.821 --> 00:11:04.671
All these cameras are made in Japan

188
00:11:04.671 --> 00:11:09.821
First one is Fuji, Sony, Nikon, Canon,

189
00:11:09.821 --> 00:11:11.271
and the last one is Samsung

190
00:11:11.271 --> 00:11:12.821
It's Korean company

191
00:11:12.821 --> 00:11:17.671
Anyway, these all camera is not film camera

192
00:11:17.671 --> 00:11:18.921
It is digital camera

193
00:11:18.921 --> 00:11:21.171
Why Kodak failed?

194
00:11:21.171 --> 00:11:23.421
Because of digital camera technology

195
00:11:23.421 --> 00:11:27.671
But ironically,
who invented digital camera technology?

196
00:11:28.071 --> 00:11:31.221
Kodak invented digital camera technology

197
00:11:31.221 --> 00:11:34.671
But the problem was
Kodak executives

198
00:11:35.871 --> 00:11:38.671
tried to keep it secret about this invention

199
00:11:38.671 --> 00:11:40.621
Because

200
00:11:41.421 --> 00:11:45.721
they felt fear of cannibalization

201
00:11:45.721 --> 00:11:46.571
So, at that time,

202
00:11:46.571 --> 00:11:50.971
that's why they didn't 
use the digital camera technology

203
00:11:50.971 --> 00:11:52.871
and they tried to keep it secret

204
00:11:53.421 --> 00:11:54.571
Then what happened?

205
00:11:54.571 --> 00:11:58.671
Kodak licensed some of its
digital camera technologies

206
00:11:58.671 --> 00:11:59.921
to Japanese company

207
00:11:59.921 --> 00:12:04.471
And then, Japanese company
took the technology,

208
00:12:04.471 --> 00:12:09.171
then made a new type of camera,
which is digital camera

209
00:12:09.621 --> 00:12:14.921
For the first time, Sony
released the Mavica,

210
00:12:14.921 --> 00:12:18.021
which is the first commercial
digital camera in 1981

211
00:12:19.671 --> 00:12:22.082
Then Kodak went bankruptcy

212
00:12:22.266 --> 00:12:23.266
Look at this

213
00:12:23.266 --> 00:12:24.766
This is Mavica

214
00:12:24.766 --> 00:12:28.716
First digital camera in the world in 1981

215
00:12:28.716 --> 00:12:31.716
Instead of using analog film,

216
00:12:31.716 --> 00:12:34.966
this camera use some thumb drive

217
00:12:34.966 --> 00:12:37.416
Probably, you don't know what it is

218
00:12:37.416 --> 00:12:39.816
That is floppy disk

219
00:12:39.816 --> 00:12:41.766
It's very similar to thumb drive

220
00:12:43.616 --> 00:12:47.416
Then, this digital camera

221
00:12:48.166 --> 00:12:51.766
made Kodak disappeared

222
00:12:55.666 --> 00:12:57.166
There's another example

223
00:12:57.166 --> 00:13:01.566
Do you remember the relationship between
Netfilx and Blockbuster?

224
00:13:02.366 --> 00:13:08.466
Netflix started with DVD-by-mail service in 1998

225
00:13:08.466 --> 00:13:14.316
At that time, Blockbuster had
more than 6,000 stores all over the world

226
00:13:14.916 --> 00:13:19.266
Then, Netflix introduced streaming service in 2007

227
00:13:19.266 --> 00:13:24.466
and in 2009, Netflix stream service

228
00:13:24.466 --> 00:13:26.566
overtook DVD shipments

229
00:13:26.566 --> 00:13:28.266
Then later, what happened?

230
00:13:28.266 --> 00:13:31.466
Nobody used Blockbuster store

231
00:13:31.466 --> 00:13:33.166
So, Blockbuster went on bankruptcy

232
00:13:36.175 --> 00:13:41.025
That's why we should care for startup's innovation

233
00:13:41.025 --> 00:13:44.425
And we should keep eye on startup's innovation

234
00:13:45.375 --> 00:13:49.325
Because their innovations sometimes
are very dangerous

235
00:13:52.082 --> 00:13:54.932
He is Dr. Chirstensen

236
00:13:54.932 --> 00:14:00.332
Although he passed away,
he left very insightful idea

237
00:14:00.332 --> 00:14:01.132
He said that

238
00:14:01.132 --> 00:14:04.382
Successful companies that did everything right

239
00:14:04.382 --> 00:14:06.582
still lose their market leadership

240
00:14:06.582 --> 00:14:12.682
If they ignore disrupted innovation

241
00:14:13.732 --> 00:14:15.782
Disrupted innovation

242
00:14:16.232 --> 00:14:19.932
from mostly startup and small company

243
00:14:20.182 --> 00:14:24.332
So, if big company ignore
those kind of innovation,

244
00:14:24.332 --> 00:14:25.932
they could be dangerous

245
00:14:26.932 --> 00:14:28.182
His idea was,

246
00:14:28.182 --> 00:14:31.482
disruptive innovation arrives in the form of

247
00:14:31.482 --> 00:14:36.932
minor threats, so we ignore them

248
00:14:37.482 --> 00:14:41.082
It is easy for us to ignore this minor threats

249
00:14:41.782 --> 00:14:44.882
According to him, 
there are two different types of disruptors

250
00:14:44.882 --> 00:14:46.282
The first disruptor

251
00:14:46.282 --> 00:14:51.032
take a low-end market of existing industry

252
00:14:51.032 --> 00:14:56.582
or second disruptor create
entirely new market

253
00:14:57.482 --> 00:15:01.732
Then try to steal the consumers

254
00:15:02.632 --> 00:15:05.632
away from the existing companies

255
00:15:05.632 --> 00:15:08.432
Again, they create a new market,

256
00:15:08.432 --> 00:15:12.466
and steal the consumers away from
the existing companies

257
00:15:13.817 --> 00:15:17.217
So, there are two different types of
disruptors

258
00:15:17.217 --> 00:15:20.367
The first disruptor, we say
Low-end disruptor

259
00:15:20.367 --> 00:15:25.217
Again, this low-end disruptor
arrived in the market at the bottom

260
00:15:25.217 --> 00:15:26.717
I want to give you an example

261
00:15:26.717 --> 00:15:32.667
There are two different types of
steel making companyl

262
00:15:32.667 --> 00:15:37.117
The first company is integrated mil

263
00:15:37.117 --> 00:15:43.667
This company is based on
traditional method of steel making

264
00:15:43.667 --> 00:15:48.417
Basically, this company
boil down the soil

265
00:15:50.317 --> 00:15:54.817
and put additional stuff,
such as coal and iron ore

266
00:15:54.817 --> 00:15:56.767
Then, they get the steel

267
00:15:56.767 --> 00:15:58.667
We say it's integrated mill

268
00:15:58.925 --> 00:16:04.225
Another type of steel making is
mini-mill, on the right side

269
00:16:04.225 --> 00:16:08.825
Instead of boiling down the soil,

270
00:16:08.825 --> 00:16:11.375
this mini-mill use electricity

271
00:16:11.375 --> 00:16:16.475
They melt down existing steel

272
00:16:16.475 --> 00:16:18.775
So, they reuse existing steel

273
00:16:18.775 --> 00:16:21.025
This is kind of recycling

274
00:16:21.525 --> 00:16:23.125
First one is traditional method

275
00:16:23.125 --> 00:16:25.425
and this second one is alternative method

276
00:16:25.825 --> 00:16:30.525
Of course, traditional method
produced high-quality steel

277
00:16:30.525 --> 00:16:34.575
On the other hand, alternative method
produced low-quality steel

278
00:16:35.075 --> 00:16:37.575
What is the good think about mini-mill?

279
00:16:38.875 --> 00:16:45.725
Mini-mill can
cost down the steel production

280
00:16:46.725 --> 00:16:49.775
This steel is 20% lower cost

281
00:16:50.175 --> 00:16:52.375
Now, you understand the relationship

282
00:16:52.375 --> 00:16:55.925
There are two different types of steel making

283
00:16:56.425 --> 00:16:59.431
First one, integrated mill
and second one, mini-mill

284
00:17:00.527 --> 00:17:04.727
In order to understand
these two companies' relationship very well,

285
00:17:04.727 --> 00:17:07.527
you need to understand industry style

286
00:17:07.527 --> 00:17:14.177
Inside, the steel making industry
there are 4 different types of products

287
00:17:14.177 --> 00:17:16.827
The first one is Rebar

288
00:17:16.827 --> 00:17:19.377
Probably, you couldn't see rebar

289
00:17:19.377 --> 00:17:26.527
because rebar can be used for
building your house

290
00:17:26.977 --> 00:17:29.827
Inside the building, there are lots of rebars

291
00:17:30.377 --> 00:17:32.477
Second one is Angle Iron

292
00:17:32.477 --> 00:17:34.377
Third one is Structural Steel

293
00:17:34.377 --> 00:17:36.627
and last one is Panel Steel

294
00:17:36.627 --> 00:17:38.827
Panel steel is pretty thin

295
00:17:38.827 --> 00:17:43.477
We can use this panel steel for making

296
00:17:43.477 --> 00:17:49.227
refrigerator, car and others

297
00:17:49.727 --> 00:17:52.604
It's daily used steel

298
00:17:54.377 --> 00:17:57.777
The quality of the steel, rebar

299
00:17:57.777 --> 00:17:59.627
has a low quality

300
00:17:59.627 --> 00:18:01.477
and panel steel has a high quality

301
00:18:01.477 --> 00:18:05.327
So, we say panel steel is
high-end product,

302
00:18:05.327 --> 00:18:07.777
and rebar is low-end product

303
00:18:08.727 --> 00:18:12.827
Gross margin is different

304
00:18:13.127 --> 00:18:16.477
Rebar's gross margin is just 7%,

305
00:18:16.477 --> 00:18:18.377
angle iron 12%,

306
00:18:18.377 --> 00:18:22.677
and panel steel has bigger gross margin,

307
00:18:22.677 --> 00:18:24.977
which is 25 to 30%

308
00:18:26.027 --> 00:18:31.477
So, of course, existing steel makers just focused on

309
00:18:31.477 --> 00:18:33.527
production of panel steel

310
00:18:33.527 --> 00:18:36.277
They wanted to produce more panel steel

311
00:18:36.277 --> 00:18:37.277
rather than rebar

312
00:18:37.277 --> 00:18:41.227
Because rebar's gross margin is much lower
than panel steel

313
00:18:41.227 --> 00:18:44.027
This is production ratio

314
00:18:44.027 --> 00:18:47.077
Just 4% and 8% and 55%

315
00:18:47.077 --> 00:18:52.777
So, the existing integrated mill just focused on

316
00:18:52.777 --> 00:18:54.099
panel steel production

317
00:18:55.082 --> 00:18:56.382
Then later, what happened?

318
00:18:56.382 --> 00:19:01.332
Mini-mill arrived in the bottom of the market, industry,

319
00:19:01.332 --> 00:19:02.882
which is rebar market

320
00:19:02.882 --> 00:19:07.032
They just focused on rebar market

321
00:19:07.032 --> 00:19:12.132
And then, quality of the steel mini-mill produce is low

322
00:19:12.332 --> 00:19:17.982
So, they just entered rebar market
with much lower prices

323
00:19:17.982 --> 00:19:20.882
How much?
20% discounted prices

324
00:19:21.332 --> 00:19:26.632
Then, integrated mill were
really happy to exit rebar market

325
00:19:26.632 --> 00:19:30.432
Because they don't care about rebar market

326
00:19:30.432 --> 00:19:34.532
They don't have any incentive
to protect this rebar market

327
00:19:34.532 --> 00:19:38.832
And integrated mill let the mini-mill to do

328
00:19:38.832 --> 00:19:40.582
whatever they want in the rebar market

329
00:19:40.582 --> 00:19:42.682
They gave up rebar market

330
00:19:42.682 --> 00:19:49.532
Instead, we will produce
more high quality product

331
00:19:51.987 --> 00:19:55.037
So, they gave up rebar market

332
00:19:55.037 --> 00:19:58.687
They just focused on
angle iron, structural steel, and panel steel

333
00:19:58.687 --> 00:19:59.837
Then later, what happened?

334
00:19:59.837 --> 00:20:03.437
Mini-mill made a lot of money from rebar market

335
00:20:03.437 --> 00:20:04.637
They saved the money

336
00:20:04.637 --> 00:20:07.287
and they upgraded the quality of production

337
00:20:07.287 --> 00:20:09.337
They produced high-quality product

338
00:20:09.337 --> 00:20:11.737
and they entered angle iron market

339
00:20:11.737 --> 00:20:15.787
Then mini-mills entered angle iron market

340
00:20:15.787 --> 00:20:19.737
Then, integrated mill decided to

341
00:20:19.737 --> 00:20:21.787
give up angle iron market, too

342
00:20:21.937 --> 00:20:25.287
Then, they decided to focus more on

343
00:20:25.287 --> 00:20:27.237
structural steel and panel steel

344
00:20:27.237 --> 00:20:30.837
Because they expect better gross margin

345
00:20:30.837 --> 00:20:31.937
Then what happened?

346
00:20:31.937 --> 00:20:34.237
Mini-mill saved the money,

347
00:20:35.787 --> 00:20:40.037
upgraded their quality,
and entered another market

348
00:20:40.037 --> 00:20:46.087
Angle iron market, structural steel market,
and panel steel market

349
00:20:46.087 --> 00:20:48.937
They entered panel steel market, too

350
00:20:48.937 --> 00:20:49.987
Later, what happened?

351
00:20:49.987 --> 00:20:53.437
Mini-mill's production increased

352
00:20:53.437 --> 00:20:57.287
and integrated mill's production decreased

353
00:20:58.087 --> 00:21:00.887
So their market shares became opposite

354
00:21:01.987 --> 00:21:03.426
Look at this graph

355
00:21:06.492 --> 00:21:09.092
There's another type of disruptor

356
00:21:09.092 --> 00:21:11.642
We say it is creative disruptor

357
00:21:11.642 --> 00:21:13.892
Do you remember the creative disruptor?

358
00:21:13.892 --> 00:21:18.692
This type of disruptor create new market
that never existed

359
00:21:18.692 --> 00:21:24.292
Then later, attempt to steal consumers
away from existing company

360
00:21:24.292 --> 00:21:25.492
I want to give you an example

361
00:21:25.492 --> 00:21:27.692
There is a radio

362
00:21:27.692 --> 00:21:29.942
This is a traditional radio

363
00:21:29.942 --> 00:21:33.092
Traditional radio used vacuum tube

364
00:21:33.092 --> 00:21:34.492
Vacuum tube is pretty thick,

365
00:21:34.492 --> 00:21:37.492
so that's why traditional radio

366
00:21:37.492 --> 00:21:40.092
is heavy and big

367
00:21:40.442 --> 00:21:45.942
Consumers' considered this traditional radio
as the furniture

368
00:21:47.292 --> 00:21:49.792
Then, what happened?

369
00:21:49.792 --> 00:21:52.442
One of the Japanese company

370
00:21:52.442 --> 00:21:56.442
took the technology of transistor

371
00:21:56.442 --> 00:21:59.342
and tried to make a portable radio

372
00:21:59.342 --> 00:22:01.192
This is transistor radio

373
00:22:01.192 --> 00:22:02.492
Then what happened?

374
00:22:03.442 --> 00:22:08.792
In 1950s and 1960s, 
the market for transistor radios exploded

375
00:22:10.792 --> 00:22:16.242
And there were about 12M
transistor radios in use by 1959

376
00:22:17.242 --> 00:22:20.842
What about the response
from transistor radio company?

377
00:22:20.842 --> 00:22:23.092
Existing radio company

378
00:22:23.092 --> 00:22:25.542
just ignored the transistor radio

379
00:22:25.542 --> 00:22:30.192
because the sound quality of
transistor radio was really terrible

380
00:22:30.192 --> 00:22:34.942
That's why established existing radio company

381
00:22:34.942 --> 00:22:38.192
just focued on SOUND

382
00:22:38.642 --> 00:22:41.842
Then later, transistor radio

383
00:22:45.192 --> 00:22:50.342
didn't fight with existing
radio companies in home market

384
00:22:50.342 --> 00:22:53.242
Instead, transistor radio

385
00:22:53.242 --> 00:22:57.442
shifted the market from home radio market

386
00:22:57.442 --> 00:22:59.292
to the outdoor market

387
00:22:59.292 --> 00:23:02.842
This radio targeted new market first

388
00:23:02.842 --> 00:23:04.592
For example

389
00:23:05.342 --> 00:23:10.242
like outdoor, such as

390
00:23:10.242 --> 00:23:14.842
vacation, ocean, or summer

391
00:23:15.242 --> 00:23:18.042
They targeted the different market

392
00:23:18.042 --> 00:23:19.442
Then what happened?

393
00:23:21.392 --> 00:23:25.242
Everybody used the transistor radio

394
00:23:25.242 --> 00:23:30.292
and existing radio company collapsed

395
00:23:30.292 --> 00:23:32.592
This is why we care for

396
00:23:34.092 --> 00:23:36.348
the startup's innovations