It's the last topic for [UNKNOWN] two. I want to look at the one controversy in the literature. Regarding innovation or regarding improvement. One school of thought suggested radical innovation is very important. And radical improvement is very important. For instance BPR. What is BPR? BPR, BPR is business process re-engineering. That's the concept that advocates for the radical change. Radical improvement. So, radical improvement is very important. That's the, that's the whole point behind this BPR. And BPR concept was very popular, maybe in 1990s, and early 2000. So that's, [UNKNOWN] here. So radical improvement means that it was at lower level. Whether that's improvement level or quality level or reputation or, any such measure, performance measure. And then what happens is that at this particular point of time, there is big jump or discontinuous. We'll just say discontinuous changes with discontinuous, improvement. There is another very different perspective regarding the improvement to our innovation, which is continuous improvement. [BLANK_AUDIO]. Continuous improvement well, continuous innovation. And what this perspective advocates is that we got to focus on this incremental improvement. Small changes and small improvement, the small innovation every day. And that's more important. That's more sustainable. And therefore the company has to pay more attention to this incremental improvement rather than radical improvement. Because if you focus too much on radical improvement somehow you will lose more important driving force. Which is the incremental forces. [BLANK_AUDIO]. Which perspective do you think is more right? I mean that which one do you think is more convincing. If you have to choose only one, out of these two, which one would you choose? But actually, I asked the same question to my class. But it's almost you know, ten years ago. Early 2000. I had the class, MBA class, MBA course on [INAUDIBLE] management. And I invited her manager at a Korean car maker, you know, you know, Korean car, company. And then I asked him to talk about this global strategy about the company, so on and so forth. And towards the end of the class, toward the end of his you know, speech. We had a Q & A session, and after answering some of the questions from my students, I asked the manager. One question, which is, around 2000, around 2000, Hyundai Motor, which is a Korean company, Hyundai Motor. Around 2000 Hyundai Motor's, brand value, or, you know, its position in the U.S. market, changed dramatically. In other words, it's almost like radical change, or radical improvement in terms of its you know market position and brand value, or the customer perception, and so on and so forth. You know, at least that's my, that's my observation. So I asked him, why do you think that happened? Why in, around the year 2000, the market's perception about Hyundai Motor changed completely, changed very radically. It seems like there was some sort of radical improvement and radical changes. That was my question. And then after pause, the manager replied. He believed that it is right the way to Hyundai Motor's marketing strategy. And in around the year 2000 Hyundai Motor introduced a new ten year warranty program. Ten year warranty program. In other words the company guaranteed that it will take care of you know, key parts, key elements of his car for ten years. And the manager said that, that kind of a really, really long term warranty program was unheard of at the time. And that actually gave big impact on the, customers' or consumers' perception about the company. And everybody was surprised. And then that actually changed the status quo about Hyundai Motor, and then the company's you know value increased dramatically at that time. After hearing what he said, I also gave him comment. And I said that, I think you're right. I mean that it is true that the Hyundai Motor introduced very impressive long-term warranty program at the time and that probably changed some general atmosphere or general, you know, perception about the company. But I want to say that the, there was much more than that. Let's say, you know, ten year warranty is good. And I, I think that gives the market a second look at the company. But if it is not, if it is not backed by the actual quality. In other words, if it's not backed by the actual quality then it's not sustainable at all. And you can, you can do that kind of a long term warranty program for couple of years, but if quality is not there; then the, your recourse, or your repairs will increase dramatically and you have to pay lots of money in the repairing owners' the defect cars. And then the, the company will collapse, the company will bankrupt very soon. And therefore, behind that seemingly radical program, seemingly radical marketing program or seemingly radical change or radical improvement. [INAUDIBLE] something substantial, substantive, something dear, quality. So my point is that even before year 2000. The company, Hyundai Motor, has been always trying to improve its quality. And, the company has been trying to develop its own engine, unlike some other companies that, simply bought engines from other carmakers. While doing this, Hyundai Motor went through, lots of trial and errors. Lots of a trial, trial and errors. In other words, there was really, really many failures. Despite all these failures the company never stopped, the company never gave up. The company tried harder. But the improvement occurred very, incrementally, in very small scale. So the quality has improved. Very, incrementally. In very, very small scale. Every day probably improves more. But let's say, okay. We improved our quality by, .00000001% today. And, therefore, can we expect that our sales will increase by 0.000001% tomorrow? That's not going to happen. Nobody will recognize that small amount of improvement. But think about, you can improve, you improves that much every day. And think about you do that for ten years, you do that for 20 years, you do that 30 years, and you do that 40 years. Then, you will have something there. So my point is that, in terms of basic capability, or in terms of a process capability, it's very important for you to improve continuously. And then sometimes, okay, you can say the control, or you know, process capability. Or I would just say this is the system level capability, system capability. So, there is some threshold level. You improve your base capability and process capability incrementally. Small amount every day. And every day you cannot recognize. Every month you cannot recognize even what kind of improvement you have achieved. But, if you continue this for, long, long time, then you will have this certain threshold level. And let's say that threshold level in 2000. For the company, right? And then When the threshold level is met, eventually, there is big shift in terms of system level capability. So my comment to the manager's, explanation or manager's point was that, these two are not contradicting each other. You gotta have, a framework. A more comprehensive framework that contains these two phenomena at the same time. And I usually talk about the example of a volcano. When, you know, volcano explode, people pay attention to that particular discrete event of explosion. And people concerned about that particular event, that radical change and radical, you know, radical, radical, everything right? Radical change, the change is sudden, radical change, and that's the, that's the kind of thing that people are interested in. But think about what's behind that volcano explosion. If you go deep down the earth you will see that there is hot fluid, magma is flowing. And then probably the, magma's temperature, increases by 0.0000000001 degree every day. So you can not recognize the change in terms of temperature, deep down below the earth surface. But if that increase in temperature, continues for, 10,000 years, 100,000 years, or even 1,000,000 years. Then, we will hit the threshold level and then the volcano explodes, at particular point in time. But in order to have that particular point of time event, or in order to look at, in order to achieve that kind of radical change and radical event, remember, there must be incremental changes and incremental improvements. At some other level. Maybe some basic level or some particular task or function or activity level. And therefore, in order to explain this phenomena, in order to understand this phenomena, you gotta have the concept of, chain of capability. [BLANK_AUDIO] Okay, so, in this lecture we learned the two different perspectives in two different approaches to, understanding this capability. And I think that if we understand these unique characteristics of capability, we will be, able to, design our supply chain strategy, more effectively. Next time, next lecture, we are going to look at learning capability, or learning perspective. Basically learning capability is another very critical capability. Which is intuitive capability, which is very closely related with integrative improvement. But it's, more than that. The, the title of this course is Supply Chain Management, a Learning Perspective. So I would define learning more formally, and I want to talk about some of the very relevant and important theories related with this learning, perspective. And then I will suggest some models with which we analyze and understand the supply chain management issues more systematically using this learning perspective. I hope you enjoyed this second lecture as well, and I hope to see you, in our next lecture. [BLANK_AUDIO]
