ESG-embedded Business Model Innovation based on Digital

ESG-embedded

Business Model Innovation

based on Digital Transformation

Lecture @ UNPOG-SNU Session Series

Prof. Dr. Young-Sup Joo

Distinguished Professor, Korea University

Chairman, Korea ICT Convergence Network (KICON)

Former SME Minister of Korea

April 23, 2021

Young-Sup Joo, Ph.D. - April 2021

The World is ... in the Hyper-Change Era

Changes at Lightspeed

Changes in Global Economic Environment

4th Industrial Revolution / New Normal

Changes in Technology

Changes in Generation

Changes in Business Environment

Changes in Capitalism

Changes in Government Policy

Changes in Management Philosophy

Changes from COVID-19 Pandemic

Many New Changes including Climate Crisis . . .

Young-Sup Joo, Ph.D. - April 2021 (Source : DFKI, Modified by Y. Joo)

Industrie 4.0

Hyper-Connectivity +

IOT

Big Data

AI more . . .

Changes from 4th Industrial Revolution (IR)

Digital Transformation


4th IR’s Impact on Enterprises and Countermeasures

Major Impact of 4th IR on Enterprises is

Business Model Innovation enabled by Tech Innovation

4th IR


“Customization”

“Personalization”

Secure Speed & Flexibility Competitiveness

Innovate Business Model by Digital Transformation

Mass Production

& Consumption

Customized Production

& Consumption (Individual/Mass Customization)

Customized Product

Customized Service

Customized Healthcare

Customized Education


Changes from ‘New Normal’ after Financial Crisis

High Growth

Low Unemployment

Low Growth

High Unemployment

Global Growth Rate Sliding Down

Job Creation As Top Priority

Increasing Sentiment of Trade Protectionism

4.12

WORLD

OECD

2.66 3.55

2.20 3.75

2.61 2.56

0.94

8.3 7.5

10.0 11.3 11.5

4.6 5.8

9.6 8.1

6.2 USA

EU

Global

Financial Crisis

Low Growth & Stagnant Economy Job ‘Zero-Sum’ Situation

Growing Protectionism : The world is in a war to create jobs

2008~2009

G2 Trade War

Negative Impacts on High Export Countries (Korea, Germany, etc.)

Need to Innovate Global Business Strategy including Exports


Robotics

Physical Based Technology

Smart Sensor

3D Printing

IOT

Big Data

AI

Cyber Based Technology

Cyber Security

(+Block Chain)

AR/VR MR

5G CPS

Digital Twin HMI

UI/UX Energy System

Cloud Computing

Platform Technology

Changes in Technology

Core Technology for 4th IR : Digital Transformation


The 2020s will be

the Age of Data!

Changes in Technology – CES2020 Tech Trends


Connectivity Intelligence Data

5G AI

(Source : CTA, Modified by Y. Joo)


Open the ‘Age of Data’ by ‘Intelligence of Things’



(Source : CTA)


Changes in Generation

Generation Gap : Changes in Business Environment

(Source : JCI Institute)

Changes in

Customers

Employees

Stakeholders

Renovate Mgt. Strategy

Marketing

HR

External Relations

. . . etc.


Changes in Capitalism

“Capitalism 4.0” : Changes in Government Policy

A. Kaletsky

(2010)

2020 Davos Forum

(WEF)

Shareholder

Capitalism

Stakeholder

Capitalism

5.0 ?

Inclusive

Growth


Changes in Management Philosophy

Social Value(SV) Based ESG on the Rise

Corona19 Pandemic

4th Industrial

Revolution

Personalization

New Demand

for R&R of

Enterprises

SV-based Management

Digitization


To resolve Social

Pain Points and

Achieve Society Vision

ESG Management

Capitalism 4.0

Inclusive Growth

MZ Generation On the Rise


Changes from Unheard-of COVID-19 Pandemic

Unpredictable Black Swan

Human War against Virus

Medicine as a Key Solution

Vaccine, Cure Medicine

(Source : McKinsey, AFP)

Future Scenario

V-shaped Surge

U-shaped Recovery

W-shaped Disorder

L-shaped Recession

?

Social distancing or lockdown

could be temporary solution

to buy time until vaccination.


Actions for Post COVID-19 Pandemic

Post-Corona New Normal : Economic Perspectives

Need Survival-First Strategy Worst-Case Scenario

Accelerate 4th Industrial Revolution & Digital Transformation

AI Everywhere, Expand Online & Untact/Ontact Economy

E-Commerce, Telemedicine, Remote Work, Smart Education etc.

Restructuring of Global Value Chain (GVC) in Progress

Chian Exodus, Reshoring Great Opportunity for Korea

Expand Globalization by exploiting GVC Restructuring

Expedite Business Model Revolution

Product/Service, Product+Service, Platform, Online Economy etc.


More Major Changes Coming: Climate Crisis . . .

Climate Crisis : Even Larger Impact than Pandemics (Source : NASA)


More Major Changes Coming: Climate Crisis . . .

Carbon Neutral by 2050 (USA/EU/Korea/Japan), 2060 (China)

(Source : Carbon Neutral Pathways for the United States - SDSN, Berkeley Lab)


Enterprise Innovation in the Hyper-Change Era


Product/Service, Product+Service, Platform, Online Economy etc.

Enterprise System Innovation

Innovate Manufacturing system: “Smart Manufacturing Innovation”

Human Resource Innovation

Expand HR Investment, Innovate Corporate Culture

driven by Human-Centered Entrepreneurship

Technology Innovation

Increase R&D Investment : Open Innovation & Collaboration

Market Innovation : Expand Globalization

Global Competitiveness, Global Win-Win Growth Model

Five Major Innovation based on Digital Transformation (DX)



based on Digital Transformation

is most important


Definition of Business Model

Product/Services

Customers Revenue Model Operation Model

(Source : Gassmann et al)

Business Model Innovation : Definition


Business Model Innovation : Direction

Prepare Action Plans fit for each Industry and Enterprise

Product/Services

Operation Model

Revenue Model

Customers

As-Is To-Be

DX

-Based

BM

In

no

vati

on


[Product + Service] Convergence (P+S)

Product Servitization : XaaS, Subscription Model, etc.

Continued Development of New Business Models

Data Driven BM, O2O BM, IPR based BM, etc.

[Product + Finance] Convergence (P+F)

Product/Project Financing

Platform (P)

Digital Platform connecting Consumers and Suppliers

Total Solution Provider : Bundling related Products/Services

Execution of Business Model Innovation

Product/Service Innovation (P/S)

Customization/Personalization: MZ Generation, Gen C

Business Model Innovation : Direction - 1



B2C Discrete

B2B Process

B2C Process

B2B Discrete

(Source : Yoram Koren, modified by Joo)

Pursue Customization & Personalization, but

Differentiate by Industry, Enterprise Type & Market

B2B B2C

Process B2B Process B2C Process

Discrete B2B Discrete B2C Discrete


Customization & Personalization using DX

Products & Services for Corona19 Pandemic,

including so-called “Homeconomy”

Eco-Friendly Products & Services : ESG

Fit for MZ Generation and Gen C


Key Trends


Product Servitization & XaaS : Global Trend

Borders among Industries are disappearing

Product [Product + Service during Product Lifecycle]

Can create new value added and growth engine : Importance of Data

Cases in CES 2021

GM Ultifi : Integrated CX Service Platform for GM EV Customers

LGE PCC(Proactive Care Service) : Predictive Maintenance Service

Omron VitalSight : Integrated Blood Pressure Management Service

Product & Service Convergence (P+S)


Platform (P) - 1

Digital Platform BM : Connecting Consumers and Suppliers


“Total Solution Provider” BM

Packaging: “P+P”(Horizontal), “P+Parts+Service”(Vertical)

Case : EV & Mobility Solution, Plant, etc.

Train EV/PHEV

New & Renewable Energy Smart Grid

Charging Infra

Core Parts Battery/Motor

Power Plant

LSE-SME Coop

- Synergy

Coop among SMEs

- Network Enterprise

- Coop Projects

Platform (P) - 2


Product & Finance Convergence (P+F)

“Product + Finance” BM

Develop Various [P+F] Business Models

• New Financing Scheme, Tech-Based Financing, Subscription, etc.

Cases : Aircraft Engine, Turbine/Generator, EV, Plant, etc.

Aircraft Engine

Manufacturers

Aircraft Makers

Engine

GE Capital Aviation Co.

GE Aviation

GE

Engine

Aircraft

Lease

GE’s Business Model Innovation Case

甲

乙甲

乙

Boeing

Airbus

GE Boeing

Airbus

Aircraft

Aircraft Makers Aircraft Engine

Manufacturer


ESG-Embedded Business Model Innovation : Global Trend

The Right Understanding & Direction of ESG is most important

E (Environment) :

- EnvironmentEnergy Tech, Energy Saving Tech, Circular Economy

Hydrogen Economy, Technology coping with Climate Change

S (Social) :

- Tech & Innovation to Accomplish Vision of Society/Nation/Mankind

and Resolve Social Pain Points and Problems

- Vision : Healthy, Sustainable, Smart, Safe, Growing Society

G (Governance) :

- Transparency, Fairness, Diversity, Inclusiveness

Need to approach from the Market Economy perspective

pursuing both Economic Value (EV) and Social Value (SV)

Business Model Innovation : Direction - 2

ESG : Concept & Philosophy

E

Environment S

Social

G

Governance

ESG Management

ESG Investment

ESG Index

Transparency, Fairness

Diversity, Inclusiveness

Environ.Energy Tech,

Energy Saving Tech,

Circular Economy,

Hydrogen Economy,

Technology coping

with Climate Change

Tech & Innovation

to Accomplish Vision

of Society/Nation/Mankind

and Resolve Social

Pain Points and Problems


Vision pursued by Society/Nation/Mankind

Goal of Business Model

Healthy

Society

Growing

Society

Safe

Society

Sustainable

Society

Smart

Society Vision of

Society/Nation/Mankind

ESG : Accomplish Vision of Society/Nation/Mankind


ESG-Embedded Business Model

Business Model Innovation based on Tech Innovation

esp. Digital Transformation

Expand R&D Investment : Create “Big Things”


ESG is the Core

of Business Model Innovation

“ESG-embedded


based on DX” is important!

Thank you

for your attention!

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Documents

ESG-embedded Business Model Innovation based on Digital