Scribd
Upload
79 views21 pages

Value-Creation Merck-Lcd-Case-Study

Uploaded by

api-345358075
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
79 views21 pages

Value-Creation Merck-Lcd-Case-Study

Uploaded by

api-345358075
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 21

Case Study: Merck and LCD Tech.

presentation by M.S. Miller

Presentation based on case study as


presented by Budde et al. in Value Creation

Background
As of February 2003, the chemical industry was
responsible for 20% of the all industryoverlapping R&D transfers
In Germany, common for company investment
toward R&D ~ 8% of its revenue

Industry-overlapping tech. transfer

Product: Liquid crystals / liquid


crystals displays
2 key benefits
Can modulate polarized light
Can act as optical switches (change orientation
within electric field responsively from applied
voltage)

These confer the various advantages of LCD


displays applications (TVs, etc)

Year in context: 2004-2005


mobile phone boom increases use of LC
consumption for displays
Cost of LCDs has fallen, thereby cutting costs for
LCD TVs
Independent research predicts a sharp increase in
demand
2004 -9 mil LCD TVs sold globally
Projections suggest that by 2009, 50 mil per annum
Additional estimates included $ 30 Billion in flat TV
tech R&D from top 5 or 6 global Mfg.s

Success in Specialty Chemicals Industry


Specialty chemicals typically succeed only when driven by
companies at the cutting edge of a tech wave
HOWEVER: developers must be able to create value from their
investments in innovation, which requires both the
scientific research to develop the chemicals in the first place, and also
a business-focused mindset to ensure their longevity in the market.

Merck's success has been attributed to five factors


Staying power
Active patent strategy
Customer-focued approach, built on expertise in production +
application technologies
Timing of related globalization, and diversification
The best intellects
(e.g. hiring strategy, organizational culture devoted to learning)

Staying Power
Organizational values:
high quality products
commitment to contributing to safety, health, and
protection of the environment
production encompasses environmentally
compatible manufacturing processes
[safe, healthy, compatible] working and living
conditions for employees
[safe, healthy, compatible] conditions for region in
which the company operates

Staying Power
Other success factors
Flexibility of team
Esprit de corps between various disciplines
Positive attitude toward market trends
**Recognition of innovative technology and its
potential to surpass limits and revolutionize
Belief in innovation, and vision to see beyond
obstacles. Stemming from:
years of experience in research
Willingness + ability to directly engate with customers

Staying Power
Worth mention
Merck accomplished in line overlap
LC division - market leader, annual turnover ~ EUR 580 mil
LCD and display - predicted growth average of 30% per
annum (projected over 4 years)
LC and LCD market: PC monitors, notebooks, cell phones,
flatscreen TVs
Other products boosting market share: Indium tin oxide (ITO)
coated glass & Color Filters produced for application in color
super twisted nematic (STN) displays

Active Patent Strategy


To deliver sustained value creation, an innovation
strategy must factor in effective IP protection.
Aggressive patenting strategty for LCs, starting
mid 1980s
Net of patents covering single LC compounds and
LC mixtures
Inventions filed so that cross-license agreements
made possible, and applied for thorough patent
coverage, giving customers long term priotection
against imitation products

Active Patent Strategy


Remained dedicated to the related field of
Display and Application Tech., resulting in
further inventions in the area (thus, even
more patents)
Example:
a basic patent for all matrix-driven twisted nematic
(TN) displays
Licensed worldwide in the 1990s

Active Patent Strategy


Regularly re-aligned patent portfolio following divestments and
acquisitions
1985 - acquired large patent package from Brown Boveri & Cie
(including one with broad coverage of LCs)
Provided access to some important compound classes, and substantial
licensing income

1995 - Merck abandons ferroelectric LCs, and sells patents to Hoechst


1996 - acquired large patent package from Hoffmann-La Roche
Provided access to an important compound type -- with which the underlying
strategic goal of dominating the TN & STN market segment could be realized.

and so the story goes. As of this publication, Merck has


accomplished > 2500 patents in the LC/LCD portfolio
(roughly+100 more per annum)

Customer-focus, Expertise on
Production + Application
Innovate rapidly!
Staying Power + Intellectual Property = Not quite enough!
Also need:

[In-house R&D] [Industry-wide Tech. Progress]

Is R&D going in the right direction?


Customers drive the focus of industry
Maintain close relationships with your market.
Gather feedback, assess needs, prioritize, and orient new
technology

Customer-focus, Expertise on
Production + Application
How do customer demands influence new
innovation? Examples
LCD TVs - initially incompatible for use as PC
monitors (LCDs switch too slowly)
Innovate: superfluorinated liquid crystals for
multidomain vertical alignment (MVA)
Boosted mass-production ability, weight, resolution,
switching rate, and viewing angle of nearly 180o

Customer-focus, Expertise on
Production + Application
Value Statement = Customer Benefits
Ex: customer-driven innovation: advancements in
LCD monitor technology throughout the 1990s

2002 saw the arrivval of LCD televisions

Customer-focus, Expertise on
Production + Application
Keeping up with customer needs //// maximizing quality
improvement
Develop products that maximize performance. Close cooperation
with customers offers a simple and reliable assessment of the final
product's quality.
Improve the productivity of product development by identifying the
product's Critical Quality Attributes (CQAs), i.e. measurable
product characteristics that dictate its performance.
Furthermore, once process understanding has been achieved, a
customer in need of a custom material having specific requirements
can simply communicate the requirements, and the correct mixture
can be prepared with no need for costly trial-and-error
experimentation.

Note: re. Customer-focus, Expertise


on Production + Application
Process Understanding refers to the identification and of
all inputs during the steps of product formation that have
demonstrated some degree of influence on the variance
of a particular CQA in the final product.
The variance of a given CQA is equal to the sum variances
for each of the inputs upon which the CQA is dependent.
Process Understanding maximizes quality and reduces the
time and cost required for development; this is because
the input parameters which exhibit no influence on CQAs
need not be experimentally determined, and the total
number of experiments required to optimize quality is
reduced exponentially (speaking generally, reduced by a
factor of 2m, where m represents the number of input
parameters having no influence on CQA).

Timing is Everything:
Internationalization and
Diversification

Cooperation with customers: easier when


close
Thus, timing of Mercks expansion of production
into East Asia was key
This helped stayability as well

The Best Intellects


Devotion to continuous learning

Learning is like swimming against the tide. It forever drives you back if
you stop.

Drawing on talent, experience, and enthusiasm in employees


interdisciplinary teams with high flexibility and creativity
Teams who think and act with a business focus
Cross-cultural Management Development centers
International Mgmt. Training
Learning by projects, speakers, self-reflection
European Partnership MBA
Merck University (program for top management)
2005: formed the Liquid Crystal Training School

Summary
Liquid crystals:
initially debated, initially mocked as berflssig
[superfluous] crystals; eventually accepted as 4th
state of aggregation
Luck, perseverance, and ignorance are, according to a Japanese
proverb, the basic conditions for a successful scientists existence.

5 key factors are attributed to Mercks success


story with LCs
Chemical industry innovations share their
benefits in an industry-overlapping manner,
fertilizing outside technology and innovation

You might also like