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The Importance of Absorptive Capacity in the Road to Becoming a “Giant Lion”—ASUSTek Computer Inc

2010; Taylor & Francis; Volume: 39; Issue: 3 Linguagem: Inglês

10.1080/1226508x.2010.513142

1744-3873

Chyong Ling Judy Chen, Susan Margaret Belcher,

Intellectual Capital and Performance Analysis

Abstract In Taiwan, small businesses, which account for about 97% of all firms, spawned Taiwan's economic miracle in the 1980s. For the past two decades, the information technology (IT) industry has formed the backbone of Taiwan's economy. There are many theories that have identified a plethora of factors which contribute to the success of a small business. This case study applies the theory of absorptive capacity to ASUSTek Computer Inc., a small Taiwanese business founded on April 2, 1990 by four engineers with capital of NT$30 million (US$950,000) which has grown to become a global leader in the IT industry with a total revenue of NT$755 billion (US$24 billion) and market capitalization of NT$49 billion (US$1.5 billion) as of December 31, 2007. (Based on exchange rate US$1=NT$31.5. ASUS's revenue dropped to NT$668 billion in 2008 mainly due to the global financial crisis.) ASUS' business significantly took off after Jonney Shih joined the company as CEO in 1993. He remains a key anchor of ASUS. ASUS' ability to not only absorb, transform, and utilize new knowledge but develop new technology in-house to create and sustain competitive advantage in the market place has ensured the company's continuing success as well as propelling it to a position of leadership in the IT industry worldwide. This paper will discuss how ASUS' in-house R&D; apprenticeship-style on-the-job training; management leadership's organizational culture and structure—all of which stress learning and innovation; financial resources and conservative fiscal policy; as well as pro-business government policies have provided the foundation and environment for great absorptive capacity to develop and adapt technology, enabling ASUS to become a "Giant Lion" in the global computer industry. Keywords: ASUSabsorptive capacitybusiness cultureinnovation Notes 1 3C refers to computer technology, consumer electronics, and communication technology, whereas 4C also includes car electronics. 2 Small businesses are defined as those businesses which have 100 employees or less. 3 In 1990, the same year ASUS was established, 40,000 new firms were set up, yet 35,000 closed (Liu, Citation2002). 4 The four founders actually invested NT$10 million of their own money (Young & Yu, Citation1998). 5 "Giant Lion" is the term coined to symbolize ASUS' strategy to become a global leader in the IT industry as discussed in more detail later. 6 The name ASUS originated from Pegasus, the winged horse of Greek mythology. The first three letters of the word were dropped to give the resulting name "a high position in alphabetical listings," as reported in a Russian-language interview with Alexander Kim, October 2003, ("ASUS," 2009). 7 M.S. Liao retired in 1997 and W.C. Hsieh left ASUS in 2003. 8 ASUS makes computer and other components for many companies, such as Apple, Sony, Palm, Compaq, HP, Alienware, and Facon Northwest (ASUSTek Computer Inc., Citation2009c). 9 According to Christensen, the "innovator's dilemma" is faced when a company must balance the need to perfect its best products which made them successful and at the same time look for or develop new technology that would make the existing products obsolete. Christensen asserts that many companies become so enamored with their existing innovations that they are unable or unwilling to adapt to new developments in technology. In the case of ASUS, as mentioned earlier, their "innovator's dilemma" was somewhat the opposite: they kept innovating and focusing on the high-end market, ignoring the low-end markets. This was an obstacle to the firm's growth because the high-end market is much smaller than the low-end market. 10 The One Laptop Per Child (OLPC) program is a US non-profit organization created by MIT Professor Nicholas Negroponte in 2005 with support from several corporations to develop a rugged laptop computer, the XO-1, with educational software for poor children in the developing world who otherwise would not have access to computers. Mass production began in November 2007. Although the target price of US$100 per computer has not been reached, manufacturers are committed to keeping the cost as low as possible. Recipient governments pay for the computers. The computers use either the free Linux/Sugar OS operating system or will have both the Linux/Sugar OS and the Windows XP operating systems.The Classmate PC program is part of the World Head program developed by Intel in May 2006 to provide low cost sub-notebook or netbook Classmate PC computers to people in developing countries. These computers were formerly called Eduwise. They are produced by Intel in the United States but by third party manufacturers in other countries. They use Mandriva Linux, Metasys, or Windows XP Professional operating system, depending on the country of sale. Unlike the OLPC program, Classmate PC is not a non-profit program. 11 Jonney Shih came up with the idea of producing small and cheap notebook computers for people who currently do not have access to computers. Jonney approached Intel for cooperation. Intel gave ASUS a challenge by saying that they want to see the prototype in one month. In fact, Intel intended to scare ASUS away since they had already joined the Classmate PC program. 12 In fact, ASUS overestimated the number of Eee PCs that they would sell and did not expect so much competition within six months from other companies, so they overstocked components and ended up encountering a loss in 2008 ("ASUS Reported …," 2009; "Jonny Shih Talks …," 2009). 13 Six Sigma is a commercial program for "… improving measurable results for any organization" ("Six Sigma," Citation2008). In order for an organization to get Six Sigma Certification, it must complete an actual Six Sigma project. There are live and on-line Six Sigma programs. In addition, there is a Lean Six Sigma program which advocates concepts that complement Six Sigma. Lean Six Sigma trains people "… to identify and eliminate sources of waste and activities that do not add value, in order to create flow with maximum productivity, capacity, and throughout" the organization ("Six Sigma," Citation2008). 14 The Taiwan Excellence award is given annually to "… products that fit the criteria of significantly embodying 'R&D/Innovation', 'Design Innovation', 'Quality Systems', 'Marketing', and 'Brand Awareness'". The competition and promotion is sponsored by the Board of Foreign Trade of the Ministry of Economic Affairs and carried out by the Taiwan Trade Development Council (TAITRA) as part of an effort to improve the international image of Taiwan's products (ASUSTek Computer Inc., Citation2008). 15 The eight ASUS products nominated for Gold Awards in 2008 include the Eee PC 4G, the ARES CG6150 Desktop PC, the MK241H LCD, the G70, U2E and VX3 notebooks, the R700t PND and the M536 Smartphone (ASUSTek Computer Inc., Citation2008). 16 TRIZ is the acronym for "Theory of Inventive Problem Solving" in Russian, which was developed by Genrich Altshuller with his colleagues in 1946. It is a tool for solving problems with the hypothesis that there are principles of invention that are the basis for creative innovation. It has its own problem- solving models, such as ARIZ (Algorithm for Inventive Problem Solving) and USIT (Unified Structured Inventive Thinking). TRIZ is a problem solving method based on logic and data, not intuition, which accelerates the project team's ability to solve these problems creatively. TRIZ also provides repeatability, predictability, and reliability due to its structure and algorithmic approach. TRIZ is an international science of creativity that relies on the study of the patterns of problems and solutions, not on the spontaneous and intuitive creativity of individuals or groups. More than three million patents have been analyzed to discover the patterns that predict breakthrough solutions to problems. For more details about TRIZ, please refer to http://www.triz-journal.com 17 ASUS has joint research projects with the ITRI. Taiwan government support for R&D with private enterprises is similar to that in Japan and Korea. 18 The SUI was replaced by the Statute for Industrial Innovation (SII) at the beginning of 2010.