MMRCDISCUSSION PAPER SERIES
No. 480

Technology Implementation and Learning Strategy:
Case Study on Ramp-up Process of Hyundai Steel’s Blast Furnaces
Sungwoo Byun
Manufacturing Management Research Center,
Faculty of Economics, The University of Tokyo, Japan
November 2015

東京大学ものづくり経営研究センター
Manufacturing Management Research Center (MMRC)
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Technology Implementation and Learning Strategy:
Case Study on Ramp-up Process of Hyundai Steel’s Blast Furnaces
Byun, Sungwoo
Project Research Associate
Manufacturing Management Research Center
Faculty of Economics, The University of Tokyo
Abstract: Implementing new technology involves a significant learning dimension forrecipient firm. In this paper, we elaborate on how the recipient firm acquires anddeploys knowledge of new technology for rapid ramp-up. We conceptualize learning
process by two processes, ‘learning-before-using’ and ‘learning-by-using’. The term
‘using’ is used to indicate the point of recipient’s commercialization of technology. And
the relationship between those learning modes is explained through the case study ofsteel making, especially blast furnace technology implementation in Hyundai SteelCompany of South Korea who imported those technologies from Germany and Japan.
By focusing on the relations between learning modes and learning strategies, Hyundai
Steel’s unprecedented rapid ramp-up of blast furnace business was able to be analyzed
more clearly.
Keywords:

implementation,

Hyundai Steelramp-up,learning-before-using,learning-by-using,1. Introduction
Economic activity involves a significant learning and so does a firm’s innovative
activity. At this level of bald assertion, there is very little to disagree with. The moreinteresting questions may arise when we attempt to give this assertion some empiricalcontent(Rosenberg, 1982). And this statement often requires qualification. A businessenterprise is essentially a learning organization, and the knowledge system exists in its
center place(Senge, 1990). Learning is any change in a system that produces a more orless permanent change in its capacity for adapting to environment. Understanding
systems, especially systems capable of understanding problems in new domains, arelearning systems(Simon, 1969). Every teacher knows that there is a profound difference
between a student learning a lesson by rote and learning it with understanding, or
meaningfully. Sometimes the best teacher is experience itself. Learning is the process
whereby knowledge is created through the transformation of experience(Kolb, 2015).
And this perspective on learning was also stressed in the intellectual origins in the workof Dewey, Lewin and Piaget.
This paper argues that we may fruitfully look upon implementing new technology asa ‘learning process’. Though there are different categories of learning from theperspective of technology recipient, the main focus of this study is not on making sharp
distinction among those categories of learning, but on understanding how they can be
managed for better performance. In this respect, main purpose of this paper is to clarify
the linkages between implementing new technology and learning process. While theexistence of user’s adaptation, modification of technology is well recognized, the role oflearning in ramp-up stage has not received much attention.
To give insights to this need, this paper uses a case study on a steel manufacturingfirm, Hyundai Steel who is the youngest integrated steel manufacturers in the world. It
started blast furnace business since 2010 and is supplying its steel products forcustomers, mostly Hyundai Motor Group. Hyundai Steel’s ramp-up time of blast
furnace business is unprecedented. It took only 39 months to complete the first blast
furnace and more notably the first and the second blast furnaces completed in the same
year, 2010 which is the first case in the history of steel industry. In the case study, we
will focus on how Hyundai Steel managed learning process, before and after
commercialization while implementing new technology.
2. Relevant concepts from literature1

New technologies are seldom perfect upon initial introduction. Implementation oftechnology involves recipient’s significant efforts to understand technology and to apply
technologies to reveal problems that were not apparent before introduction(Rosenberg,
1982; Dutton and Thomas, 1985). In this process, user adapts and modifies technology
to its production system. Leonard-Barton(1988) showed that undertaking suchmodification is a complex, recursive process, involving ‘mutual adaptation’ of both the
new technology and the organization, and requiring the active cooperation of both users
and technology developers. Because the final outcome is extremely uncertain due to thedifficulty of anticipating some of the interactive consequences of any given technologies,
learning is widely recognized important. There are 3 major research streams on what
drives a firm to continue learning activity and management particularly regarding
implementing new technology.
(1) Characteristics of knowledge
Not all technological knowledge is equally accessible and understandable. In general,
explicit knowledge is more accessible than tacit knowledge in the form of operating
manuals and other documents (Polanyi,1958; Nonaka and Takeuchi, 1995). To acquire
tacit knowledge is known as a challenging process, and in this case, the best teacher isoften ‘experience’. A well-established concept in organizational theory is thatorganizational actors use ‘experience’ to create routines that simplify theirinformation-processing needs(March and Simon, 1958). In this case, the efforts to turn
tacit knowledge into explicit knowledge are required though it is still challenging.
‘Information stickiness’ is another important factor to bring prolonged learning activity.
Much data have ‘sticky’ qualities that make them hard or impossible to replicate anddiffuse to remote sites(von Hippel, 1994). Some technology information tends to be‘sticky’ to the people who know it. So recipient strives to ‘unstick’ this information fromhuman factor to facilitate and continue learning activity. In addition, productarchitecture is also critical characteristic in implementing new technology. This isparticularly important in the case of integral architecture of a product or capital good.
The performance characteristics of an integral architecture product often cannot be
understood until after prolonged experience with it.
(2) Recipient’s learning capacity
Outside sources of knowledge are critical to the innovation process. Introducing new
manufacturing technology is not simply a question of implementing a well-developed
solution, but of managing a problem solving process to adapt existing ideas and create2new solutions within a particular environment(Tyre, 1991). Assimilating external
knowledge largely depends on firm’s ability to exploit external knowledge, in otherwords, it is a function of the firm’s level of prior related knowledge. Thus, prior related
knowledge confers an ability to recognize the value of new information, assimilate it,
and apply it to commercial ends. These abilities collectively constitute a firm’s
absorptive capacity(Cohen and Levinthal, 1990).
(3) ‘Learning’ and ‘doing’
The aspects of learning commanding much attention deal with ‘learning by doing’. As
Arrow(1962) pointed out, this is a form of learning that takes place at the
manufacturing stage after the product has been designed. At this stage, learning
consists of developing skills in production, and it has the effect of reducing labor costs
per unit of output. Related with this concept, the existence of learning curve is wellrecognized. Learning by doing is essentially a form of problem solving that involves
application of a production process in a use environment(von Hippel and Tyre, 1995).
Since the most of knowledge about the manufacturing process is acquired throughactual operating experience, learning by doing approach was considered the mosteffective learning mode.
Another stream of learning mode is ‘learning-before-doing’. In this learning mode,prior learning can reinforce following real operation. The term ‘learning before doing’ isused to differentiate problem-solving strategies from learning-by-doing that takes place
after a process is transferred to a commercial production environment. So this learningmode focuses on lab-based learning, or what we call research and development(Pisano,1996). Some scholars named it ‘learning by experimentation(Thomke, 2003)’.
Problem solving tradition as above reveals the existence of different types of learningmodes within an industry or a technology system. However, it is not easy to make a
sharp distinction between learning by doing and learning before doing, or learning by
experimentation. This is because due to conceptual ambiguity of ‘doing’, in reality ‘doing’
can take many other forms.
3. Research Framework
The main focus of this study is not on making sharp distinction among those categories
of learning, but on understanding how they can be managed for better performance. In
this paper, to analyze implementation process, we use ‘using’ instead of ‘doing’ concept.
The ‘using’ perspective can be useful particularly in two reasons. First, ‘learning before
using’ and ‘learning by using’ can be comparatively easily distinguished by the point of3

user’s commercialization of imported technology. Second, by this distinction, we canelaborate on the impact of learning strategies on ramp-up performance. With those twolearning modes, ramp-up process of blast furnace business of Hyundai Steel analyzed.
The main focus here is that what learning strategies Hyundai Steel had on each mode,
and its impact on ramp-up performance, especially speed.
4. Case study: Rapid of ramp-up of Hyundai SteelHyundai Steel is the youngest integrated steel manufacturer in the world and the 14thlargest steel-producing company as of 2014. The biggest point which catches one’s
attention is its rapid ramp-up of blast furnace business(Table 1).
Table 1 Blast furnace construction of Hyundai Steel
Completion

Construction time

Time to stabilization(YY/MM)(months)(days)

Blast Furnace #1

2010/01

39

25

Blast Furnace #2

2010/1137

12

Blast Furnace #3

2013/09

29

6<Source: interview with Hyundai Steel Company>
In the history of steel industry, there was no other case that a steel company starts two
blast furnaces in the same year. It took only 39 months to finish construction of blast
furnace #1 and the time to stabilization(time to have stable output) recorded 25 days.
This record is also noteworthy. As table 1 shows, construction time from blast furnace #1
through blast furnace #3 was shortened, so did the time to stabilization. Now, one canhave an interesting question about this record, “How did Hyundai Steel succeed at this
rapid

ramp-up?”.

We

give

two

explanation

on

this,

learning

modes(‘learning-before-using’ and ‘learning-by-using’) and learning strategies.
(1) Learning before using (~2009)
Hyundai Steel was surely a new comer in blast furnace business, but not in steel
making business. It already had operating experiences in electric arc furnace whichuses steel scrap as raw materials to produce products. However, the firm had noexperience in producing pig iron(‘virgin steel’) and in producing steel with oxygen
furnace. Therefore what we mean by ‘blast furnace business’ in this case includes three4

processes all together, which are blast furnace, oxygen furnace and continuous
casting(Figure 1).
Figure 1 Hyundai Steel’s introduction of new technology

At this stage, Hyundai Steel decided what to learn explicitly. The first strategy was‘repeated learning’ strategy, exactly same furnaces repeated. Since Hyundai Steel had
no experience in using blast furnace and oxygen furnace, it decided to introduce threesame lines to maximize learning effect and at the same time minimize the uncertainty
of technology. Hyundai Steel imported blast furnace from Paul Wurth, Luxembourg andoperation technology from TKS(Thyssen Krupp), Germany. But it decided to bringoxygen furnace from Japan, SPCO(JP Steel Plantech Co.). And this combination wasapplied to all three newly installed lines. The second strategy was pre-research. Before
its implementation of new processes, Hyundai Steel established research anddevelopment center in 2007 which was years before it commercialized new processes.
However, the main focus was collaboration with its customer, Hyundai Motor Group to
customize its products to automobile steel sheet. The third strategy was focusing on
specific products, mainly automobile sheet and shipbuilding plate. By limiting thevariation of product line, Hyundai Steel was able to deploy its resources more effectively
and efficiently.
The experience in electric arc furnace could not be directly connected with blast
furnace process because the fundamental differences in technology. However, theknowhow on basic inventory management and flow management did help learning newprocess.
The biggest problem at this stage was that how it can learn faster without direct5experience in blast furnace business. Though Hyundai Steel had agreement with TKS
on operating technology transfer, this support was only for blast furnace operation, notfor the oxygen making process. It could not experience what cannot be experienced since
the construction process was still on going. The only way to pre-learn ‘experience’ was tobring the experienced manpower from outside. Luckily enough, around 2005~2007,
there were quite a few retired workers who experienced working in blast furnace andoxygen furnace, most of them from its rival POSCO(Pohang Iron and Steel Company)
established in 1973. Hyundai Steel hired those veterans and let them train their young
operators. Hiring veterans were not limited from POSCO, some of them were fromJapanese steel manufacturers such as JFE steel. Those experts shared their own‘learning-by-using’ experience with younger generation in Hyundai Steel.
(2) Learning by using (2010~)
The first blast furnace starts operation from January 2010, 39 months after Hyundai
Steel officially declared construction of new processes. The time to stabilization took
only 25 days, and this number shortened 12 days in the second blast furnace, completed
10 months later. In this stage(learning by using), literally using of new processes
started and from this point, Hyundai Steel started accumulating operating knowledge
and knowhow. Also, in this stage, Hyundai Steel’s learning had two major objectives.
The first one is overlapping and transferring knowledge and knowhow to other lines
swiftly(ex: to #2 and #3 blast furnaces). The second objective was getting feedback fromits customer(Hyundai Motor Group) as soon as possible.
Blast furnace #1 and #2 are mostly overlapped(Figure 2.) in construction time as well
as operation starting time. However, there exists about half year between completion of#2 and construction start of #3. As mentioned previously, those three blast furnaces areexactly the same specification.
<Figure 2 Overlapping and reinforcing among processes>

6

The overlapping of #1 and #2 was effective in acquiring and deploying operation
knowledge in short time span between two blast furnaces. Though construction time
was not shortened greatly from #1 to #2, the time to stabilization shortened from 25days to 12 days. And accumulating operation experience for more than 6 months playeda critical role for #3 blast furnace. In other words, the experience accumulation in #1
and #2 greatly reinforced both the construction and operation of #3 blast furnace(29months in construction and only 6 days in stabilizing operation). In this respect,
overlapping and reinforcing was particularly effective way based on its strategy ofbuilding 3 same lines.
The second objective of learning by using stage was getting feedback from its customer
as soon as possible. As of 2012 which is only 2 years of stating operation, Hyundai Steelsupplied 3 million ton(less than half of output from blast furnace) of automobile sheet
for Hyundai Motor Group. When Hyundai Steel established R&D center in 2007, it
started R&D activity with Hyundai Motor Group. Hyundai Motor Group sourced steel
sheets from Hyundai Steel, and from the very early stage, found quality issues andestablished a task force team to address this issue. This was possible because they are
under the same conglomerate, but this early feedback played critical role to improve
quality.
5. Discussion
This paper stressed the impact of learning strategies on ramp-up process. We analyzed
two learning stages, ‘learning-before-using’ and ‘learning-by-using’. We found ‘using’ is7

very useful concept, not only in understanding time of action, but also in emphasizinguser’s perspective. More importantly, Hyundai Steel’s learning strategies on each stage
elaborated. In the first stage(learning before using), Hyundai Steel deployed repeatedlearning strategy to maximize learning effect and minimize the uncertainty of newly
introduced technology. And in the second stage(learning by using), Hyundai Steel used
overlapping and reinforcing strategy.
Implementation of new technology involves learning activity, but what this paperemphasizes through brief empirical study is that learning activity entails learning
strategies. The fitness between learning mode and firm’s learning strategies have agreat impact on the technology implementation and its performance. Though this study
used a case study on this research question as exploratory study, the causal relationshipbetween the performance of recipient’s implementation and learning strategies on eachmode is worth further research.
Understanding technology transfer or technology implementation process from therecipient’s perspective can also suggest many fruitful researches. Implementing newtechnology as learning process is just one of the various approaches possible. But
ramp-up process has not been highlighted as much as user’s modification andadaptation activity.

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