Home to some of the world’s biggest technology companies like Samsung, LG and the SK Group, South Korea has a longstanding reputation for innovation, which includes being named the world's most innovative economy according to the Bloomberg Innovation Index for the last two years. It also ranked number one in the world for R&D intensity, as well as value-added manufacturing and patent activity.
Yet, despite this recognition, Seoul ranks 27th out of 45 cities in Connecting Commerce: Business confidence in the digital environment, a report by The Economist Intelligence Unit (EIU) commissioned by Telstra. The report measures executives’ confidence in the strength of their local environments to support digital transformation, across categories such as innovation and entrepreneurship, ICT infrastructure, and development of new technologies.
However, Seoul remains the “city of the future,” with the South Korea government and its chaebols (large conglomerates including Samsung, LG, and Hyundai) leading the way in supporting the country’s digital transformation.
So what can we learn from their efforts?
1. Investing in digital skills.
While Seoul is home to numerous technology companies, executives in the city face challenges recruiting people with the right digital skills. For example, only 36 per cent of Connecting Commerce respondents based in Seoul believe its educational institutions are effective at equipping students with the digital skills businesses need.
The South Korea government is making a concerted effort to improve the digital skills of the country’s workforce. A 2016 report by Barclays jointly ranked South Korea and Estonia first in the world, in terms of their ability to equip their workers for the digital economy. It lauded South Korea’s world-leading track record in broadband provision, in addition to the well-balanced nature and effective implementation of its digital skills policy – in formal education as well as adult training, including those out of work.
2. Balancing start-up smarts with enterprise-level chaebol platforms.
South Korea has put a sharp focus on entrepreneurship and boosting the start-up scene, both within and beyond the chaebol.
The South Korean government has invested heavily in R&D, focusing on technology tied to the fourth industrial revolution such as Artificial Intelligence, Augmented Reality, the Internet of Things and Big Data. President Moon Jae-in has committed to spending US$3.7 billion on start-up grants and other initiatives over the next three years, while a range of accelerators like Primer, SparkLabs, and KSTARTUP have launched. South Korea has seen year-on-year growth in the number of start-up investments increase by 49 per cent in 2016.
As money is invested in innovation, more companies are taking advantage of Korea’s world-class technology and telecom infrastructure. Telecoms chaebol KT, alongside the country’s dominant messaging app Kakao, have created the first new South Korean bank in more than 20 years. K-bank, the country’s first web-only bank, has attracted over half a million users since its launch in April 2017. By creating new start-ups within the umbrella of a larger chaebol platform, KT has been able to promote new innovation and entrepreneurialism. At the Pyeongchang Winter Olympics in February 2018, KT will also join homegrown telcos SK Telecom and LG U+ to showcase the latest 5G networking technology to the world.
3. Playing an active part in the innovation ecosystem.
Telstra’s global research into digital transformation has repeatedly underlined the necessity for organisations to work as digital partners with their peers, their community, and their local ecosystem. Almost a third of firms (29 per cent) in several Asian cities turn to innovation labs to obtain ideas and advice, and another 18 per cent work with incubators and accelerators.
This trend is mirrored in Seoul, where business associations and events were cited as the most helpful local resources for digital transformation by 28 per cent of organisations. One example of this activity in action is from Hyundai. The company has participated in a range of groups including the ITU-T, a group devoted to creating new ICT standards, in order to facilitate collaboration between car and technology companies as new innovation continues to spur the growth of the connected car industry.
Opportunities for growth in the land of innovation.
As Connecting Commerce underlines, Seoul remains one of the most digitally advanced cities in the world, leading to high expectations for infrastructure and support.
A focus on investment in entrepreneurship and digital talent across the ecosystem is creating a range of new opportunities for businesses, local and international, to thrive.