The end of the Korean model ?

In retrospect, 2010 clearly marked a turning point for Korea : this is probably the year leadership spirit became mainstream.

I'm not talking about the "can do", "fighting" spirit, but about a cultural shift from an eternal best follower to a trend setter.

Ever since I first came to Korea 20 years ago, business management has been essentially based on international benchmarking, and executives obsessed with what others were doing overseas. Still now, you can feel almost everywhere that old Japanese Complex (how to kill the economic father), or this more recent CEO Complex (how would Steve or Bill think or do ?). But a top-down revolution seem to be trickling down hierarchies. The mottos ? Don't wait for others to move first, start thinking by yourselves, go set the pace... (or, until recently, "come on, be a Tiger")

New generation of US-grown Ivy Leaguers have instilled strategy into Korean boardrooms, converting top chaebols to quality, sustainability, or proactivity. Most notably, Hyundai's Chung Mong Koo or Samsung's Lee Kun-hee had to literally shake their own companies to force much needed cultural revolutions. A couple of years later, both companies shine among the top stars of 2010, but both have yet to confirm and to reach new levels in order to secure their recently claimed leaderships. And they are very much aware of it : even if Samsung timely increases massively its research and development efforts, competition remains fierce, and Chinese players keep catching up in all major innovation fields.

Yet, two of the main hurdles to this Korean revolution are homegrown : a SME ecosystem and an education system unfit for the challenges to come. Because paradoxically, the most connected country on Earth generated monsters hampering the emergence of a truly efficient network society.

Of course, this is a country where netizens have more power than anywhere else, but precisely : it proves the existence of an enormous gap between the people and the politic, economic, or media elites. Korean society it as the same time too connected and too disconnected.

But let's get back to business, where evergrowing and ever more agile chaebols leave no room for manoeuvre to SMEs : if they want to become bigger, small fishes can only grow more dependent on bigger fishes as clients or providers... or end up as trophies in their acquisition sprees. Even at the peak of the economic crisis, SMEs had a tough time hiring or keeping talents because everybody wants to work for a big brand.

Big fishes are just starting to realize that they need stronger players around, and that if they keep sucking all value from the pond, it will eventually dry up. Take mobile applications, for instance : for years, the most advanced country in mobile multimedia was lacking a balanced ecosystem because operators wanted to control the whole chain and push their own solutions. The irruption of Apple in the local pond did not only wake up the smartphone market at the hardware level, but also the complete middleware and application ecosystem, forcing everybody to open up new stores and to look for new partners. If Korean mobile industry took over Europe ten years ago, it is only catching up now by moving towards a more open ecosystem, fitter for innovation and disruptive environment*.

In Korea's unbalanced environment, major cultural changes can't happen without a top-down intervention, and it sometimes takes a whale to set the pond in order : last year, the Korean government had to coerce industry leaders into collaborating with each other as well as with smaller companies on key R&D fields, because that was the only way to compete at the global level. When you're addicted to power, it's hard to swallow the fact that open systems are more powerful than wholly controlled ones.

As a matter of fact, Korea's ultra-competitive culture doesn't prepare for "coopetition", nor for next generation partnerships. Business relationships seldom reach beyond the usual provider / customer model... except of course for that all time favorite : winning against competitors, being the number one, neutralizing the Other.

The same can be said about Korea's ailing educational system. Ailing ? Korean students fare so well worldwide that this system is often praised as one of the most efficients... but record denatality and suicide rates tell a completely different tale : this system is now completely corrupt and must evolve. If Korea reached the top thanks to a merit-based, social-ladder-friendly educational system, it will collapse if it persists into this unfair, money-based nightmare where creativity is totally eradicated, and where young humanoid robots compete in the ultimate race for conformity.

So instead of celebrating 2010 as the year of the confirmation of Korea as a global power in such various fields as economics, Olympics, or diplomacy, I'd like to expose 2010 as the year the Korean model reached its limits.

1998 could have been that year, an abrupt end to the Miracle on the Han River. But the country somehow managed to rebound, leveraging beyond regional opportunities (struggling Japan, booming China), on its own, unique dynamics. Great social reforms happened but at the economic level, what came next was basically the same model pushed a bit harder.

This time, change truly seems to be coming. And I'm confident it will radiate across a society so quick at embracing change. Seoul, the capital city, is showing the way by embracing cultural diversity and collaborative sourcing of new ideas to stimulate the SME ecosystem, to improve everyday life and international competitiveness. And at long last, the national government is reconsidering SMEs as a priority. Unfortunately, the much needed reform of education is not on the agenda of this otherwise very conservative power.

Now is the moment. Flush with money, surfing on an unprecedented wave of international recognition, Korea must embrace reforms if it wants to remain a top player.

And to make of 2011 year one of the authentic Korean Model.
Seoul Village 2011

* Apple itself is not really a model of open business, but that's yet another story

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ADDENDUM 201201

This post was also published in Korea JoongAng Daily (see "New Korean Model (continued)")