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How Korean Companies are Utilizing Open Innovation

As a person who makes a living by providing open innovation services in South Korea, I often receive the following two questions:

Question #1: What is the secret behind the Korean companies that are so good at open innovation?

-       This question comes from overseas innovators who wish to learn about Korean companies that are using open innovation effectively to increase speed to market.

Question #2: What is the reason why Open Innovation does not work for Korean companies?

-       In contrast, this question comes from Korean innovators who benchmark themselves against overseas organizations that are publicly well known for their excellence in Open Innovation.

By working with most of the Global Fortune 500 ranked Korean companies, it is my privilege to have a broad perspective when answering the above questions. I sincerely hope that answering these two questions will help the readers of NineSigma’s blog gain a better understanding of how Korean companies are utilizing Open Innovation.

Why Koreans are so good at Open Innovation (Speed to Market)?

If you have read the history of major Korean manufacturers (e.g. electronics, display, automotive, shipbuilding companies, etc.), it is not that difficult to see that their birth always come from working with overseas partners. Korean electronics companies made their first radio in collaboration with Japanese, American and German partners. Korean automobile manufacturers made their first cars through licensing agreements with Japanese and American automakers. Korean shipbuilders made their first ships by learning from Japanese and European major shipbuilders. Regardless of industry, there has been a history of collaboration with overseas partners in Korea. They did not have the terminology - Open Innovation - back then, yet the concept existed. Then it was known as ‘hand-in-hand technical cooperation.’ Therefore Open Innovation is in the blood of all Korean manufacturers.

Why did so many Korean companies start manufacturing products by using others’ technologies instead of developing their own? When I asked this question to senior and retired Korean engineers, their answer was simply “to survive.”  Compared to other countries, Koreans do not have the same natural or financial resources. Especially in the 1960s when the industrialization started after the Korean War, the only way to make a living and survive in global competition was to make something fast and cheap while seeking ways to export those products. By doing this over the last 30 to 40 years, Koreans have become masters in speed to market, which is another way of describing Open Innovation.

Why some Koreans think Open Innovation is not for them?

Up until the early 1990’s, the electronics stores in the US were filled with Japanese televisions.  I remember walking into one of the US electronics stores back in 1992.  Small and not so good looking Korean television sets were sitting in the back corners while flat screen and amazing quality Japanese television sets were flashing on the shelves. Something has changed over the last 20 years and well-designed, innovative Korean television sets are on the front shelves. Korean engineers say it was possible because there were competitors to go after. They studied the gaps to fill and thrived to quickly make better products. Some say that it was game of ‘fast following’, and that the Koreans did a good job with this.

Now, many Korean manufacturers that are ranked in first or second place in certain industries no longer have competitors to benchmark. The rules of innovation have changed for them. Korean manufacturers have to come up with their own new product development strategy, set their own specifications, measure performance targets, understand the root cause of failure, etc. This causes much uneasiness and many of them look around for help. And that is why some of the Korean companies try Open Innovation.

Those Korean manufacturers that do not realize the paradigm shift of new product development often have a great deal of difficulty when adopting Open Innovation. It is painful to see some of them still practice the old rules yet dress it up with fancy words. However, those Koreans who clearly understand their short and long-term needs are able to reduce risks and work with unexpected partners, achieve tangible benefits through Open Innovation. I am happy to see an increased number of Korean innovators moving in this direction. But it is important to remember that success in Open Innovation requires working with the right people and a trusted brand, having the right skills combined with smart work processes; and only then can true benefits be achieved.

 

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