Observations From Korea’s Creative Economy 2013 Conference

12/24/13Follow @bbuderi

Innovation is one of those goals that transcends borders. Spurring technology innovation, and through it the creation of new industries that accelerate job growth, is always high on the agenda of any advanced economy.

But what if you had to change the culture of an entire nation at the same time?

That’s a major part of the challenge facing South Korea, where I recently took part in a conference called Creative Economy 2013. The four-day conference was the outgrowth of the massive Creative Economy initiative formally launched earlier this year by new president Park Geun-hye to try to overcome some 15 years of declining or stagnant GDP growth rates and make it more competitive for the long term.

As part of a small group from the U.S. invited to speak at the conference, I had the great honor of meeting President Park and other dignitaries in a private session on the opening day of the event, December 11. (Disclosure: transportation, hotel, breakfast, and a $400 honorarium for other expenses were provided by the conference organizer, the Ministry of Science, ICT, and Future Planning.)

This was actually the second time I had met her in seven months: the first occasion was at the Getty Museum in Los Angeles last May, where some of the same group and others met to share ideas and perspectives on fostering entrepreneurship and innovation in advance of the Creative Economy’s formal unveiling the following month (Park only took office in February, so she is moving fast).

Our entourage included some leading Korean-American entrepreneurs, as well as others, like me, who are immersed in the innovation economy and hopefully have some insights to share. Among them: Steve Kahng, founder of Power Computing (an early Macintosh clone company ultimately bought by Apple); Israeli and New York venture capitalist Zeev Klein of Landmark Ventures; Stanford University engineering professor Thomas Lee, former director of DARPA’s Microsystems Technology Office; New York-based Suk Park, co-founder of entertainment startup DramaFever; former University of Alabama system chancellor Malcolm Portera; Kay Seo, senior director for open innovation at Bell Labs; and mysimon.com founder Michael Yang.

Four of the group came from the Boston area: early stage investor Kija Kim, of Clark Hill Partners; Hikyu Lee, co-founder and CEO of Olev Technologies, a wireless charging company; intellectual property lawyer Bruce Sunstein; and me.

That's me between the moderator and Power Computing founder Steve Kahng. I missed the name of the Korean entrepreneur on the right.

That’s me between the moderator and Power Computing founder Steve Kahng. I missed the name of the Korean entrepreneur on the right.

At its root, the Creative Economy initiative is about cultivating an environment for high-tech innovation by spurring entrepreneurship, venture capital investment, new collaborations, mentoring, and more. The idea is to enhance the competitiveness of existing industries while also creating new ones—all things that in the U.S. we see as omnipresent but are always trying to improve.

In Korea, as in many other nations in Asia and elsewhere, the challenge is cultural as well as economic. I heard this time and time again—at the conference, in special meetings with various government and industry officials, and in a visit to a Seoul startup accelerator called D.Camp. Almost everyone spoke about the imperative to spur risk-taking, to be more innovative in their thinking, and to praise (rather than ostracize) people who try to create new businesses but come up short initially. As a briefing paper we were given put it, the initiative seeks to help “people with indomitable entrepreneurial spirit take on the challenge again without fear of failure.”

None of this will surprise readers who have experienced these same cultural restraints (in Asia or elsewhere). But it seems rare in my experience, anyway, to have the sentiment come from the very top. As President Park said in her opening keynote, the country is in “dire need of a paradigm shift.” Korea, she said, can no longer just follow industrialized countries—real recovery will “depend on who has more ideas and who will be more creative.”

The goal of the Creative Economy is to uncover and foster people’s “hidden and potential talent,” she said. “Dazzle us with your capabilities.”

The economic situation against which this cultural shift is framed is interesting. Korea is a country that has seen staggering growth in the past 50 years. It has tremendous assets, ranking among world leaders in education and in industries from autos to shipbuilding to steel, consumer electronics, and smart phones, according to a presentation I was given by Woo Cheonsik, VP for Global Research Cooperation at leading think tank Korea Development Institute.

But it also faces formidable challenges. The growth rate peaked in the late 1980s and has been on a slow but pretty steady decline ever since, with the government’s briefing document projecting the decline in growth continuing past 2020. At the same time, government leaders, Woo, and others I met with cited a rising income disparity between those at the top and the rest of society, an aging population coupled with high youth unemployment, a shortage of global talent, and worries about a looming brain drain, with more Koreans educated abroad not returning home.

(Even Samsung’s success story is not without caveats: During some brief conversations about Samsung vs. Apple, I found the strong sentiment that while Samsung has risen to No. 1 in smartphones with some important process innovations, it falls short in blazing entirely new trails that will keep it on top for the long haul.)

On the exhibit hall in Seoul's Gangnam district. No Psy, but scores of new tech innovations.

On the exhibit hall in Seoul’s Gangnam district. No Psy, but scores of new tech innovations.

All this, and more, factors into the Creative Economy initiative. So with that as a backdrop, here are a few more observations from the trip:

—The Creative Economy initiative is spearheaded by the Ministry of Science, ICT, and Future Planning, but it spans 21 ministries and seven business associations—making it one of the seminal efforts of Park’s administration, but of course also running the risk of making it highly bureaucratic. The closest parallels to it in the U.S. are probably the Strategy for American Innovation unveiled by President Obama in 2009 and the public-private Startup America Initiative launched in 2011, both of which were cited in the Korean briefing paper.

—The idea is for government to create the framework and be the coordinator, but then let business and the private sector take over. The plan includes funding for incubating ideas and startups, as well as for venture capital investments, paired with tax credits for M&A activities.

—Under Korean law, the president serves just one five-year term and cannot run for reelection—raising the stakes even higher to make progress quickly.

—Just as in the U.S., many in the opposition party are fiercely opposed to the Creative Economy initiative—not its goals, which seem to be universally shared, but the way it has been conceived and implemented. Sound familiar?

—President Park was elected in part through her background, her charisma, and her talent (which you can read more about in this New York Times article). But she also did something really interesting. She is from the conservative party in Korea (Saenuri, or New Frontier), which was called the Grand National Party until early 2012. She helped bring it back from a long period of disfavor and scandal not just through the name change, but by helping to move it to the left via some social welfare programs designed, as the New York Times put it, to “appeal to voters fed up with the nation’s jobless recovery after the global financial crisis.” I can’t help but wonder if the Republican party would win back the White House if it did something similar. (But what would the new name be?)

—Korea is strong in patenting and in some areas of research, but poor at commercializing research. The number of cases where research had been commercialized barely moved from 2008 (122 cases) to 2012 (132 cases), according to the government’s briefing document.

Rapidly expanding Gangnam accelerator, D.Camp.

Rapidly expanding Gangnam accelerator, D.Camp.

—The number of startups formed by professors or researchers plummeted, from 3,144 in 2004 to just 1,761 in 2009, according to the document. (Of course, that could be a direct result of the 2008-09 recession—and I haven’t compared it to U.S. figures).

—Only 10 percent of Korean PhD students in engineering want to start a business, compared to 22 percent of Americans (this figure is also from the government briefing).

—A website called Creative Economy Town was built to solicit innovative ideas or technologies (apparently it works much better than healthcare.gov), and then hopefully link those ideas to people who can provide mentorship and other assistance to make them reality. In her talk, President Park praised the fact that some 3,800 ideas had already been submitted, and said she was inspired by the creativity of those concepts. However, she expressed disappointment over how few of them had been commercialized.

—The event included an exhibition hall where scores, if not hundreds, of products and programs were on display. These included booths from government labs and large companies like Samsung, as well as 60 startups doing everything from fighting stroke to making parking apps to building a better golf club. My favorite was a display from the national Railroad Research Institute that showed a plan to replace canals with special railways for ships. In the model, ships were raised right out of the sea onto the railway. According to the person at the booth, this would be far more cost-effective than building and maintaining canals.

Korea has a long, long way to go with these efforts. As I was walking around the exhibition floor, I was pulled aside by a television reporter and asked what I thought of the Creative Economy’s chances of success. I told her there were so many variables, and my knowledge of the country so sparse, that I couldn’t possibly answer that.

But I also told her I could determine one thing for sure: it wasn’t going to happen if they didn’t try.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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