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[Discussion Broadcast] "Small and Medium Enterprises Are the Driving Force of the Fourth Industrial Revolution Transformation; Must Possess Digital Capabilities and Leadership Capabilities"
Published2017.01.31 15:40IT Policy Forum Held on Digital Transformation as Theme
The business environment has begun to change with the development of new digital technologies such as social networks, mobile, big data, and AI. Now, a company's capabilities are often measured by its ability to utilize digital technology.
Digital Transformation (Digital Transformation), which Loa Consulting defines as "the collective term for the phenomenon of transitioning from traditional business methods of existing manufacturing enterprises to ecosystem-centered platform business models capable of acquiring new value," has been presented as a solution to the Fourth Industrial Revolution era.
The Korea Information Industry Association held its 2017 IT Policy Forum on the 24th at the COEX Conference Room under the theme "Fourth Industrial Revolution, Digital Transformation is the Answer." We are broadcasting a live discussion held under the theme "Capabilities of Domestic Companies and National Policy Direction in the Era of Digital Transformation."
The first presentation of the forum was delivered by Kim Jin-young, CEO of Loa Consulting, under the theme "Fourth Industrial Revolution, What Should We Prepare?" Regarding business models in an era of low growth where industry boundaries are collapsing and becoming ambiguous, CEO Kim explained, "For domestic companies, digital transformation under the CEO's digital vision involves establishing governance centered on a dedicated department with digital leadership to deliver new customer value and experience, transforming into a Digital Visionary."
▲GE is the company that led the trend of digital transformation. GE, which was a world-class representative manufacturer, now prides itself as a software company.
(Photo from GE Report Korea's "GE's Thinking Factory Becomes Reality")
Next, Choi Yun-seok, Senior Managing Director of Korea Microsoft, presented on "Leading Application Areas of Digital Transformation, Key Technology Elements, and Success Cases." Director Choi stated that the Fourth Industrial Revolution is about achieving innovation with data, and the key is how to handle data whose scope is widening and quantity is increasing.
Kim Jin-uk, Vice Director of Korea IT Law Research Institute, gave a lecture on "Data-Driven Innovation and Data Governance Direction for Successful Digital Transformation." Vice Director Kim argued, "The purpose of data innovation is ultimately to improve quality of life," and "corporate digital transformation should be implemented through data-driven intelligent systems using data as a core corporate asset and new growth engine."
Following three presentations, a panel discussion was held. Opinions were shared on the definition of digital transformation, the situation and capabilities of domestic companies, and what direction national-level policies should take. The discussion, moderated by Professor Hwang Kyung-tae from Dongguk University's Department of Business Administration (chair), included CEO Kim Jin-young of Loa Consulting, Senior Managing Director Choi Yun-seok of Korea Microsoft, Vice Director Kim Jin-uk of Korea IT Law Research Institute, Senior Managing Director Kim Young-duk of Lotte Accelerator, Senior Managing Director Kim Yi-sik of KT Big Data Center, Partner Shim Tae-ho of AT Kearney, and Professor Yang Hee-dong of Ewha Womans University's Department of Business Administration.
To Achieve Digital Transformation, Vertical Corporate Culture and Rigid Systems Must Change
Senior Managing Director Kim Young-duk Most companies pursuing digital transformation present a vision, form dedicated organizations, and implement systems, but beyond that, they neither try nor know how to utilize the systems. From an organizational perspective, digital transformation is difficult even when the company's leader attempts it. While the pace of digitalization is accelerating, vertical corporate culture becomes an obstacle. For companies to pursue digital transformation, more than system implementation is needed—education and investment in people are necessary. If internal capabilities are insufficient, I believe companies should research methods of hiring talent and utilizing external resources, with investment following suit.
"The issues are the lack of IT-based platforms and original technology. There are no outstanding businesses to showcase.
This creates a risk of dependency on global platforms when adopting and utilizing them."
- Partner Shim Tae-ho
The business environment has begun to change with the development of new digital technologies such as social networks, mobile, big data, and AI. Now, a company's capabilities are often measured by its ability to utilize digital technology.
Digital Transformation (Digital Transformation), which Loa Consulting defines as "the collective term for the phenomenon of transitioning from traditional business methods of existing manufacturing enterprises to ecosystem-centered platform business models capable of acquiring new value," has been presented as a solution to the Fourth Industrial Revolution era.
The Korea Information Industry Association held its 2017 IT Policy Forum on the 24th at the COEX Conference Room under the theme "Fourth Industrial Revolution, Digital Transformation is the Answer." We are broadcasting a live discussion held under the theme "Capabilities of Domestic Companies and National Policy Direction in the Era of Digital Transformation."
The first presentation of the forum was delivered by Kim Jin-young, CEO of Loa Consulting, under the theme "Fourth Industrial Revolution, What Should We Prepare?" Regarding business models in an era of low growth where industry boundaries are collapsing and becoming ambiguous, CEO Kim explained, "For domestic companies, digital transformation under the CEO's digital vision involves establishing governance centered on a dedicated department with digital leadership to deliver new customer value and experience, transforming into a Digital Visionary."
▲GE is the company that led the trend of digital transformation. GE, which was a world-class representative manufacturer, now prides itself as a software company.
(Photo from GE Report Korea's "GE's Thinking Factory Becomes Reality")
Next, Choi Yun-seok, Senior Managing Director of Korea Microsoft, presented on "Leading Application Areas of Digital Transformation, Key Technology Elements, and Success Cases." Director Choi stated that the Fourth Industrial Revolution is about achieving innovation with data, and the key is how to handle data whose scope is widening and quantity is increasing.
Kim Jin-uk, Vice Director of Korea IT Law Research Institute, gave a lecture on "Data-Driven Innovation and Data Governance Direction for Successful Digital Transformation." Vice Director Kim argued, "The purpose of data innovation is ultimately to improve quality of life," and "corporate digital transformation should be implemented through data-driven intelligent systems using data as a core corporate asset and new growth engine."
Following three presentations, a panel discussion was held. Opinions were shared on the definition of digital transformation, the situation and capabilities of domestic companies, and what direction national-level policies should take. The discussion, moderated by Professor Hwang Kyung-tae from Dongguk University's Department of Business Administration (chair), included CEO Kim Jin-young of Loa Consulting, Senior Managing Director Choi Yun-seok of Korea Microsoft, Vice Director Kim Jin-uk of Korea IT Law Research Institute, Senior Managing Director Kim Young-duk of Lotte Accelerator, Senior Managing Director Kim Yi-sik of KT Big Data Center, Partner Shim Tae-ho of AT Kearney, and Professor Yang Hee-dong of Ewha Womans University's Department of Business Administration.
To Achieve Digital Transformation, Vertical Corporate Culture and Rigid Systems Must Change
Senior Managing Director Kim Young-duk Most companies pursuing digital transformation present a vision, form dedicated organizations, and implement systems, but beyond that, they neither try nor know how to utilize the systems. From an organizational perspective, digital transformation is difficult even when the company's leader attempts it. While the pace of digitalization is accelerating, vertical corporate culture becomes an obstacle. For companies to pursue digital transformation, more than system implementation is needed—education and investment in people are necessary. If internal capabilities are insufficient, I believe companies should research methods of hiring talent and utilizing external resources, with investment following suit.
"While the pace of digitalization is accelerating, vertical corporate culture becomes an obstacle.
For companies to pursue digital transformation, more than system implementation is needed—education and investment in people are necessary."
- Senior Managing Director Kim Young-duk
For companies to pursue digital transformation, more than system implementation is needed—education and investment in people are necessary."
- Senior Managing Director Kim Young-duk
Partner Shim Tae-ho What is necessary in digital change is digital capability and leadership capability. First, executives must have a vision of the future of the digital world. With a precise vision, digital transformation can be achieved. Second, as seen in the presentation content, technology is important, but not everyone can develop original technology. If everyone possesses technology, there must be differentiated value. Finally, data utilization cannot be avoided. Then, it is important to find ways to use it safely.
Senior Managing Director Kim Yi-sik Big data is the cause triggering digital transformation. Nowadays, many companies are keeping work instructions and work records as digital records. Performance is evaluated based on this data. In this way, intelligence is being achieved based on data. Since only intelligence needs to be controlled, artificial intelligence has begun to be highlighted, and the transition to corporate dissolution has started. Since there is no need to maintain a corporate form, large enterprises cannot achieve digital transformation. Digital transformation innovation will come from new businesses, not large enterprises.
Senior Managing Director Kim Yi-sik Big data is the cause triggering digital transformation. Nowadays, many companies are keeping work instructions and work records as digital records. Performance is evaluated based on this data. In this way, intelligence is being achieved based on data. Since only intelligence needs to be controlled, artificial intelligence has begun to be highlighted, and the transition to corporate dissolution has started. Since there is no need to maintain a corporate form, large enterprises cannot achieve digital transformation. Digital transformation innovation will come from new businesses, not large enterprises.
"Intelligence is being achieved based on data.
Since there is no need to maintain a corporate form, large enterprises cannot achieve digital transformation.
Digital transformation innovation will come from new businesses, not large enterprises."
- Senior Managing Director Kim Yi-sik
Since there is no need to maintain a corporate form, large enterprises cannot achieve digital transformation.
Digital transformation innovation will come from new businesses, not large enterprises."
- Senior Managing Director Kim Yi-sik
Professor Yang Hee-dong At the Davos Forum, countries were ranked on their preparedness for the Fourth Industrial Revolution. Korea ranked 25th. The reason is that the labor market is inflexible and systems are too rigid. Another issue is that while large enterprises have the capacity to follow IT trends when they change, small and medium enterprises and startups lack such capacity and show no interest. We need to discuss how to utilize these aspects.
The second topic was opinions on the definition of digital transformation and the situation and capabilities of domestic companies.
Vice Director Kim Jin-uk Personally, I believe digital transformation is a legal and institutional means for collecting big data. All materials must be digitalized to become information with utilization value through analysis. In that sense, I view digital transformation as an instrumental device that increases the value of data and improves quality of life by providing necessary data to those who need it.
The second topic was opinions on the definition of digital transformation and the situation and capabilities of domestic companies.
Vice Director Kim Jin-uk Personally, I believe digital transformation is a legal and institutional means for collecting big data. All materials must be digitalized to become information with utilization value through analysis. In that sense, I view digital transformation as an instrumental device that increases the value of data and improves quality of life by providing necessary data to those who need it.
"Digital transformation is an instrumental device that increases the value of data and improves quality of life
by providing necessary data to those who need it."
- Vice Director Kim Jin-uk
by providing necessary data to those who need it."
- Vice Director Kim Jin-uk
Senior Managing Director Choi Yun-seok Looking at digital transformation from a terminology perspective, it is viewed in relation to transformation, but there are no domestic success cases of transformation. From another perspective, it is changing into a new business by breaking through the existing behaviors of other companies and entering the market. Major foreign companies are good at acquiring other companies and internalizing them. Domestically, even when companies are acquired, it rarely leads to development. We need to internalize and create new services, but we are weak in that area. We are still unprepared to pursue digital transformation.
CEO Kim Jin-young Personally, I view the subject of digital transformation not as large enterprises but as small and medium enterprises and analog companies. When discussing the Fourth Industrial Revolution, the third disappears and the fourth arrives, as if the paradigm has fundamentally shifted, but it doesn't feel real yet. However, the terms "digital transformation" and "Fourth Industrial Revolution" will continue to emerge. The time has come for government and business coalitions to take the lead and articulate their meaning. When digital transformation is mentioned, there are always certain companies. They were able to achieve this because they possess digital capabilities and leadership capabilities. The government should help small and medium enterprises with these capabilities, not just large enterprises, and large enterprises should also help from a co-prosperity perspective so that small and medium enterprises can become the protagonists of paradigm change.
CEO Kim Jin-young Personally, I view the subject of digital transformation not as large enterprises but as small and medium enterprises and analog companies. When discussing the Fourth Industrial Revolution, the third disappears and the fourth arrives, as if the paradigm has fundamentally shifted, but it doesn't feel real yet. However, the terms "digital transformation" and "Fourth Industrial Revolution" will continue to emerge. The time has come for government and business coalitions to take the lead and articulate their meaning. When digital transformation is mentioned, there are always certain companies. They were able to achieve this because they possess digital capabilities and leadership capabilities. The government should help small and medium enterprises with these capabilities, not just large enterprises, and large enterprises should also help from a co-prosperity perspective so that small and medium enterprises can become the protagonists of paradigm change.
"There is an ecosystem where the platform can operate.
That ecosystem is the service market, and most of the service market has know-how from the local market.
We should target this area. The core of the Fourth Industrial Revolution is the combination of IT and manufacturing."
- Professor Yang Hee-dong
That ecosystem is the service market, and most of the service market has know-how from the local market.
We should target this area. The core of the Fourth Industrial Revolution is the combination of IT and manufacturing."
- Professor Yang Hee-dong
Professor Yang Hee-dong Industry and manufacturing are closely related. It is probably too late for Korean IT to compete with Amazon, Microsoft, and Google. There is an ecosystem where the platform can operate. That ecosystem is the service market, and most of the service market has know-how from the local market. We should target this area. The core of the Fourth Industrial Revolution is the combination of IT and manufacturing. Even in this combination, there are various issues such as unions and human resources management. Our companies have much know-how to transfer in these areas, so they can gain strengths in the consulting market. The weakness is that there is no platform or ecosystem where small and medium enterprises can share their experiences with external companies, and there are no cases of sharing with foreign companies.
Senior Managing Director Kim Yi-sik The main concern about digital transformation is what will happen to us. As mentioned earlier, the core is the dissolution of corporate structure due to big data intelligence. According to Coase's Law, if internal transaction costs are lower than external transaction costs, companies take corporate form. However, due to the digital revolution, external transaction costs have become significantly cheaper. Innovation for large enterprises has ended. It is difficult to match transaction conditions and costs internally. The reason our country cannot achieve digital transformation is because large enterprises are trying to do it. If they compete with open source, differentiation decreases and no one attempts it. Ultimately, one must either pursue new businesses within large enterprises or break away and start a global startup.
Senior Managing Director Kim Young-duk Digital transformation completely changes business processes based on data. Our companies' weakness is corporate culture. Even if the CEO builds a system, employees cannot use it. Therefore, decision-making systems must be established before implementing platforms or solutions. The problem is the mindset of only seeing tangible results. This causes a lack of ability to connect with external sources and fundamentally socialize. Through training to teach this, and by handling small data, making decisions, making inferences, and reflecting on business, companies can develop the capability to handle large data.
Senior Managing Director Kim Yi-sik The main concern about digital transformation is what will happen to us. As mentioned earlier, the core is the dissolution of corporate structure due to big data intelligence. According to Coase's Law, if internal transaction costs are lower than external transaction costs, companies take corporate form. However, due to the digital revolution, external transaction costs have become significantly cheaper. Innovation for large enterprises has ended. It is difficult to match transaction conditions and costs internally. The reason our country cannot achieve digital transformation is because large enterprises are trying to do it. If they compete with open source, differentiation decreases and no one attempts it. Ultimately, one must either pursue new businesses within large enterprises or break away and start a global startup.
Senior Managing Director Kim Young-duk Digital transformation completely changes business processes based on data. Our companies' weakness is corporate culture. Even if the CEO builds a system, employees cannot use it. Therefore, decision-making systems must be established before implementing platforms or solutions. The problem is the mindset of only seeing tangible results. This causes a lack of ability to connect with external sources and fundamentally socialize. Through training to teach this, and by handling small data, making decisions, making inferences, and reflecting on business, companies can develop the capability to handle large data.
"The issues are the lack of IT-based platforms and original technology. There are no outstanding businesses to showcase.
This creates a risk of dependency on global platforms when adopting and utilizing them."
- Partner Shim Tae-ho
Partner Shim Tae-ho If digital transformation is viewed as simply one trend experienced so far, it can lead to serious errors. Despite being a necessity rather than a choice from a company's perspective, many approach it short-term. Korea's corporate strength is entrepreneurial spirit. Korean people have tremendous drive, and this aspect resembles characteristics of digital technology. Conversely, the weakness is insufficient capability in data management and analysis. Many companies fail to properly accumulate data. Nevertheless, the fact that digital consumers are demanding and have high expectations serves as an opportunity. From the service provider's perspective, consumer demands act as a catalyst driving innovation. Threat factors include the lack of IT-based platforms and original technology. There are no outstanding businesses to showcase. This creates a risk of dependency on global platforms when adopting and utilizing them.
Government Understanding and Research on Digital Transformation Are Needed
CEO Kim Jin-young Value chains are being dissolved and the concept of assets is changing. Business models are being created that optimize transaction costs and marginal costs even without many assets. People conducting such businesses are not bound by rules or laws. From this perspective, the core of digital transformation is to educate small and medium enterprises unaware that value chains are dissolving and markets are changing. The government and large enterprises need to publicize this as a social responsibility.
"The core of digital transformation is to educate small and medium enterprises unaware that value chains are dissolving
and markets are changing. The government and large enterprises need to publicize this as a social responsibility."
- CEO Kim Jin-young
"The government must invest by providing value to other areas even if there are potential risks.
The government must pursue new attempts, investments, and research that no one has thought of.
Regulating is not the government's role."
- Senior Managing Director Choi Yun-seok
Government Understanding and Research on Digital Transformation Are Needed
CEO Kim Jin-young Value chains are being dissolved and the concept of assets is changing. Business models are being created that optimize transaction costs and marginal costs even without many assets. People conducting such businesses are not bound by rules or laws. From this perspective, the core of digital transformation is to educate small and medium enterprises unaware that value chains are dissolving and markets are changing. The government and large enterprises need to publicize this as a social responsibility.
"The core of digital transformation is to educate small and medium enterprises unaware that value chains are dissolving
and markets are changing. The government and large enterprises need to publicize this as a social responsibility."
- CEO Kim Jin-young
Senior Managing Director Choi Yun-seok Our country tends to block everything if there is a risk of deviating from standards whenever something is about to happen. The government must invest by providing value to other areas even if there are potential risks. The government must pursue new attempts, investments, and research that no one has thought of. Regulating is not the government's role.
Vice Director Kim Jin-uk For the nation to pursue digital transformation, the consciousness level and direction of the people must improve. Awareness of the value of data is relatively low. People are resistant to companies utilizing and sharing personal information. This problem must be resolved first. The government needs to change information protection laws to a negative system, premised on advance consent regarding regulations for industry activation. However, each government ministry in our country has divided responsibilities. If the government does not provide clear guidelines, ministries are reluctant to relinquish authority. To improve people's quality of life, I believe the legal system should be improved to make it easier for service providers to conduct business.
Vice Director Kim Jin-uk For the nation to pursue digital transformation, the consciousness level and direction of the people must improve. Awareness of the value of data is relatively low. People are resistant to companies utilizing and sharing personal information. This problem must be resolved first. The government needs to change information protection laws to a negative system, premised on advance consent regarding regulations for industry activation. However, each government ministry in our country has divided responsibilities. If the government does not provide clear guidelines, ministries are reluctant to relinquish authority. To improve people's quality of life, I believe the legal system should be improved to make it easier for service providers to conduct business.
"The government must invest by providing value to other areas even if there are potential risks.
The government must pursue new attempts, investments, and research that no one has thought of.
Regulating is not the government's role."
- Senior Managing Director Choi Yun-seok
Partner Shim Tae-ho I view this from two aspects. From an encouragement and support perspective, we must understand why existing companies find digital transformation difficult. Tax incentives when hiring personnel or adopting technology would be helpful. The other aspect is regulation. There are many conflicts arising from regulations failing to keep pace with industry development speed. It is difficult to follow the development speed of the digital sector. Even if we are one step behind, regulations should be created to match the situation and circumstances when major digital changes occur.
Senior Managing Director Kim Young-duk When new businesses emerge, people first think of government support, and this mindset must change. If companies rely on government support, competing companies engage in unfair competition and an ecosystem cannot form. Support should stop, and with minimal policy, unnecessary parts of business structure should be eliminated and the market should be left to decide. And to make policy, the government must research digital transformation and understand how it will be applied in practice before creating it.
Senior Managing Director Kim Yi-sik For many startups to emerge, the government must screen well and provide focused support. Data between companies must be transmitted smoothly. To do this, data control and management functions must be strengthened, which the government must do. If data flows well between companies, there are many potentially viable business models. If the government legally defines who has the authority over data, it is time we try something like the UK's MyData policy (companies providing personal data that machines can learn from).
Professor Yang Hee-dong We must see the dark side of IT. As personal protection, small and medium enterprise protection, and employment effects increase, the employment ratio of business establishments is declining. Additionally, we must consider that there is no innovative vision. We have no precedent for innovative vision, and what applies varies by country. Innovation has limitations in three aspects: knowledge, access, and time. We must break through these barriers.
Senior Managing Director Kim Young-duk When new businesses emerge, people first think of government support, and this mindset must change. If companies rely on government support, competing companies engage in unfair competition and an ecosystem cannot form. Support should stop, and with minimal policy, unnecessary parts of business structure should be eliminated and the market should be left to decide. And to make policy, the government must research digital transformation and understand how it will be applied in practice before creating it.
Senior Managing Director Kim Yi-sik For many startups to emerge, the government must screen well and provide focused support. Data between companies must be transmitted smoothly. To do this, data control and management functions must be strengthened, which the government must do. If data flows well between companies, there are many potentially viable business models. If the government legally defines who has the authority over data, it is time we try something like the UK's MyData policy (companies providing personal data that machines can learn from).
Professor Yang Hee-dong We must see the dark side of IT. As personal protection, small and medium enterprise protection, and employment effects increase, the employment ratio of business establishments is declining. Additionally, we must consider that there is no innovative vision. We have no precedent for innovative vision, and what applies varies by country. Innovation has limitations in three aspects: knowledge, access, and time. We must break through these barriers.
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