After delivering the keynote speech at the Korean-ASEAN forum in Seoul Korea, I reflected on the status of Korea's creative economy. Yes, Korea ranks number one in 2015 as the country having the highest R&D intensity according to OECD. Korea also has the highest IT workers per capita. But does Korea have a creative economy? Yes and no. At Best Buy, we can see innovative cell phones, appliances, laptops made by Samsung and LG. But other than these brands, do Korea have innovative products. Yes, when you visit Korea, their fashion industry is creative, but is there any major Korean fashion brand? Korean furniture design BIF has been innovative. Korea pop-culture or K-pop is well received - esp. Psi's Gangnam. Of an economy of relatively small size, Korea's accomplishment in innovative products is quite impressive. What is the future of this creative economy? Who is the next worldwide competitor of Samsung? Samsung aims to replace Apple. Does Samsung have a competitor? Consider Xiao-mi from China, recently dubbed as being able to bring about "Big bang" innovation with little R&D. The important question is does creativity require R&D. In the world of lean start-up, is R&D a must for creativity and innovation? The answer is NO. The business model of R&D as a driver of innovation is no longer a valid model in the digital world. As open source of everything to include knowledge is widely available, the key to future innovation is not R&D. What then is the key to innovation in the digital world?
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Just to underscore the point, Apple spends only 2% of its revenue on R&D. But of course they had Steve Jobs who functioned at times as a one man R&D department. There was no R&D department in Jobs’ garage while he and Wozniak were putting together the first Apple computers . Jobs didn’t get his MacIntosh operating system from R&D – he saw a sample of a windowing environment at a Xerox lab and recognized it immediately as the future of computing – one man R&D. And even though we can’t say the iphone was produced without development costs, it was Jobs who steered development – away from an ipad and toward an iphone – with legendary results. Goodbye R&D, hello disruptive innovation. But I wouldn’t fire all the R&D departments just yet. Microsoft spends 13% of revenue on R&D, and I wouldn’t want to be the one to tell Bill Gates he’s got it all wrong. (See http://www.cultofmac.com/252876/apple-spends-just-2-of-its-revenue-on-rd/ ).
No doubt R&D is in for some changes. An HBR article warns that more attention has to be paid to “process development” or “process R&D” as well as initial R&D. If the R&D people don’t communicate well with the manufacturing managers, a product might die at the manufacturing stage. The manufacturing process might be unforeseeably expensive or slow . The authors detail a fiasco at Sigma Pharmaceuticals. (See https://hbr.org/1995/09/the-new-logic-of-high-tech-rd ).
The Korean Herald makes a similar point. Only one in ten technologies developed in South Korea through R&D makes it to the market as a product or service. Only one in four technologies developed through state funded R&D is transferred to private companies. The South Korean government has taken note and is fostering start-up incubation centers and industry-academic collaborations. It remains to be seen whether this strategy will remedy the deficiencies in the total R&D process. (See http://www.chinadailyasia.com/opinion/2014-06/10/content_15139754.html ).