South Korea’s Fast Follower Disadvantage

29 Aug

Who's the Winner, the Fast Follower, Or the First Mover? In the wake of the Apple verdict against Samsung in a San Jose federal court, Tom Coyner argues, that it’s time for South Korean business executives to choose between being labeled as copycats, or innovating.

Putting aside patent issues for the moment, it is not enough to produce high quality products that are often better in various ways than the originals. Producing improved copycat models requires priorities that limit basic R & D. While some R & D is put into improving the original product design, huge amount of resources must be devoted to setting up production lines capable of generating large volumes of high quality products in very, very short time frames. This is Samsung Electronics primary global competitive advantage. But the tradeoffs include being branded as a copycat and being forced to also compete on price, which means much smaller profit margins than the true innovating companies.

This is not to say there is anything wrong per se, at least for the short- to long-term, with this business mode. But there are also some structural weaknesses, particularly given that Korea has to watch its backside with up and coming competitors, such as China today, and possibly Thailand and Indonesia tomorrow.

The Koreans need to find the means to move up the food chain in terms of basic R & D and market-creating innovation. Otherwise, they may risk emulating their Japanese mentors yet one more time.

As an added illustration, I’m unpleasantly amused by this Chosun Daily editorial.

Samsung must try its best, but it really needs to bolster its design and software capabilities so that future products will not be accused of being copied. Over the short term, it will need to hire global experts to improve product designs, and Korea as a whole should recruit experts from around the world to train up-and-coming designers at universities here. Samsung should look into how it can make a contribution to that effort.

The Chosun just doesn’t get the notion of innovation, does it? The newspaper is as stubborn as students, trained since birth to be human vacuum cleaners with ears, who act as if going to class made them dedicated, yet passive spies in a fight against the foreign world. It’s a world where there is one way to do everything, including learning, and texting, music videos, and cynical humor under the influence of massive doses of sugar-infested coffee are the only permitted avenues of escape. As much as the editorial tries to ridicule the legal concepts behind the verdict as based on superficial aspects, such as design, and the jurors as “ordinary”, not “experts”, there is still the implication, that fast following can somehow produce something special. Yet, creativity requires acting like a first mover, inventing something or some process that has an ineffable quality of being unique. Or, whatever the legal definition of it is.

And, the jury was qualified.

One of my students, an older professor, told me about a study he was working on involving encouraging small business incubation in South Korea. The ministry was worried about South Korea’s mix of small and large enterprise, comparing supposedly dismal scores with the likes of Verona. His team was tasked with compiling incentives to adjust South Korea’s small-to-large mix. Aside from the value of any Italian exemplar right now, I could not help but ridicule any attempt to compel people to become businesspeople based on a rigid target. Central planning might have its place, but stats and innovation do not go together.

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