|Lee Jang-woo, a professor of business administration at Kyungpook National University and the chairman of the Institute for Success and Economy, speaks during a K-pop seminar at the Korea Press Center in Seoul, Thursday. Courtesy of Institute for Success and Economy|
By Dong Sun-hwa
At first glance, K-pop and semiconductors seem unrelated ― they have different market sizes, target audiences and business models. But from an industrial perspective, the two can still fall into the same category of being the “first movers,” according to experts.
During Thursday’s seminar titled “Significance and Implications of K-pop’s Success for Innovation of Korean Economy” ― which was hosted by the Institute for Success and Economy, the Korea Institute for Industrial Economics & Trade (KIET) and the Korea Cultural Industry Forum ― researchers discussed common ground that the K-pop and local semiconductor industries share in terms of innovation.
“K-pop labels like SM Entertainment and semiconductor manufacturers such as Samsung Electronics pursued vertical integration and redefined their business models,” Lee Jang-woo, a professor of business administration at Kyungpook National University and the chairman of the Institute for Success and Economy, said during the seminar at the Korea Press Center in Seoul. Lee is also the author of the book, “K-pop Innovation” (2020).
“Just like semiconductor manufacturers that internalized their production to maximize efficiency, K-pop agencies also adopted a comprehensive management system for the idol-making process. They take part in all steps including casting, training and marketing.”
The professor also explained how K-pop management companies formulated a new business model.
“In bygone days, an album was the core product in the music industry,” he said. “But Korean innovators changed the game by shifting their focus to an idol group, defining it as their major revenue stream. They established a new system to continuously create different bands.”
Semiconductor companies also took a similar approach, the professor noted. They pursued cost-effectiveness while maintaining “reasonable” quality, instead of seeking the “best” quality like their Japanese rivals. The Korean firms also brought speediness to the fore.
Lee added that Samsung and SM are the first movers that have led the country’s “second-generation innovation” by coming up with new knowledge and skills. Prior to the onset of the second-generation innovation in the mid-1990s, Korea experienced the first-generation innovation beginning from the 1980s, and was mostly involved in creative imitation, according to Lee.
|From left: Choi Bong-hyun from the Korea Institute for Industrial Economics and Trade; Lee Jang-woo from Kyungpook National University and the chairman of Institute for Success and Economy; Shim Sang-min from Sungshin Women’s University and the seminar’s moderator; Rhee Dong-kee from Seoul National University; Ko Jung-min from Hongik University; and Lee Gyu-tag from George Mason University Korea were participants in the a K-pop seminar, Thursday. Courtesy of Institute for Success and Economy|
During the seminar, Choi Bong-hyun, a researcher at the Korea Institute for Industrial Economics and Trade, shed light on the export of K-pop, suggesting the genre can become a stepping stone to disseminate other valuable cultural assets of Korea, such as arts and crafts.
“According to data from the Ministry of Culture, Sports and Tourism, exports of K-pop grew 45.5 percent on average every year from 2009 to 2018,” Choi said. “In 2018, exports soared to 629.5 billion won ($564.3 million).”
He added, “K-pop labels do not need a lot of raw material afterward, once they create their singers’ content for local consumers ― they can export it as it is, without requiring a lot of additional spending. It is easier for them to create added value.”
Pointing out that various factors ― such as a systematic training system and the smart use of social media ― contributed to the roaring K-pop boom, Choi underscored that these strategies can also have a positive influence on the other Korean industries.
“It is common for people to appreciate the cultural content of their own country, but some content transcends that and successfully revs up their presence at home and abroad, as evidenced by cases of American productions,” he said. “K-pop is also showing similar signs, although it is still at an early stage. The genre’s growth might be able to help Korea build a ‘K-culture platform’ and further promote our lesser-known cultural assets globally.”
Rhee Dong-kee, a professor of business administration at Seoul National University, noted that K-pop’s innovative strategies offer crucial hints for small- and mid-sized enterprises (SMEs) here.
“I have witnessed numerous SMEs jumping into price wars without devising differentiation strategies for their general products,” he said. “Just like K-pop, SMEs can gain strength if they provide differentiated customer values.”
The seminar was also attended by Professor Lee Gyu-tag of George Mason University Korea and Ko Jung-min of Hongik University. Sim Sang-min, a professor of media communication at Sungshin Women’s University, was the moderator.