As digital transformation has become a prerequisite for the success of South Korean companies, local digital solutions providers must offer them support to come up with a more cost-efficient and innovative business models, a tech chief executive officer said on Wednesday.
“It’s the ugly truth that although it is crucial to use cutting-edge digital technologies to improve business operations and satisfy customers, these initiatives are not being delivered fast enough,” said Cha In-hyuck, CEO of CJ Olive Networks, a tech subsidiary of retail and entertainment giant CJ Group, at the Global Business Forum in Seoul.
Korea still lags far behind the US when it comes to the number of digital solutions providers that can support some 13 million small and mid-sized companies and fledgling startups for their urgent mission of digital transformation, Cha said.
“More than 86 percent of the companies here recognize the importance of going digital using technologies like artificial intelligence, machine learning and data science, but it has become extremely difficult for them to find the right providers.”
And the lack of digital solutions providers is reducing operational efficiency and raising costs at Korean companies, leading to their undervaluation in global markets, according to Cha.
Cha added that although IT security firm AhnLab is one of the largest digitalization service providers, its sales revenue is merely one 1,500th of US tech behemoth Microsoft.
“Even though South Korea is known as the country with the best IT services, especially fast internet, the market size for digital solutions is incredibly small.”
IT subsidiaries of conglomerates including Samsung and LG, and tech giants like Naver and Kakao have the capacity to provide support, but don’t do many collaborative projects with SMEs or startups that fundamentally improve their business models, Cha asserted.
“CJ is no exception. Internal services for CJ Group subsidiaries used to make up almost 90 percent of our sales, but we have continued efforts to lower dependence. Currently, the portion has been reduced to some 30 percent,” he said.
“We need to wake up and face the fact that most small companies are falling behind in the ‘platform era’ where interactive communication with customers based on digital transformation becomes a core part of every business.”
Cha said the key to digital transformation is to carry out “disruptive innovation,” in which small companies move up the value chain based on drastic transformation, and challenge large incumbent firms. “With help from data solutions firms, companies can focus on their core competencies in the industry.”
Cha introduced the case of CJ CheilJedang, a food manufacturer under CJ Group, saying that it has reduced the cost of importing raw grains by 3 percent last year compared to a year earlier by using big data analysis in collaboration with an AI tech firm.
Aside from leading CJ Olive Networks, Cha also serves as chief digital officer at CJ Group and digital new deal part manager at the presidential commission on policy planning. Before joining the company, he headed a tech insight group at SK Telecom and was head of analytics business at Samsung SDS.
Cha was one of the speakers at the Global Business Forum 2022 hosted by The Korea Herald. The weekly events run from April to July.
By Byun Hye-jin (hyejin2@heraldcorp.com)