Korea should shift to ‘Fourth Industrial Revolution 2.0’
This is the ninth in a series of interviews with international experts on Korea giving advice to President Moon Jae-in on how to overcome challenges and create a better future for the Korean people. — ED.
President Moon Jae-in should speed up the shift toward the Fourth Industrial Revolution by revamping the creative economy centers initiated by the previous administration, said Choi Won-sik, managing partner of McKinsey & Company Korea.
He said Moon should not drop every economic project his predecessors created just to distance his administration from previous ones.
“The new government shouldn’t throw the baby out with the bathwater. It should keep what’s good from previous administrations and build on them,” said Choi, who is a leader of McKinsey’s Asia Strategy and Corporate Finance Practice and Advanced Industrial Practice.
He pointed out that in the past several decades, Korea already picked much “lower-hanging fruit” in terms of economic growth, social and cultural advancement but it is time to shift to fruit at higher levels.
“Those are much tougher to get and it takes a much longer, complex process to get them. Also, it requires efforts that have to build on previous administrations,” he said.
In his view, one of the projects Moon must take over from the former administrations is the Centers for Creative Economy & Innovation initiated by former President Park Geun-hye.
“There are a lot of controversies as to whether those are the right centers to drive innovation in Korea. Despite the challenges, I can say it’s a good starting point for Korea to build on to benefit from the Fourth Industrial Revolution rather than starting things from scratch,” he said.
“I think the Creative Economy Effort 1.0 can be propelled toward the Fourth Industrial Revolution 2.0. Moon may want to consider revamping the centers to be more functional and practical to enhance public-private collaboration.
Choi believes the creative economy centers should be developed into a global, multilateral platform to improve the sustainability of Korean companies through public-private collaboration and help them prepare for the era of the Fourth Industrial Revolution.
To that end, Choi said that Korea can take a cue from Singapore’s Advanced Remanufacturing and Technology Center (ARTC).
ARTC is a top-notch research agency based on public-private partnerships with 44 industry members from aerospace, machinery, oil and gas to fast-moving consumer goods sectors with a mission to bridge the gap from research to industry application for remanufacturing.
He explained what sets ARTC apart from the creative economy centers in Korea is that it is a multiparty collaboration platform with many global players. IHI, Rolls-Royce, Siemens, and SKF are founding members, and McKinsey is one of the tier 1 members.
“ARTC started as a way to basically track technology-driven companies to establish their remanufacturing capabilities but because of the Fourth Industrial Revolution they decided to put a digital capabilities center in it to usher in the opportunities in the important industrial revolution,” he said.
Improving gov’t productivity
Choi stressed that the Moon administration should seek ways to improve productivity of the Korean economy by capitalizing on the Fourth Industrial Revolution.
He is a member of the Strategy Committee for the Fourth Industrial Revolution chaired by the deputy prime minister for economic affairs.
“Advanced countries are addressing the Fourth Industrial Revolution as a way for productivity-driven economic growth,” he said. “Korea must double down on must-win opportunities and focus on public-private collaboration.”
He picked mobility — not automotive — and healthcare as the top two most promising areas, followed by logistics, energy and finance.
In particular, Choi said the focus should be placed on improving productivity in government and public sectors.
“Driving government and public sector productivity is a global imperative, and Korea is no exception,” he said.
He pointed out that government productivity is a huge challenge and an under-tapped $35 billion opportunity for governments around the world.
“Korea needs to adopt zero-based budgeting to government budget setting and expenditure,” he said. He expects it will lead to savings of 10 percent to 25 percent on private sector selling and general and administrative expenses.
According to a recent report by the global consulting agency, zero-based budgeting looks for the highest return on spending, from the bottom up, rather than comparing the current year’s spending to the previous year’s.
He also stressed the importance of mapping out a long-term plan to educate and train people fit for the jobs of the 21st century ruled by new technologies.
“Moon needs to develop a long-term master plan for education for employment to repurpose and redeploy people for higher value-added activities versus machines,” he said.
Delivery unit needed
When pushing for new initiatives, Choi, who is also a member of the New Industry Development Committee for the Ministry of Trade, Industry and Energy, said Moon should give the same weight on “how to deliver” as on “what do to.”
He recommended the launch of a special “delivery unit” that will be in charge of putting Moon’s two key goals — job creation and the Fourth Industrial Revolution — into action.
“Global case examples show the devil is in the details of the design and operation of the mechanism,” he said.
“Korea can learn from the U.K.’s Prime Minister’s Delivery Unit (PMDU) and Malaysia’s Performance Management and Delivery Unit (PEMANDU).”
He explained the key success factors for the two delivery units of the U.K. and Malaysia, which were initiated under the administrations of Tony Blair and Nazib Razak, respectively, are “strong leadership” and “focus on a small number of initiatives.”
“Heads of the two states were deeply and directly involved in setting up tasks and directions, and evaluating the outcomes,” he said.
“They also ensured that most of the energy was funneled into a small number of issues that were critical to bringing about tangible results and providing the impetus for policy implementation.”