We are living in an age of unparalleled digital disruption, with massive amounts of technology-driven change, huge innovation, and significant evolution in the ways people use technology. Whether facilitating social progress or commercial leadership, in order to unlock the growth that digitization promises, companies and governments alike must act swiftly, decisively, and strategically along three important dimensions.
Disruption is rarely the result of a single gadget or innovation. It is typically when two or more technologies converge, that real changes begin. Also, most new innovation is generated from firms of under 50 people. Computer processing power has made huge leaps over recent decades.
Disruptive technologies will transform life, business, and the global economy. Harvard Business School professor Clayton M. Christensen coined the term disruptive technology. In his 1997 best-selling book, “The Innovator’s Dilemma,” Christensen separates new technology into two categories – sustaining and disruptive. Sustaining technology relies on incremental improvements to an already established technology. Disruptive technology lacks refinement, often has performance problems because it is new, appeals to a limited audience, and may not yet have a proven practical application. (Such was the case with Alexander Graham Bell’s “electrical speech machine,” which we now call the telephone.)
In his book, Christensen demonstrates how it is not unusual for a big corporation to dismiss the value of a disruptive technology because it does not reinforce current company goals, only to be blindsided as the technology matures, gains a larger audience and market share and threatens the status quo.
And then there is the convergence of technical phenomena such as cloud, mobile and social computing, big data analysis, and the Internet of things. Gartner uses the term “Nexus of Forces” to describe the convergence and mutual reinforcement of social, mobility, cloud and information patterns that drive new business scenarios, and says that, although these forces are innovative and disruptive on their own, together they are revolutionizing business and society, disrupting old business models and creating new leaders.
A disruptive technology is one that displaces an established technology and creates a huge change in an industry, or is a groundbreaking product that creates a completely new industry.
Here are a few examples of disruptive technologies:
- The personal computer (PC) displaced the typewriter and forever changed the way we work and communicate
- The Windows operating system’s combination of affordability and a user-friendly interface was instrumental in the rapid development of the personal computing industry in the 1990s. Personal computing disrupted the television industry and a great number of other industries
- Email transformed the way we communicate, largely displacing letter-writing, telex and fax and disrupting the postal and greeting card industries
- Cell phones made it possible for people to call us anywhere and disrupted the telecom industry
- The laptop computer and mobile computing made a mobile workforce possible and made it possible for people to connect to corporate networks and collaborate from anywhere. In many organizations, laptops replaced desktops
- Smartphones largely replaced cell phones and PDAs and, because of the available apps, also disrupted: pocket cameras, MP3 players, calculators and GPS devices, among many other possibilities. For some mobile users, smartphones often replace laptops. Others prefer a tablet
- Cloud computing has been a hugely disruptive technology in the business world, displacing many resources that would conventionally have been located in-house or provided as a traditionally hosted service
- Social networking has had a major impact on the way we communicate and – especially for personal use – disrupting telephone, email, instant messaging and event planning.
China has a long history of innovation, scientific discoveries and inventions covering many centuries. This includes the Four Great Inventions -papermaking, the compass, gunpowder, and printing (both woodblock and movable type). The historical region now known as China experienced a history involving mechanics, hydraulics and mathematics applied to horology, metallurgy, astronomy, agriculture, engineering, music theory, craftsmanship, naval architecture and warfare.
In recent years China has instigated a review of their “Medium and Long-term National Plan for Science and Technology Development 2006-2020 (MLP)”.
According to the results of a recent survey, promising technology hubs for disruptive breakthroughs show that China continued to secure two out of the five cities (Beijing and Shanghai) expected to become next leading tech hubs in addition to Silicon Valley.
When asked about which industry will see the greatest transformation due to emerging technologies, respondents in China rated the technology sector (30%), consumer markets (16%) and financial services (13%).
There are an increasing number of entrepreneurs, angel investors and venture capitalists establishing a presence in China and seeking out new innovative ideas and project. Their actions are helping to create an ecosystem similar to Silicon Valley, but accentuated with unique Chinese characteristics.
Technology business executives in China see artificial intelligence (AI) and the Internet of Things (IoT) are of growing importance in terms of technology disruption.
One-third of China’s respondents saw consumer markets has the greatest potential to monetize from adopting IoT, while 26% said the adopting of AI will benefit the technology sector the most.
In China, nearly one-sixth of respondents said AI and cloud will be the most indispensable consumer technology over the next three years, while 9% of them highlighted IoT.
In terms of technologies that will drive business transformation, the top three are: IoT (14%), biometrics (12%), AI and cloud (both 9%). These compared to cloud (21%), D&A (13%) and autotech (13%) in 2014.
In 2013, China overtook the European Union in expenditure on science and technology as a percentage of its economic output as Europe’s economy stagnates, according to figures released by the Organization for Economic Co-operation and Development. The country once known as the world’s factory devoted 1.98% of its gross domestic product to science and technology in 2012, a 7.6% increase from the previous year. The previous Five Year Plan aims for an increase of expenditure to 2.2% of GDP by 2015.
A recent study estimated that by 2018 China could overtake a combined pool of 34 European countries, and by 2022 it could overtake the US, which currently spends almost twice as China in absolute terms. The two largest economies will then likely each dole out USD600 billion for science and technology, it said.
The US is still the world leader in science and technology, but as a new Nesta report and others have noted, Chinese capabilities are developing rapidly. China is on track to pass the US in terms of spending on research and development (R&D) in 10 years, and the share of scientific papers published by Chinese scientists in journals included in the prestigious Science Citation Index rose to 9.5% in 2011. China now boasts of a manned space programme and the world’s fastest supercomputer, the Tian-he 2.
The Boston Consulting Group has named e-commerce firms Alibaba and Xiaomi Technology, a maker of mobile phone technology, as among the most innovative up-and-coming companies.
Asked to predict future disruptive technologies and the next epicentre for innovation, technology executives worldwide believe that China and the US will be at the forefront, with Cloud enabling both the next indispensable consumer technology and business transformation for enterprises.
Mobile technologies will continue to build on Cloud, providing the tech breakthrough that will transform businesses. Almost 30% of the 668 business executives in the Americas, Asia Pacific (ASPAC), Europe, the Middle East and Africa (EMEA) said China and the US show the most promise for disruptive breakthroughs with global impacts, while 13% cited India. Interestingly, only 39% of US respondents selected the US as most promising, while 71% in China selected China.
Three global trends would contribute to Asia leading the world in disruptive innovative technologies. First, there is an unprecedented explosion of growth in the middle class due to changing population demographics and increasing economic prosperity. Their demand for quality goods and services brings with it a remarkable spending capacity and with that, enormous growth opportunities. Second, there is a shift in centres of innovation from being Western-focused towards being Asian-focused. The third trend he mentioned was the potentially massive role that multi-national companies (MNCs) could play in shaping Asian innovation.
The third arrow of Abenomics emphasizing the importance of innovation and entrepreneurship. See a list of Japanese inventions and discoveries at https://en.wikipedia.org/wiki/List_of_Japanese_inventions_and_discoveries. According to the results of a recent survey, promising technology hubs for disruptive breakthroughs show that Japan secured the number one city expected to become next leading tech hub in addition to Silicon Valley.
Though the Japanese contributed in a number of fields, the country plays a crucial role in the digital revolution since the 1970s, with many revolutionary and widespread technologies in the fields of electronics and robotics being introduced by Japanese companies and entrepreneurs. Japanese popular culture, strongly shaped by its electronic technologies, also considerably influences younger Western populations.
Ancient cultures have long been known to discover, create, and produce new and useful tools, medicines, and foods, and ancient Japanese inventions are among the most popular discoveries still used today. This list of Japanese inventions includes martial arts like karate, aikido, and jujutsu, as well as modern Japanese inventions like karaoke.
Over the years, historical inventions from Japan have helped move society forward, enabling humans to hunt, eat, and travel in much more efficient ways. Ancient Japan inventions have also allowed people to learn more about the world, keep safe from wildlife, and stay healthier longer. The US, the world’s largest economy, devoted 2.8% of its GDP to R&D. Japan, the world’s third-largest, devoted 3.3%. South Korea topped the ranking, spending 4.4%.
Underlying Korea’s remarkable post-1961 economic development has been the development of a strong science and technology capacity. During the authoritarian regimes (1961-1988), the state created a rudimentary research capacity, primarily focused on creation of government-run research institutions, a technical university, and a central research park, as the private sector gradually began to muster its own applied research capacity. The late 1980s to late-1990s saw a change of direction, as Korea’s chaebol conglomerates became the lead actors in R&D. The well-funded National S&T Technology Program became the focus of state efforts, later superseded by the 21st Century Frontier Program and specified research funds. By the turn of the century, Korea had achieved strong aggregate performance in terms of numbers of researchers and funds spent on R&D, and has continued to build on that for the past decade.
Bloomberg News recently published the Bloomberg Global Innovation Index and ranked South Korea first among all nations by comparing a group of indicators such as research & development capability, productivity, tech density and patent activity. South Korea’s ranking is not a surprise. In recent decades, South Korea has transformed into an economic heavyweight, having systematically applied substantial resources to research and development. As a result, South Korea has become the world leader in patent activity, and information and communication technology. The country has the highest broadband penetration in the world at 97% and is a leader in broadband speed with an average peak connection of close to 50 megabits per second.
Success in manufacturing and exporting cutting edge electronic products has burnished the country’s image as a leader in technology but the connection goes deeper. Koreans are avid consumers of digital media and apply the lion’s share of their bandwidth resources to online gaming. South Korea is home to the World Cyber Games, the world’s largest video game competition, and has three television channels fully dedicated to eSports featuring professional gamers. South Korea’s home grown, highly visual K-Pop music videos are streamed by the millions and have become a significant global export. Last year streaming of mok-bang through Afreeca TV, a peer-to-peer online video network, became the rage. For the uninitiated, mok-bang videos feature self-made celebrities eating massive amounts of food for hours.
Increasingly young technologists are fueling a fledgling start-up scene that is led by mobile game developers and social media innovators. This is complemented by entrepreneurs returning from overseas with an eye on conquering the globe. These entrepreneurs are coming back with a sense of how to take on the US market, a greater willingness to assume risk, and an interest in building things that aren’t just made for Korea. This has attracted the notice of American technology companies. Google has taken an active role in nurturing South Korean companies, introducing their favorites in the US to help them build a global profile. A company called Sparklabs was formed a little over a year ago with offices in Seoul and San Francisco to incubate Korean startups.
There is a growing interest from overseas VCs in the South Korean venture ecosystem as well as a rise of angel groups, accelerators and event organizations to promote entrepreneurship in Korea. Softbank Ventures, StoneBridge Capital, and Strong Ventures are a few examples of established VCs moving to get a foothold in South Korea. My firm, Digital Entertainment Ventures, is pursuing a South Korea strategy as well. However, to fully understand the Korean venture capital industry, it is critical to recognize the important role of the government in promoting and supplementing private fund-raising and investment in the venture capital market. In 2013, South Korean President Park Geun-Hye announced the desire for a more “creative economy” and launched the new Ministry of Science, ICT and Future Planning. For 2014, the ministry’s budget increased to more than (USD equivalent) 12 billion, with over two billion going directly into fostering growth for the startup ecosystem along with elimination of many restrictions on the venture industry’s activities.
It is logical for South Korea to follow this path. The country is smaller than the state of New York, is not rich in oil or other natural resources, and has limited agriculture and manufacturing capacity. Korean’s must promote technology and innovation to be competitive as a nation since it is not enough to just contend on cost or scale. While the South Korean Chaebols, or large family-controlled corporate groups, focus on exporting and manufacturing, there is a clear recognition that South Korea needs to have a more diverse economy. Thus, the tides are shifting towards supporting smaller businesses and promoting entrepreneurship.
Formulating new business ideas and inventing IP is only the first part of the equation. South Korea can ascend to the next level by developing a new venture ecosystem that provides operational support, a broader network and ready access to early stage capital; one that rewards risk taking by Korea’s best and brightest. These entrepreneurs have the opportunity to target new markets, but they need to be funded and properly equipped to design their products for localization by language and culture. CEO’s of early stage companies need access to advisors that can assist them in creating effective pitch presentations and preparing them for exposure to foreign markets and investors. With the right blend of investment and guidance, early-stage Korean companies can take on the US and other global markets and really scale their businesses.
Many of the fundamentals are already in place. Just as Samsung transformed the consumer electronics business, Korean startups are poised to have an explosive impact on digital media and services.
GC Partners Asia Capabilities
- GCP is uniquely positioned and committed, with experienced tertiary qualified bi-lingual staff, to provide investment banking, corporate finance and advisory services to companies involved with the Asian technology & innovation industry.
- We act for private companies and companies listed on the AIM (London), and ASX stock exchanges. Being located “on the ground” amongst the key Asian markets, GCP is attuned to local business conduct, processes & culture, news flow, corporate announcements, government policy and economic initiatives. Combined with regular contact and our long standing relationships with key industry participants, this equips us to best understand the demand and potential for corporate equity investment, sources of project equity, joint ventures, R&D collaboration, technology & knowhow transfer, and for market entry research and strategies and customer acquisition.
- With Australia’s proximity to the key Asian markets, and combined with GCP’s strong differentiation, we are able to assist a variety of technology and new product companies with their financing requirements who have projects along the full value chain, from conceptualization and R&D, to full commercialization including development & production financing.
- With over 27 years of operations GCP has assisted promoters of projects globally. These included new technologies, mobile cellular distributors and retailers, satellite and cable TV developers, software developers (including receiving the COMPAQ computer award for best software company in 1997 – GCP was a founding shareholder in the company), computer hardware and software distributors, web hosting and development companies, internet service companies, content developers, the largest e-payments system in SE Asia, database management software development, data centre operators, telecommunications companies (including being the advisors to the successful applicant for Australia’s 100th telecoms license), Wi-Fi developers and operators, and a variety of others.