By Na Jeong-ju
Staff Reporter
South Korea has launched a bold project to foster 300 "hidden champions," little-known but highly innovative small-and mid-sized enterprises (SMEs), over the next 10 years.
Most analysts agree that the plan is a step in the right direction given the economy's excessive reliance on family-controlled conglomerates and the lack of interest among young jobseekers in smaller firms.
However, there have also been doubts raised as to whether the goal is realistic.
It is not easy to change business culture in a short period of time, but a reorientation of societal values toward entrepreneurship and SMEs will be vital to move the Korean economy forward, according to the author of the global bestseller "Hidden Champions."
"Hidden champions are not created in one or two years. The challenge for the Korean government and society is to better promote the internal capabilities of Korean mid-sized firms on the international stage," Hermann Simon said in an interview with The Korea Times.
"Young capable Koreans still prefer to work for large corporations rather than to start their own businesses. So, a reorientation of societal values toward entrepreneurship is required."
He said Korean society should be more open to foreign markets and cultures. At the same time, it needs to introduce various programs so that young people can work abroad for an extended period of time and - above all - have entrepreneurial ambitions.
The German scholar plans to visit Seoul from April 22 to 25 to give lectures on Korea's hidden champion strategy.
The term has become increasingly familiar here as leading securities firms have announced their own pick of SMEs with global competitive edges and high growth potential.
On March 18, Minister of Knowledge Economy Choi Kyung-hwan said in a report to President Lee Myung-bak that the country should develop 300 hidden champions by offering tax cuts and other financial incentives as well as technological support.
The government plans to support their overseas marketing activities and provide "corporate doctors" to help them improve their financial health, develop new technologies and create long-term growth strategies, according to the ministry.
The globalization of the hidden champions is crucial not only for the country's economic future, but also for the government's efforts to enhance Korea's international image.
Last year, Euh Yoon-dae, chairman of the Presidential Council on Nation Branding, proposed measures to promote the Korean hidden champions abroad, saying it will help consolidate the country's reputation as a technological powerhouse and, in the long run, enhance its global image.
Simon said the plan was ambitious, but realistic.
"Our rough estimate is that Korea currently has about 100 hidden champions. Korean mid-sized firms have the potential to grow internationally and to establish leading market positions in Asia as well as in the world. However, this will take some time," said Simon.
Simon, currently serving as chairman of Simon-Kucher & Partners, a global business consultancy firm, got involved in researching small firms 30 years ago while studying why Germany had become a strong exporter.
"I looked deeply into this issue and it became clear that there is mainly one explanation: The incredible export strength of Germany's small-and mid-sized global market leaders. I came to call these little known market leaders hidden champions," he said.
He stressed the strength of German enterprises lies in certain traditions.
In the country's Black Forest area, the manufacturing of clocks and watches is a century-old tradition. The watch industry has disappeared now, but the competencies in fine mechanics were transferred into new industries.
As a result, there are 400 medical technology companies in one county in the Black Forest area today, most of them are makers of surgical instruments requiring fine mechanic competencies, Simon said.
He said the German experience can provide crucial lessons to South Korea.
"Germany was reunited 20 years ago, while Korea is still separated into South and North. This separation will come to an end some day, but nobody knows when and how," Simon said.
"In the process of integrating East Germany, West Germany neglected the development of SMEs in the east. My recommendation to Korea is to keep this in mind when its reunification comes."