By Jason Lim
Strategy and Business, a publication of the consulting giant Price Waterhouse Coopers (PWC), recently published a piece titled, "The Bionic Company," to make the case that today's businesses need to get a handle on three new forms of capital that are critical to creating value: behavior, cognitive and network capital.
It cites a historical analogy: "During the heyday of the Industrial Revolution, few firms understood the intricate dynamics of financial capital ― companies that pioneered better approaches to business economics had a strong competitive advantage.
"As the 20th century unfolded, two additional types of equity became important: human capital (the return gained from the appropriate development and deployment of staff and contractors), and natural capital (the manageable value of land, water, and other environmental resources).
"Business success came to depend on managing these three forms of capital effectively. The first two grew exponentially, seemingly slow in the early years but doubling regularly, and thus accumulating immense wealth and influence for the companies that knew how to manage them."
So, how do you define the new forms of capital?
Behavior capital is the "collection and modeling of data that tracks the behavior of people, companies, nature, and manmade things … Apple, GE, Google, and their customers can use that information to make models of the behavior of the people and machines, and therefore improve the value of their respective activities."
Cognitive capital is the "set of algorithms (some transparent to onlookers, others opaque) that represent the codified knowledge flows of individuals and the enterprise in a bionic world. These algorithms are becoming sophisticated enough to make many decisions on their own, or to start a machine-learning process that can lead to automated, continually improving routines."
Network capital is the "set of connection points that an enterprise can use to develop and execute a successful strategy. For example, Netflix has developed, over the years, a large group of followers who have gotten into the habit of watching shows there ― and who exchange messages with one another on social media about what they've watched."
The article defines "Bionic Companies" as those that manage the forms of capital wisely as to produce mutually reinforcing value. "For example, five of the most highly capitalized companies in the U.S. stock market are bionic: Apple, Alphabet (Google), Microsoft, Facebook and Amazon together account for about 13 percent of the capitalization of the entire U.S. stock market.
Bionic companies have grown rapidly without relying solely on physical assets such as people and land, or even on managing funds and investments effectively. Instead, they have grown by building and linking digital-based cross-boundary platforms that make the most of their capital."
Applying this framework to Korea, the Miracle on the Han River was driven mainly by leveraging human capital with strategic injections of financial capital, as the Korean Peninsula was sorely lacking in natural capital.
That miracle came to a screeching halt with the 1977-98 Asian financial crisis, although the corporate leaders insist on squeezing the last drop of blood from the nation's human capital ― rapidly dwindling as Korea becomes an ageing society ― to sustain their business models.
But what if the political leadership takes this approach to redefining South Korea for the 21st century? Take a step back and re-imagine the country as a platform that offers an open capability to increase businesses' behavioral, cognitive, and network capital.
Essentially, all this capital is based on data. As a part of the nation's services to businesses, as well as to drive innovation, offer types of Application Programming Interfaces that businesses can plug into to access data that they can turn into capital.
This is far more attractive than your run-of-the-mill tax breaks or labor concessions. And it doesn't have to be limited to Korean citizens. Consumers are not limited by national boundaries.
For example, K-pop fans run the gamut of nationalities. And who doesn't own Samsung or LG appliances in major, developed countries of the world? And what did the visitors to the PyeongChang Winter Olympics like to buy, do, or go?
Granted, some of this data is private or proprietary. However, there will be data that is unique to Korea that could be made accessible, even through a quid pro quo basis, with other data owners.
Further, you can build an ecosystem of data sharing that makes it easier for innovative companies to securely leverage to build their new forms of capital while ensuring the privacy of consumers and citizens.
What I am suggesting is that Korea's new national strategy must take into account the digital transformation of its economy and consider how data could fundamentally restructure its business model.
The behavioral, cognitive, and network capital framework is a great starting point to thinking about what types of infrastructure you'd need to build to ensure that Korea stays ahead of the competition curve as the Fourth Industrial Revolution age dawns.
If Korea is the "Land of the Morning Sun," then you must be ready for what the new day will bring.
Jason Lim (jasonlim@msn.com) is a Washington, D.C.-based expert on innovation, leadership and organizational culture. He has been writing for The Korea Times since 2006.
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It cites a historical analogy: "During the heyday of the Industrial Revolution, few firms understood the intricate dynamics of financial capital ― companies that pioneered better approaches to business economics had a strong competitive advantage.
"As the 20th century unfolded, two additional types of equity became important: human capital (the return gained from the appropriate development and deployment of staff and contractors), and natural capital (the manageable value of land, water, and other environmental resources).
"Business success came to depend on managing these three forms of capital effectively. The first two grew exponentially, seemingly slow in the early years but doubling regularly, and thus accumulating immense wealth and influence for the companies that knew how to manage them."
So, how do you define the new forms of capital?
Behavior capital is the "collection and modeling of data that tracks the behavior of people, companies, nature, and manmade things … Apple, GE, Google, and their customers can use that information to make models of the behavior of the people and machines, and therefore improve the value of their respective activities."
Cognitive capital is the "set of algorithms (some transparent to onlookers, others opaque) that represent the codified knowledge flows of individuals and the enterprise in a bionic world. These algorithms are becoming sophisticated enough to make many decisions on their own, or to start a machine-learning process that can lead to automated, continually improving routines."
Network capital is the "set of connection points that an enterprise can use to develop and execute a successful strategy. For example, Netflix has developed, over the years, a large group of followers who have gotten into the habit of watching shows there ― and who exchange messages with one another on social media about what they've watched."
The article defines "Bionic Companies" as those that manage the forms of capital wisely as to produce mutually reinforcing value. "For example, five of the most highly capitalized companies in the U.S. stock market are bionic: Apple, Alphabet (Google), Microsoft, Facebook and Amazon together account for about 13 percent of the capitalization of the entire U.S. stock market.
Bionic companies have grown rapidly without relying solely on physical assets such as people and land, or even on managing funds and investments effectively. Instead, they have grown by building and linking digital-based cross-boundary platforms that make the most of their capital."
Applying this framework to Korea, the Miracle on the Han River was driven mainly by leveraging human capital with strategic injections of financial capital, as the Korean Peninsula was sorely lacking in natural capital.
That miracle came to a screeching halt with the 1977-98 Asian financial crisis, although the corporate leaders insist on squeezing the last drop of blood from the nation's human capital ― rapidly dwindling as Korea becomes an ageing society ― to sustain their business models.
But what if the political leadership takes this approach to redefining South Korea for the 21st century? Take a step back and re-imagine the country as a platform that offers an open capability to increase businesses' behavioral, cognitive, and network capital.
Essentially, all this capital is based on data. As a part of the nation's services to businesses, as well as to drive innovation, offer types of Application Programming Interfaces that businesses can plug into to access data that they can turn into capital.
This is far more attractive than your run-of-the-mill tax breaks or labor concessions. And it doesn't have to be limited to Korean citizens. Consumers are not limited by national boundaries.
For example, K-pop fans run the gamut of nationalities. And who doesn't own Samsung or LG appliances in major, developed countries of the world? And what did the visitors to the PyeongChang Winter Olympics like to buy, do, or go?
Granted, some of this data is private or proprietary. However, there will be data that is unique to Korea that could be made accessible, even through a quid pro quo basis, with other data owners.
Further, you can build an ecosystem of data sharing that makes it easier for innovative companies to securely leverage to build their new forms of capital while ensuring the privacy of consumers and citizens.
What I am suggesting is that Korea's new national strategy must take into account the digital transformation of its economy and consider how data could fundamentally restructure its business model.
The behavioral, cognitive, and network capital framework is a great starting point to thinking about what types of infrastructure you'd need to build to ensure that Korea stays ahead of the competition curve as the Fourth Industrial Revolution age dawns.
If Korea is the "Land of the Morning Sun," then you must be ready for what the new day will bring.
Jason Lim (jasonlim@msn.com) is a Washington, D.C.-based expert on innovation, leadership and organizational culture. He has been writing for The Korea Times since 2006.
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