According to the 2015 Bloomberg Innovation Index, South Korea is the most innovative country in the world. The East Asian country has vigorously invested in research and development to foster creativity and drive growth, and today spends 4.4% of its GDP on R&D, the highest rate among developed OECD nations.
Our list of the top 5 innovative Korean companies
South Korea’s cosmetic industry has experienced rapid growth in recent years, with South Korean women spending twice as much of their income on beauty products and make-up than their American counterparts. Meanwhile, South Korean men spend more on skincare than those in any other country. Apart from the growing domestic market, consumers from surrounding Asian countries such as China have channeled their obsession with K-pop and K-dramas into purchasing Korean cosmetics products. This has resulted in Korean companies achieving a 22.1% market share in the country. Of these, the biggest driver is beauty giant AmorePacific.
Founded in 1945 by Suh SungHwan, AmorePacific is a leader in the cosmetic industry in South Korea and runs businesses in China, Southeast Asia, Europe, North America and Japan. It is also the world’s 14th largest cosmetic company and operates 30 different sub-brands. With a market capitalization of nearly $25 billion, shares of AmorePacific have surged more than 250% since the beginning of 2014. Last year’s revenue jumped 20% from the previous year to $4 billion.
Much of the company’s success is credited to its innovative product lines. In 1954, AmorePacific was the first beauty company to establish a research and development (R&D) laboratory in Korea. The team went on to develop cutting-edge products such as the world’s first skincare line based entirely on green tea, a luxury line based on Asian medicinal herbs, and more recently, the cushion – a three-in-one compact that offers skincare, sunscreen and liquid foundation in one formula.
The explosive popularity of the cushion resulted in sales of 50 million units – one sold every 0.6 seconds, with overseas sales jumping 1,000%, spawning imitators such as L’Oréal and signing a memorandum with Christian Dior to give the European luxury brand access to its cushion technology.
As the company behind South Korea’s leading messaging app KakaoTalk, Kakao has grown to become one of Korea’s most innovative startups. The company was founded under the name IWILAB in 2006 by Kim BumSu, the mastermind behind online game developer Hangame. According to the vision statement on the company’s website, “The more we innovate the way we connect, the closer and more harmonious our world can become.”
Kakao is driven by its flagship app Kakaotalk a messaging service available on multiple platforms. Kakaotalk lets users send free text and multimedia messages, and make free voice and video calls. As of May 2015, the app recorded 38 million monthly active users in Korea and is used by 93% of the country’s smartphone users, and currently has over 170 million users around the world.
The most innovative aspects of the company stem from its ubiquitous presence on Korean phones, allowing it to create an entire digital ecosystem. Its offerings include KakaoStory, a Snapchat-esque app which lets users share their stories through photos and videos, KakaoTaxi, an Uber-like service that can request registered call-taxis, KakaoTv, a video-sharing app, and KakaoPage, a content portal that hosts webcomics, e-books, and video content.
In what is perhaps one of the most disruptive innovations, Kakao was approved to launch South Korea’s first Internet-only bank in 2016. The bank will engage in the same business as existing commercial banks, including processing deposits, loans, and wiring money, but done entirely through digital means, taking advantage of its presence in the country with the world’s fastest internet.
Established in 1938 by businessman Lee ByungChul in Daegu, South Korea, Samsung was initially a small export business supplying dried Korean fish, vegetables, and fruit to Manchuria and Beijing. Today, the company is a sprawling global conglomerate that runs a variety of businesses through a number of subsidiaries, which include electronics, weaponry, construction, shipbuilding, life insurance, and luxury retail.
Of its many businesses, its largest and best-known arm is Samsung Electronics, which is the world’s second largest information technology company behind Apple and the world’s largest smartphone brand.
Samsung Electronics runs its operations in three main business segments. The first is the consumer electronic unit, which produces televisions, refrigerators, and home appliances. The unit’s many innovations have allowed Samsung to emerge as the leader in LCD and Smart TV sales, controlling a 20% market share and spearheading a number of technologies such as 4K, OLED, and curved displays.
Samsung’s second unit is its IT and mobile unit, which develops mobile communication and network technology such as smartphones, computers, and network systems. On the back of its Galaxy smartphone line, the unit has helped Samsung retain the world’s largest smartphone brand since 2012, although recent years have seen market share dwindle due to the emergence of cheap Chinese brands such as Xiaomi and Huawei.
Samsung’s third unit is its Device Solutions unit, which produces semiconductors (memory chips), RAMs, and flash drives. Samsung Electronics has been the world’s largest memory chip maker since 1993, supplying components for most of its competitors including Apple iPhones. It is also the world’s second largest producer of semiconductors behind IBM, controlling 10% of the massive $336 billion industry.
Founded in June 1999 by Korean entrepreneur Lee HaeJin, Naver is South Korea’s largest web portal and search engine, which controlled almost 80 percent of country’s search market in 2014. The company seeks to create a bigger world where “friends from far away stay connected, where generations from the past, present and future are joined, and where information is shared through networks.”
The Seongnam-based company is best known for its Internet search engine Naver.com, which popularized the question-and-answer format of Quora 10 years before Quora was founded. It also offers a web portal for children called Junior Naver that creates a safe and healthy Internet environment for children to access educational and fun content. Naver also operates an online donation portal called Happybean, which allows people to easily find and donate to welfare organizations and fundraising activities. In addition, the company’s subsidiary Naver Business Platform is a leader in online advertisement services.
Besides the search engine business, Naver runs the country’s largest game portal called Hangame. The company’s search engine and game portal are also available in Japan where they launched the successful instant-messaging segment Line. It grew to become Japan’s top messaging app and recorded 600 million active users all over the world thanks to its explosive popularity in other Asian markets.
Thanks to Naver’s innovative business arms and projects, the company was ranked the 21st most innovative company in the world in 2015 by Forbes.
Founded on 2010, Coupang experienced a rapid growth to become a leader in South Korea’s e-commerce industry. The company sells a large range of items from its own inventory, including clothing, cosmetics, electronics, footwear, food products, home furniture, and accessories. The online retailer also provides a marketplace for merchants to sell their goods.
Coupang founder Kim Bom, a Harvard dropout, has steered the innovative company to what he calls the “the next-generation e-commerce model.” Using a vertical integration model, Coupang controls everything during the retail process, from managing product storage to distributing the products through their delivery service. Coupang was the first in the local industry to run a customer center on weekends and public holidays as part of its customer satisfaction improvement scheme. In addition, its logistics center takes full control of product delivery and works seamlessly with its own call center to process higher response rate to customers’ requests.
Thanks to these efforts, Coupang dominates the booming mobile shopping market in South Korea, which is the world’s sixth-largest and the biggest social commerce market in Asia. The company counts 25 million app users, who display greater levels of trust than with other e-commerce sites, with typical users visiting the company’s website on a regular basis compared to those who look for attention-grabbing items through social networking sites.
The innovative approach used by Coupang won the attention of number of investors, including $300 million from BlackRock and $1 billion from Japanese telecom giant Softbank, who considers Coupang “one of the most disruptive internet companies in the world.”