Chazen South Korea 2019 – Final Thoughts

As we wrapped up our final dinner before heading back to New York, we reflected on the diverse experiences and learning that we will be taking away from South Korea. 

The Organizing Team with the Chairman of Lotte Corporation

Starting with business lessons – we knew beforehand that chaebols were the main show in town, and this trip further reinforced that idea.  Columbia Business School’s connection with Lotte Corporation is a visceral example of the far reach of chaebols that we could only read about prior to our visit.  During the morning of the company visit I drank a Lotte iced tea from the Lotte Mart and left the Lotte hotel to go to the Lotte Tower, the highest tower in Korea, which sits next to Lotte World, the world’s largest indoor amusement park.  While the impact of each conglomerate can be seen in almost every aspect of life, business and government is beginning to open up to entrepreneurship and social impact businesses, albeit slowly and in their own style.  During our visit to the Lotte Accelerator (note that conglomerates are even involved in startup incubation) we were given presentations from three portfolio companies that have all been marked at multiples of their invested value.  As an interesting aside, all three founders were Samsung alumni.  Regarding Social Enterprise, our visit to the co-working space Heyground gave us a look into the social impact organizations focused on solving specific issues such as child adoption, child care, and others that the current business environment is not addressing.  As the global trend towards using business to solve societal issues continues, I would expect start ups and impact focused companies to continue to proliferate in South Korea.

The Chazen Team Visits Startup My Music Taste

Korean economic success has also led to the exportation of culture in the form of K-Beauty and K-Pop.  While the growth and size of both industries was obvious, we gained a greater appreciation for the global influence of South Korean style and beauty sensibilities and the importance of these industries in burnishing the country’s image abroad, recent scandals aside.  The Korean beauty ideal of skin maintenance and health is a departure from the standard skincare/beauty philosophy and has been embraced in Asia as well as western countries.  K-Pop’s approach to making music borrows from the global entertainment business’ standard practices but the outcome is uniquely Korean and is clearly a hit for certain demographics.

L&P Cosmetic Office Tour

In between company visits we learned about Korea’s dynastic history, its relationships with North Korea and its love for baseball.  While visiting Gyeongbokgung, the largest palace of five palaces in Seoul, we learned about the Joseon period which ruled Korea for over five centuries.  The Korean historical progression prior to 1900 showed remarkable stability, with The Silla dynasty ruling Korea for almost 300 years and the Goryeo dynasty ruling for almost 400 before the Joseon dynasty took power.  During our visit to the Demilitarized Zone, we learned about past efforts at reconciliation between the two Koreas including the Sunshine Policies of the 1990s and the Kaesong Industrial Zone.  We came away with a sense that the South Korean Government and Business community is eager to promote reunification.  Finally, we attended opening day for the Korean Baseball Organization – Korea’s professional baseball league.  The first notable characteristic is the sponsorship of each team by a major company – the game we watched was the Doosan Bears vs. the Hanhwa Eagles.  The second and more enjoyable characteristic is the constant energy and coordinated cheering from fans throughout the game. The experience was more akin to a rock concert than a MLB-style baseball game. 

Gyeongbokgung Palace
Go Bears!

Seoul has been a wonderful place to explore and learn about.  I know I speak on behalf of the group in thanking the organizers for their tireless efforts to create this unique experience.

Vincent Su (CBS ’19) is an MBA Candidate at Columbia Business School

A Look Into the K Pop Phenomenon

South Korea’s most popular cultural export is a genre of pop music known as K Pop.   The industry’s revenues reached $5B in 2017.  The number of fans increased from 30 million in 2013 to 70 million in 2017 with 35 million of those fans coming from outside of South Korea.  The Chazen team got a fascinating insider look at the industry through two company visits this past week.

Rainbowbridge World

The Korean pop music scene was historically operated by two major television studios under tight state control. In the early 90s, experimentation with a combination of American style pop music and traditional South Korean cultural elements led to unexpected popularity.  The industry subsequently shifted to a Hollywood-esque studio system in the mid 90s where today’s three major K Pop players, SM, YG and JYP emerged.  These companies develop and introduce new groups to music fans in Korea and abroad. The packaging of dance moves, high production value, and catchy songs is not new.  What is slightly different from what readers may be familiar with is the complete personal and artistic control studios have over performers, the integration of fans into a community revolving around band members’ lives via content outside of performances such as interviews, reality shows, and social media, and finally the consistent generation of new bands.  In my view, this combination allows the studios to create on-trend boy and girl groups that can appeal to the shifting intra-generational tastes.  K Pop studios have seemed to master this process.  To pop music fans, the K Pop genre is reminiscent of bands in the U.S. such as NSYNC and The Backstreet Boys. 

Jack Shu (CBS ’20) auditioning to be the next K Pop star

On Thursday, we visited two studios – an up and coming label called Rainbowbridge World and the entertainment arm of the established conglomerate CJ (part of Samsung until 1996).  Rainbowbridge World was a fascinating presentation because of the candor from the head of operations.  We learned the audition process is intensely competitive and groups are formed as early as age 15-16.  The bands then practice an average of five years before they are ready for their public “debut”.  We got a chance to ask a RBW group in incubation (their term for artist training) about their experience.  Two things that stood out are the amount of time they spend practicing, and reinforcement of the idea that hit-making requires a healthy dose of luck.  12-hour days seem to be the norm, and the group’s working name is literally 365 Practice.  Second, despite the non-stop preparation, group failure is always a risk. The COO could not hide his disappointment and skipped a slide about a group that failed to become popular.  The term “washed-out” was constantly used by both the artist and the management team in a matter of fact way to describe individuals or groups that do not achieve commercial viability. 

M Countdown at CJ E&M

During the second part of the day, we visited CJ Entertainment and a live taping of M Countdown, a weekly TV show where several K Pop groups perform.  I think for most of us this experience was unique – fans were lined up to get a glimpse of the stars and during the performances the passion and energy (at 5pm in the afternoon) was clearly displayed through incessant screaming.  While my sense was that most of our group did not know what to expect, the formula of high production value, catchy hooks, and great dance moves proved to be thoroughly entertaining.  RBW’s most successful group, Mamamoo won the show, closing the loop on our K Pop day.       

CBS Chazen Korea at CJ Entertainment & Media

K Pop has been unquestionably successful in South Korea and has shown significant crossover appeal in markets including the United States.  Going forward – I wondered if K Pop will have to evolve beyond its tightly controlled approach / product to reach older audiences / generate broader appeal.  I think the narrow scope of music means it does, however the global teen / young adult age range is a large enough market to stay busy in for many years to come.  Finally, as a major scandal involving K Pop stars made headlines just before our meetings took place, a re-evaluation of the education and personal development of young K Pop stars in the hands of studios is warranted.  The singular focus of training programs could create challenges for the young group members when facing choices outside of the recording studio.  It will be interesting to monitor how much power the studios voluntarily or involuntarily cede going forward, especially if global popularity growth reverses trend. 

Vincent Su (CBS ’19) is an MBA Candidate at Columbia Business School

Mamamoo – Rainbowbridge World’s most popular K Pop group

Chaebols & Economic Development

The CBS Chazen Korea ’19 Organizers at Hyundai Steel

Here at the Hyundai Steel plant, the vast majority of the automotive steel produced here goes to into Hyundai and Kia automobiles.  This particular plant in Dangjin also has an electric arc furnace (Hyundai is the 2nd largest EAF steel producer) that turns scrap and iron byproducts into rebar, h-sections and heavy machinery that has applications in Hyundai’s construction and shipbuilding businesses.  The result is a well oiled cog in the vertically integrated Hyundai “machine”. During our tour of the facilities, we saw the end to end “integrated” process that begins with raw material from the port, and transforms iron ore and coal into coke, then molten metal, and finally various finished steel products.  While we were not allowed to take pictures inside the facility, the pure scale and size of the operations was immediately obvious.  The casting and rolling processes alone were housed in facilities that were at least the size of several football fields.

Senior Leadership at the Hyundai Steel Factory present their business

Hyundai is one of the largest conglomerates or “chaebol” in South Korea.  The sales from Hyundai and the other top four chaebols in aggregate is more than 50% of the nation’s GDP.  These economic powerhouses have powered the “Miracle on the Han River” but started in a time when North Korea outpaced South Korea in economic output.  In post World War II South Korea, well before it became Asia’s 4th largest economy and a member of the G20, chaebols began their starring role in economic growth.  During the 1960s, the government began to actively intervene in and work closely with private companies via rolling five year plans, giving birth to the chaebol era. 

The Steps of HQ at the Steel Mill

After decades of rapid export driven growth (exports are ~70% of Korean GDP today), numerous chaebols failed during the Asian Financial Crisis due to unsustainable debt burdens.  In the aftermath, reforms were undertaken and the remaining chaebols quickly recovered, grew significantly larger, and remain intertwined in daily South Korean life.  Looking forward, the South Korean economy will undoubtedly be shaped by these economic institutions.  Historical criticisms of these firms include corruption, political entrenchment, and the potential lack of competition. While rapid progress can be made when power is concentrated in a few hands, scandals and inter-generational hand-offs could be catalysts for re-thinking the current model as the South Korean economy enters its next stage of growth.

Vincent Su (CBS ’19) is an MBA Candidate at Columbia Business School

So long, Seoul! Final Reflections from South Korea

As I board the plane to JFK, I can’t help but reflect on the last week and everything that I learned about this warm, humble, dynamic country. Here are my top ten reflections from our time abroad:

1. South Korea has come a truly remarkable way in the last fifty years. During the Korean War in the 1950s, much of South Korea was destroyed. Now, less than a century later, an extremely urbanized and industrialized Seoul houses about half of the total South Korean population. It’s incredible to look at the Seoul skyline and remember that very few of these buildings existed when our parents were born.

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Me and Connor Stoval (’19) overlooking the Seoul skyline from the top of Lotte World Tower (the 5th tallest building in the world).

2. South Korea’s corporate landscape is dominated by chaebol, multi-vertical conglomerates that control almost every major industry in the country. There’s nothing like Lotte in the United States. Lotte, which is the 5th largest conglomerate in Korea, holds the highest market share across all its core business areas: food, retail, chemical, and hospitality. Picture CVS, 7-11, Forever 21, The Gap, 3M, Marriott, and Starwood all operated by one parent company—that’s Lotte. Oh, and Lotte owns the equivalent of SeaWorld and Disney World too (there is a full aquarium in the Lotte World Tower and an amusement park next door). It’s a corporate structure that could never exist in the United States due to our pro-competition, anti-trust laws, but it’s the way of doing things in Korea. The five major chaebols—Hyundai, Samsung, LG, SK, and Lotte—control pretty much every major industry in the country and competition is essentially impossible due to government support and intervention.

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Jack Kantelis (’18) asks questions about Lotte’s chemical division

3. The intersection of digital and big data will define the future of South Korea’s corporate strategy. At our visit to Samsung Innovation Museum, we watched a video of Samsung’s vision for the future. It showed a ten-year-old child scaling cliffs in Alaska while her father received updates about her health and wellness from his bathroom mirror. A few days later, at Lotte, we watched a similar video highlighting Lotte’s “Lifetime Value Creation.” In this vision for the future, we saw a couple experience auto facial recognition while checking into a hotel, automatically proportioned meals, and on-demand rental cars and bike shares. One quote from Lotte’s video summed up the visions particularly well: “From the moment you wake up in the morning, you are surrounded by Lotte.” Frankly, it was a tad dystopian in nature, and left all of us wondering about the pros and cons of excessive corporate access to and use of personal data.

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CBS students at the Lotte R&D Center

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At the Lotte Aquarium

4. The desire for innovation and start-up culture is thriving in South Korea across both corporate and social sectors. On Monday, we visited Hanwha’s DreamPlus Center, the Fintech accelerator of the life insurance conglomerate. On Thursday, we visited Hyundai Genesis, the company’s first luxury vehicle and first new brand in about fifteen years. That afternoon, we visited Heyground, a co-working space for social entrepreneurship founded by CBS classmate Kyungsun Chung. Across each visit, we saw an unprecedented desire for South Korean companies to be at the forefront of innovation, both in South Korea and across the globe.

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Me and Einat Aldaag (’18) learn about the strategic decisions behind Hyundai Genesis

5. The current threat of North Korea, as well as the tragedy of the Korean War, is present in the minds of the South Korean people. On Wednesday, we visited the Korean War Memorial and paused to remember the 30,000 Americans and 100,000 Koreans who lost their lives in the conflict. Then, on Friday, we traveled two hours to the demilitarized zone of the North Korean border and met with a North Korean defector who escaped the country through China, leaving her son behind. It was powerful to hear her story of oppression and perseverance and we all left the visit feeling extremely thankful for the rights and opportunities we possess in the United States. We also had the opportunity to travel 300ft below ground into one of the tunnels that North Korea built in preparation for an attack on South Korea, even after nonaggression agreements were signed. Four of these tunnels have been discovered, but it’s estimated that up to sixteen of them are still undiscovered. Finally, we went to a lookout point and looked across to North Korea through telescopes.

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CBS students at the North Korean border

6. The South Korean people we met were extremely humble and generous. At each corporate visit, we were greeted by company leaders who expressed their honor at being able to address students from Columbia Business School. We were all a bit surprised at how impressed they were by us! Moreover, we left every company visit with our arms filled with gifts. At Samsung, we were given mousepads with our group picture painted on them. At Lotte, we were given empty paper bags and asked to fill them with Korean snacks, candies, chocolate, and beer. It was a very unique experience and not one we are used to back in the United States.

7. We love Korean food! Bring on the kimchi, bibimbap, and red bean paste. We had the best time getting to live on spicy Korean dishes for the week. A few times, we especially appreciated the 24-hour Korean spots around the corner after enjoying Korean nightlife 🙂

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Lindy Gould (’19) is an MBA candidate at Columbia Business School.

There is No Textbook for Changing The World: Social Impact in South Korea

“There is no textbook for changing the world. But I can find the right people with the right missions and provide them with the resources to solve the most difficult problems.” -Kyungsun Chung (’19)

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Luis Acosta (’19) and Sebastian Brunal (’19) at the Heyground entrance

“I was thinking of going into my family business for twenty years or so,” Kyungsun Chung (’19) explained to us, “and then find a way to make a difference. But then I realized I am more of a channel. My purpose is to provide stable infrastructure for the social entrepreneur.”

Kyungsun Chung is one of the trip organizers for Chazen South Korea. He is also the founder of Root Impact, a non-profit that builds capacity for social innovation within his country. On Thursday, he brought us to visit Heyground, the co-working space he created for Korean social ventures. The building just opened in August 2017 and already has 500 employees across approximately 40 non-profit organizations. The nine-story building operates with community as its foundational principle; organizations interested in residency at Heyground must be equally as committed to building cross-organizational relationships as they are to driving their individual company’s success.

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Kyungsun Chung (’19) sharing his journey of founding Root Impact and Heyground

In addition to hearing Kyungsun speak about Root Impact, we also heard from a panel of three entrepreneurs-in-residence.

Enuma: Enuma is a mission-driven, for-profit company focused on providing digital learning for students in Korea with special needs. It also serves children in developing countries who do not have access to effective education. “This is the potential of digital,” said founder Sooinn Lee. “We can scale at large adaptability to serve every child.”

KOA: KOA is innovating in the landscape of sustainable fashion. The company seeks to push beyond traditional “do-gooder” fashion models, namely profit sharing and one-for-one strategies, by helping rural communities turn their raw materials and natural resources into targeted brands, like le cashmere.

Dr. Kitchen: Dr. Kitchen is a local Korean business that operates as the “Blue Apron for diabetes.” It provides subscription Korean-style meals with a low-carb approach. For example, the company mixes up the traditional Korean white rice by providing rice with complex grains, vegetables, and other protein sources mixed in.

After hearing from the entrepreneurs and getting a tour of Heyground’s space, we moved down to the ground floor to eat dinner in Health Club, a restaurant designed by Kyungsun’s sister.

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CBS students eating dinner at Health Club, Heyground’s public restaurant

As a CBS student, it was incredible to see my friend and clustermate Kyungsun already have such a direct and positive impact on the social landscape of Korea. We all left the evening inspired by his leadership and excited to see the continued results of his work when he returns to Root Impact after graduation.

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Lindy Gould (’19) is an MBA candidate at Columbia Business School.

DreamPlus: South Korea’s Fintech Accelerator

“In order to achieve sustainable growth, innovation is vital.” -Hanwha DreamPlus Entrepreneur

Read More: Columbia MBA students visit Hanwha Life’s startup incubator (Maeil Business News Korea)

Walking into Hanwha’s DreamPlus center, you might initially think you are at a regular office building for the life insurance conglomerate. Yet far from a traditional Hanwha outpost, the DreamPlus center—which will have its grand opening next month—is a Pan-Asian innovation ecosystem and the largest Fintech accelerator in Korea. It finds, cultivates, and supports startups in global expansion, investment opportunities, and innovation acceleration. DreamPlus centers handpick high-impact startups across payment, lending, security, cryptocurrency, and a variety of other Fintech spaces. Since 2014, five DreamPlus centers have opened across Asia, including three in South Korea, one in Japan, and one in China.

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Welcome sign in the lobby of DreamPlus

The DreamPlus center is intentionally designed to foster a collaborative and growth-oriented culture. For example, the 4th floor contains a media center, complete with soundstage and recording studio, while the 3rd floor is built out as an expansive library. The lower level includes a sports bar, convenience store, and a meeting space decked out with neon lights and graffiti. On the 9th and 10th floors, early- and mid-stage start-ups are housed together to promote continued conversation and shared resources.

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The library at Hanwha’s DreamPlus Center

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Jess Beidelman (’18), Taylor Palank (’19), and Kelly Lundy (’19) in DreamPlus’ recording studio

The Korean start-up scene sits within a unique landscape. One of the major benefits to start-ups is that the Korean government invests heavily in its conglomerates, or chaebols, providing subsidies that allow for quick growth, expansion, and maturity. In addition, many Koreans we met with pointed to the economic and cultural dynamism of the country as a key facet of the industry’s competitive advantage.

Yet start-ups here are not without challenges. There already doesn’t exist a lot of work-life balance in Korea, and this is even more pronounced in start-up culture. It can also be difficult to attract top talent to these companies. The Korean education system is incredibly competitive and, most parents want to see their kids go to work at traditional market leaders, like Samsung and Hyundai.

We asked one of the entrepreneurs about the biggest benefit of DreamPlus. “You don’t have to spend money or time here trying to appear successful,” he said. “You can focus on the work, the innovation, and solving the problem at hand.”

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Students in Hanwha’s lounge and meeting space

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Checking out the green screen in the media lab

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DreamPlus’ soundstage and filming room

Lindy Gould (’19) is an MBA candidate at Columbia Business School.

#SeoulExcited for South Korea: An Interview with Kyungsun Chung (’19)

With our Chazen South Korea study tour kicking off on Sunday, I sat down with trip leader Kyungsun Chung (’19) to chat about his plans for the trip. Prior to joining CBS, Kyungsun was the Founder and CEO of Root Impact, a nonprofit that focuses on building capacity for the social innovation sector in Korea. He is in the third-generation of the Hyundai family.

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Why did you want to plan a Chazen trip to South Korea?

I really wanted to add something to the Columbia community. I knew this Korea trip was something I could do well and it seemed like a good fit. Since I’m coming from a family business background, I thought I could add an interesting mix into the trip.

On that note of family business, I know one of the things we’re going to be learning about is this idea of chaebol. Would you tell me more about that?

A chaebol is a large business conglomerate that is owned by family members. With companies like Samsung, they are billion-dollar companies, but they are controlled by maybe 10-50 people in a family. So chaebol is basically family business—but with a crazy business size.

How did this idea of chaebol get started in South Korea?

This idea of a family-controlled conglomerate is especially popular in developing countries. When an economy is developing and doesn’t have a lot of resources or infrastructure, you’ll see a government make a conscious decision that they will basically concentrate the economic power within a few family businesses so they can compete internationally. As you know, the international businesses coming from Europe or the United States have much more capacity to compete; the developing government needs to put everything they have into a small number of businesses.

In Korea, the government gave a lot of tax breaks, bank loans, and other benefits to these family businesses so they could grow fast and drive the Korean economy. In Korea, there was basically nothing after the Korean War in the 1950s—it was really devastating—but now you have these Korean conglomerates, Samsung and Hyundai, which are the #1 conductor company and #6 largest automaker in the world, respectively. I really wanted my friends at CBS to learn more about chaebol because it’s really one of the few successful cases of the government-intervention economic model.

Aside from the company visits, what are you most excited about?

Basically… everything! The food part, of course. We are going to Korean traditional barbecues. On Wednesday, we have a cultural day—we are going to the Korean War Memorial Museum.

What do you think are some misconceptions that people have about Korean culture?

Because of North Korea, a lot of people think that South Korea is dangerous. They’re worried we are going to be invaded. But it’s not at all like that. I mean, there are more than 20,000 U.S. citizens living in South Korea. In terms of crime, we are one of the safest cities in the world.

Lindy Gould (’19) is an MBA candidate at Columbia Business School.