I have a long history supporting Songdo, an urban business community on the West Coast of South Kore
I recall an early visit to Incheon and what would be Songdo and looking out at acres of land reclaimed from the sea. Over time buildings, parks, and infrastructure soon emerged from the sand. The photo was a view from my Songdo office in 2018.
Stepping back some… the community, now called Songdo International City, was developed with Western amenities and covers roughly 1500 Acres complete with a Central Park, an international school, and a Jack Nichols-designed golf course–all within a short distance of the Incheon shipping port and the international airport.
It was also an early adopter of buildings with LEED certification, which provides a framework for healthy, highly efficient, and cost-saving green buildings. Plus, Songdo was seen as a frontrunner as a Smart City innovator. Today, it is one of 3 districts of the Incheon Free Economic Zone and home to the Incheon Global Campus.
Today, I am happy to continue to share and highlight Songdo
Expanding internationally offers numerous benefits such as access to new markets, customers, workforce, and improved reputation.
I am a strong advocate of global business, as it presents great opportunities. I am also deeply passionate about seeing brands succeed in overseas markets.
Expanding internationally offers numerous benefits such as access to new markets, customers, workforce, and improved reputation. As Wharton Magazine noted, “…expansion provides diversification and additional revenue, it also exposes one to different methods of doing business.”
Frankly, my experience is that global companies looking at market entry for Asia-Pacific countries like Korea, Singapore, the Philippines, or Vietnam, should recognize the potential upfront investment required to enter a new market. Best practices require a company to invest time and resources in “Discovery” and hire a qualified expert or firm to assist in the local mark
It is also common for local entrepreneurs to approach global brands with the hope of securing a memorandum of understanding (MOU) to bring a popular brand to their market. However, these entrepreneurs may not currently have the necessary resources and means to operate the brand. They intend to get the MOU, and then pitch the deal to local business partners.
Sadly, we’ve seen over the years even seasoned international companies realize too late that their well-intentioned partnership was less than qualified. The deal, then, stalled or ended.
Qualifying a local partner can be a challenge, as it requires deeper insights into the local market and identifying key players.
As a benchmark based on recent projects this cost is easily a minimum of US $20,000- $50,000 in international travel and legal fees to secure a partnership. There are, of course, additional costs after an agreement is signed.
There are methods to offset these development costs, which include joint ventures and licensing. Also, a best practice is to ensure you are working with a market entry firm that can
Effectively screen for highly qualified potential partners,
Secure high-level meetings with decision-makers and,
The target company has the required capital, resources, and experience to successfully operate the brand.
Going it alone
In contrast, I have seen firms entering overseas markets who prefer to take a different, more reserved approach and go it alone with their internal staffing. Sadly, the success rate for an international firm successfully entering a new overseas market is poor— or more costly than expected, even with the support of highly dedicated government agencies for local market entry.
To elaborate more, some businesses want to focus on finding a solid, committed overseas partner or client with little investment and need to pay upfront fees to engage a local expert in a market entry — all compensation is contingent upon first finding a potential partner. This rarely (code word–never!) works.
More to the point, a highly qualified market entry firm that has a track record of getting results will rarely shoulder the risk of funding the upfront development costs for a client. Instead, an experienced market entry firm will seek out businesses that expect success and are willing to compensate for the services.
Also, although a company going it alone may have websites, products, and company information (often in need of editing), they however lack what is commonly accepted content for meeting presentations with potential partners, including, but not limited to, a detailed localized, savvy Go to Market Plan—often a high content 20+ pages and a competitive market analysis. These expectations are not options.
And finally, for highly recognized U.S. or global brands, there is less of a barrier in setting up meetings because of the strong international desire for a top brand. For less-known brands entering an overseas market, there is considerably more effort. I most often have to rely on my credentials to begin a dialogue with a potential partner vs. the brand itself, which typically is little known outside Korea and East Asia.
All said I am a strong advocate of global business. I see a great opportunity and am passionate about seeing brands succeed overseas. However, as I have shared, this does require an upfront investment in time and resources, as well as securing local expertise. My advice, too, is to follow best practices for market entry.
I have been fortunate throughout my career to receive extensive media coverage in both Korean and Western publications. I feel a major contributing factor is that as a consultant I cover and am engaged in Korean business.
I have a lot to say, and many people seek out my perspective. In fact, in just the past 6 months, I’ve contributed to Korea Times, CNBC, Branding in Asia, Haps Magazine, and Sisajournal-e.com, not to mention releasing a new book and multiple press releases.
Topics often vary — Hyundai, Startup Ecosystems, EV and Critical Minerals, Smart Cities, and insights into the ever-changing Korean business culture.
So why “Tip of the Iceberg?” As a prolific writer, I enjoy sharing my perspective, but only a fraction of my insights are shared, like the tip of an iceberg.
It’s in my consulting work that I explore the difficulties that companies and teams encounter in greater detail. I have decades of experience providing solutions and workarounds.
All said, for those who follow my commentaries and writings as well as acquaintances — Have a request for an article? — please let me know. Have a question or opportunity… let’s talk.
Over the past nearly 20 years, I have been engaged in Smart Cities. This work has involved various Smart City projects. The first was the Songdo International Business District in Incheon, South Korea, and more recently—cutting-edge Smart City Platforms.
The concept of “Smart City” is an emerging technology that many local governments see as the future; however, few municipalities have a solid roadmap.
The term “Smart City” can be defined differently. Some envision a green and sustainable community that offers a life-work balance and implements cutting-edge technologies to achieve these benefits.
For example, Songdo, on the West coast of South Korea was built on reclaimed land and covers roughly 1500 Acres. Today, Songdo is a community of 167,000 residents located within one of three Free Economic Zones (IFEZ) in Incheon, South Korea. The project has been approximately 86% completed. Aside from residential areas, the location is also home to a Global Campus, Pharma Hub, Startup Center, and international organizations such as the Green Climate Fund.
Songdo’s development aimed to create an integrated 15-minute city, where people can access 90% of their daily activities by bike or public transportation in fifteen minutes or less.
In Songdo, traffic sensor data is utilized to regulate signal timing on the technical front, while household waste is directly transported from homes to waste processing centers through underground tubes.
Additionally, various apps assist residents in managing their daily lives providing them with information on bus schedules or checking on parking availability in the area.
That said, since these innovative systems were first offered, many new smartphone apps are now available across Korea and provide these and other digital services.
Today, there is a continuing effort to foster the development of Songdo as an urban district under the Incheon Free Economic Zone (IFEZ).
Dr. Won Sok Yun, who has been named the new Commissioner of the IFEZ) notes, “Over the next three years, I will aim to attract foreign and domestic investment in pharma and healthcare, tourism and leisure, and high-tech industries to create a ‘world-class city’.”
Smart City Platform
Recently, we are seeing the adoption of Smart City Platforms. These provide an integrated Geographic Information Systems (GIS) and Information and Communication Technology (ICT) platform. Plus, they offer municipalities some innovative urban solutions.
With the help of the Internet of Things (IoT) and AI, cities can enhance their emergency and fire response, traffic management, sanitation services, and facility maintenance. I’d add that it’s a tool for urban development and revitalization, and in some cases can enhance a city’s security.
Seoul, South Korea’s Smart City Platform is an example of successful integration. The system was developed between 2017 and 2019 to provide various services, including sophisticated drone defense monitoring.
The platform has been highlighted at recent Consumer Electronics Shows (CES) and gained global attention when it was modified during the COVID-19 pandemic to track real-time virus outbreaks.
In January 2024, neighboring Incheon’s Mayor Yoo Jeong-bok was quoted, “Building a smart city is a global challenge that all cities worldwide should aspire…. in collaboration with leading global companies and cities that possess state-of-the-art technology related to smart city construction.”
I agree that developing “Smart Cities” will require collaboration between private tech companies and local government. The mayor envisions building “eco-friendly smart cities centered around people’s needs.” This will address concerns about the ambiguous nature of the “Smart City” identity, which may mean different things to different groups.
The bottom line is that in discussions centered on “Smart Cities,” I suggest there is no one exact definition, however, the goal should be improved quality of public services and citizen welfare.
Incheon
Incheon is a city located on the northwest coast of South Korea and is home to a population of about 3 million people. Its suburbs are situated on the outskirts of Seoul.
Moreover, Incheon is home to South Korea’s primary international airport, the Incheon International Airport, serving as a gateway to northeast Asia.
IFEZ
In 2003, the Incheon Free Economic Zone (IFEZ) was designated as Korea’s first free economic zone. Within the Zone are three districts– Songdo, Cheongna, and Yeongjong International City.
Over the past 20 years, IFEZ has grown significantly and developed into a global city currently home to more than 400,000 residents, 3,300 businesses, 14 international organizations, and renowned foreign universities.
Don Southerton takes a look at smart city development in South Korea
Heads up– I am a keynote speaker at the 2024 Korea’s Sisa Journal-e.com Start-up Conference this week.
My topic–The Ecosystem of Global and Korean Start-ups: Risk, and the Shift in Startup Mindset.
I’m joining an amazing lineup of guest speakers talking on: the electric vehicle market, the Unmanned Exploration Research Institute Space robotics, and The role of climate tech in achieving carbon neutrality.
The event will be held in Seoul at 10 AM, March 20 KST, and shared Live via this YouTube link.
Black mass and upcycling. Once a lithium battery reaches the end of its useful life or becomes damaged, the battery pack can be collected, dismantled, and shredded.
The shredded material is then processed to produce what we in the industry call black mass, not be confused with an astrophysics term, or a dark movie on Netflix.
This black mass can consist of high amounts of lithium, manganese, cobalt, and nickel metals. EV batteries use these metals in ratios which we label as NMC 622 or 811–60% nickel, 20 % manganese, and 20% cobalt, or 80% nickel, 10% manganese, and 10% cobalt. [1]
These metals when sent to a facility can be reclaimed from the black mass and in direct recycling reused in new battery production.
(Image courtesy of Argonne National Laboratory.)
I like to use the term upcycle vs recycle for these materials.
As I wrote in my End-of-Life article, “The Lithium-ion Battery Life Cycle: Mandates, Sustainability, Recycling, Recovery,” compared with the West, Asia — specifically China and Korea have been at the forefront in recovery and re-use — reclaiming batteries’ black mass.
I reported in 2021, “… with strong encouragement from the Korean government, many of the nation’s top groups are actively engaged in some form of end-of-life program. For example, Korean steel producer POSCO, looks to import waste battery scraps concentrated in a powdered form from Europe. Likewise, the Hyundai Motor Group, SK Innovation, and LG Chem all have programs to ensure used batteries have second-life applications, or are recycled and metals such as Lithium, Nickel, and Cobalt are recovered. These programs made lots of sense, as Korea is one of the world’s largest producers and innovators of Lithium-ion EV batteries — with accordingly a high demand for these raw materials.”
Fast forward…
This trend has shifted with new incentives for North American battery recovery.
For one, the U.S. government has mandates to shore up batteries among the nation’s key strategic interests. Second, the government looks to make the U.S. more competitive in the battery market.
These programs include the Inflation Reduction Act (IRA) and other funding under the Biden Administration such as The Energy Act of 2020, and the Bipartisan Infrastructure Law (BIL), which, together with the IRA, offer billions of dollars to the Department of Energy (DoE) funded government programs.
These monies do come with some restrictions.
Specifically, under the Inflation Reduction Act, vehicles that use batteries that contain (i) any “applicable critical minerals” that were extracted, processed, or recycled by an FEOC [ or (ii) any component manufactured or assembled by an FEOC would be ineligible for the $7,500 Section 30D consumer tax credit (Sec. 13401(e)(7)) starting after 2023.
A FEOC is defined as a Foreign Entity of Concern and, with reference, to the IRA, a Chinese company or entity controlled by a Chinese firm.
These prohibitions take effect in 2024 for EV battery components and in 2025 for “applicable critical minerals.”
A Question.
In a recently attended EV battery panel, I raised a question, “Will we, like in the EU, see more regulations for End of Life?” [For example, the new EU regulations will over the next few years, mandate minimum levels of recycled content in batteries, noting end-of-life batteries contain many valuable resources and these critical raw materials must be reused instead of relying on third countries for supplies.]
The panel’s consensus was that unlike the EU and their use of widespread regulations; the thought was for the U.S. to continue to use more of a carrot approach — incentivizing reclaiming battery materials. Something we can see in a range of DOE grants now being offered.
In closing,
One final takeaway the driver for reclaiming black mass is sustainable profitability. The critical metals, NMC, for example in the black mass in this formhave a value that may or may not be competitive against new widespread sourcing of the rare materials.
That said, when the reclaimed key materials are further refined and separated from the black mass their value increases 3-fold, and even further new processes increase the value 6 times.
I have also read that these refinements in the reclaiming process can result in improvement in the very EV battery life span, battery density, and range… all of which add considerably to what I see as “Upcycling”.
Mr. Southerton provides strategy, consulting, and training to Korea-based global businesses.
This includes long-time support of many of the major Korean Groups including the Hyundai Motor Group, SK Corp., and LG.
He also has supported Korean market entry for several innovative small and medium enterprises (SMEs). Most recently Southerton has been engaged in the mobility, electrification, and the battery sector.
On related issues, Southerton has been a contributor to CNBC, The Economist, Automotive News, the BBC, CNN Fortune, Korea Times, Yonhap, tbs eFM, Wall Street Journal, and Forbes.
[1] Most EVs today use either lithium-ion NMC, NCA (Aluminum), or lithium-ferrous LFP chemistry batteries. There are advantages and disadvantages.LFP: lower cost, lower density, higher discharge cycles; and NMC/NCA: higher cost, higher density, lower discharge cycles. Regardless they all contain ametals that are reclaimable.
I am often asked to assist with Korea-facing business ventures. This can be a North American firm just entering the Korean market or a Western company already with operations in Korea.
Too, I am also asked to support top Korean Groups with their overseas operations.
Most often Korean and Western senior leadership teams did a great job of gaining mutual trust. Both negotiated well. The deal is signed and it’s time to perform.
Sadly, the honeymoon is over. Challenges arise, and what appeared to be clear expectations can now seem murky with poor alignment and weak communications. Why?
There are several reasons. One is that teams that meet, bond, and negotiate are seldom the ones doing the work. The teams on both sides that crafted the deal are better skilled in global business. The teams doing the work are talented, but usually less skilled in local affairs.
Many Westerners have no recent experience working with Koreans, and the Korean teams have limited experience working with North America.
A caveat to this is that many of the Korean teams are bright, but very junior, new to the workplace, and tend to be generalists, while Western teams are comprised of highly specialized industry veterans.
So, what’s the solution?
Frankly, in our experience, the most successful firms show great leadership and vision. They also recognize both sides will need constant ongoing support and training.
Expecting the teams to “get it” seldom works — and if it does it takes time, is costly, and contributes to stress, poor productivity, and even employee turnover. Expecting non-Koreans to understand Korean culture, business models, and workplace expectations is like throwing someone into a pool and assuming they will swim, not sink.
That said, a huge mistake is hiring an industry consulting firm without a full understanding of the specific challenges and cross-cultural issues. In many cases, they fail to get to the root of the problem(s) and expectations are never fully clarified. Issues will surface. Things will get worse.
To conclude,
In dealing with partnerships, I understand the huge stress loads within Korean-based firms. Teams need to perform. Partners will also be expected to perform. Clear, well-communicated expectations and cross-cultural understanding from the beginning are vital, along with a strong business plan and strategy.
Need a solution, I am here on-call with practical workarounds and seasoned experience in overcoming the challenges. Waiting only adds layers and costs.
Year-end organization-wide promotions, restructuring, and new assignments for teams are traditionally a part of Korean corporate culture. Top to bottom within Korean companies they occur sometime between early December and early January, with the changes to senior leadership announced first, and team level changes as a norm made known the week just before or between Christmas and New Year’s Day.
After the Holidays, teams then report back to work. Some assume new roles frequently in departments where they have little experience—requiring employees to acquire new skills—sink or swim.
In the days that follow those shuffled brief their replacements, as staff remaining in their jobs update new management teams on the status of projects and issues.
Meanwhile, others will be en route to assignments in overseas operations; a challenge for those working outside Korea for the first time.
This can also be a challenge for local overseas operations. In particular, it is common for those newly assigned to be unfamiliar or have very limited experience with the many nuances in the localized foreign business, as well as the new role and responsibilities. Not to mention, working outside Korea is in itself a learning curve that can take months and even years.
And I strongly recommend leadership—Western and Korean– have countermeasures in place to mitigate any transitional gaps. They do occur. In fact, over the years I have worked extensively to facilitate smooth transitions.
So, what to look for… The top Chaebol will and have begun to announce key promotions, which can provide some insight into future trends. The Chaebol usually also comment on whether this year’s promotion number is more or less than in the past and the reasons “why.”
On restructuring, top Chaebol have already announced plans. These can range from granting more independence to business units to consolidating control.
In their restructuring, SK Group elevated a number of executives to vice-chairman level and granting independent decision-making authority to their key affiliates that span from semi-conductor chips, batteries to wireless network, energy, and biotech.
In contrast, Samsung Electronics noted as a shake-up they will merge 3 of their business units.
Samsung also announced several changes in its corporate policies. With the new year, they will employ a new personnel management system. Under the new system, Samsung will abolish a set of requirements before an employee gets promoted to a certain level, such as a minimum term of service that lasts roughly eight to 10 years. Instead, top-performing employees will be eligible for their work performance and expertise be taken into account as key factors for promotion over time in grade.
The Hyundai Motor Group, too, has announced its executive reshuffle. To align with the new Chairman E.S. Chung’s future vision, we see a plan to bring younger faces on the C-suite with a focus on future mobility and on technology sectors such as infotainment, ICT, and autonomous driving. This then means many of the current leadership are stepping aside to the advisory posts.
New Years’ Message This said, as in the past, with the new year, we can expect leadership will share their 2022 plans in an annual New Years’ company announcement, too. I monitor closely and as they are in Korean will share when appropriate and upon request.
As a final note, for western global teams, I suggest congratulating those who are promoted but also be sensitive to Korean team members who were passed over… or possibly moved to what may be seen as a less strategic assignment.
BTW Time in grade is just a criteria for promotion, or in some cases if a junior is promoted over a senior it is deemed as their time to retire.
Korean Business Culture Question?
Don Southerton Thought Leader
Do you have a Korean business or cultural question?
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Looking forward to talking.
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Don
https://www.bridgingculture.com