[Opinion] Corporate Management Riding the Waves of COVID-19 and the 4th Industrial Revolution?

[Asia Economy Reporter Jong-il Park] Overcoming the Waves of COVID-19 and the 4th Industrial Revolution in Business Management?

Kim Changon (Professor of Business Administration, University of North Carolina, USA · Former Deputy Mayor of Jung-gu and Songpa-gu, Seoul)

Recently, a virus that was completely unimaginable has plunged the entire world into fear, causing unprecedented difficulties in all areas including daily life, economy, education, and culture due to non-face-to-face social distancing.

Historically, the Black Death (plague) epidemic in Europe during the 14th century killed one-third of the European population at the time and created an environment that ushered in a new era of civilization called the Renaissance. In our era, the changes triggered by COVID-19 are so significant that New York Times columnist Thomas Friedman said that future world history will be divided into 'Before Corona (B.C.)' and 'After Corona (A.C.).'

The changes brought about by the COVID-19 situation, such as non-face-to-face online and mobile shopping, remote telecommuting, remote education, and virtual concert halls, are unlikely to return to the same state as before COVID-19 even after the vaccine is distributed and social life normalizes.

Companies must quickly grasp and proactively respond to this wave of change, or they may find it difficult to survive. Even without COVID-19, the lifespan of companies has become shorter in modern times. According to the American credit rating agency Standard & Poor's (S&P), the average lifespan of the top 500 companies decreased significantly from 61 years in 1958 to 18 years in 2016.

The economic magazine Forbes states that the average lifespan of the world's top 100 companies is only about 30 years.

South Korea is in a similar situation; among the top 100 companies in 1965, only 16 remain today, with a survival rate of 16%, and it is predicted that 80% of companies will disappear after 30 years.

In the distribution sector, an example of a company that fell due to insensitivity to the wave of change is Sears, the largest retail company in the United States, which operated 3,800 stores nationwide and employed 350,000 people, dominating an era. At its peak, Sears even built the 'Sears Tower,' then the tallest building in the world (108 floors, 442m). However, failing to read environmental changes and complacently responding with arrogance as the best, it ended its 125-year history and filed for bankruptcy in 2018.

On the other hand, the newly emerged warehouse-style large discount store Walmart succeeded by utilizing IT to efficiently manage logistics and winning consumers' hearts with the slogan 'Everyday Low Price,' always selling good products cheaply. Amazon, which started as an online bookstore, rapidly grew by expanding products through convenient e-commerce and has now emerged as a retail giant.

The COVID-19 crisis has accelerated the speed of the ongoing 4th Industrial Revolution. The 4th Industrial Revolution is characterized by ultra-connectivity through the Internet of Things, ultra-intelligence using artificial intelligence and big data, and a hyper-realistic society utilizing AR and VR technologies, leading to various industrial convergences.

Companies and industries applying digital technologies are enduring the COVID-19 crisis, while those that do not are experiencing sharp declines in sales. Failure to adapt to the new business environment changes could lead to extinction like the dinosaurs that failed to adapt to climate change on Earth.

In this era, companies face an important crossroads: whether to confront the huge waves of change and fall or to skillfully ride and overcome the waves. To overcome the approaching waves, companies must boldly abandon past practices and innovate management in line with the trends of the times.

To overcome the waves of the post-COVID era and the 4th Industrial Revolution, companies must first achieve digital transformation throughout the entire business process, including product planning, procurement, production, logistics, sales, after-sales service, and support tasks, digitizing the entire value chain of the business.

In a world where one cannot live a day without a smartphone, companies cannot manage without applying digital technology. To maintain continuous competitive advantage, companies must develop and expand their core competencies, unique resources, and strive to provide differentiated products and services at low cost with excellent quality, efficiency, and customer responsiveness.

The conditions for a company's resources to become core competencies can be summarized by 'VRIO': Valuable, Rare, Inimitable, and Organized resources.

Examples of core competencies that provide competitive advantage include Apple's design capabilities, Walmart's efficient logistics system and low-price offering capabilities, and Disney's characters and creative storytelling. Since information is open and spreads at the speed of light through the internet, core competencies are better when they are rare resources that competitors cannot imitate.

Companies aiming to overcome the waves of COVID-19 and the 4th Industrial Revolution must stay alert, adapt to environmental changes, and respond swiftly to survive not only domestically but also in global competition.

South Korea, having risen from the ruins through the colonial and war eras to join the OECD, hopes that its people, business leaders, and government will unite once more, muster wisdom and determination, and become a Korea that stands tall in the world.