Background of the KITA Open Innovation Program

Many major companies around the world have chosen open innovation cooperative agreements with startups as essential corporate strategies for purposes such as:

• Acquiring promising technologies
• Establishing new business models
• Acquiring staff talents
• Collecting market information

This trend also continues in small and medium enterprises, which have sought to improve the competitiveness of their value chain in the face of limited growth. Therefore they have focused on establishing open innovation teams, investment teams, and tech scouter positions.

This renewed interest in open innovation comes from the fact that the Fourth Industrial Revolution functions essentially as a GPT or a seedbed that produces derived technologies in turn. Furthermore, the current stage of the technology life cycle is at its maturity. In addition, this phenomenon can be seen in AI technology, which was once considered an expensive toy but now has assumed the function of a personal secretary in daily life.

In 2016, 52.4% of Forbes 500 companies cooperated with startups. Some forms of cooperation include:

• Technological advising
• Business support
• Co-working spaces
• Accelerators/Incubators
• Open Contests

The top 100 companies on the Forbes 500 have twice as much cooperation with startups (68%) as the lower 100 on the Forbes 500 (32%). In addition, 97 companies selected by the European Union (EU) as startup-friendly companies have separate and independent teams tasked with open innovation.

“The best way for companies to survive is through Open Innovation. Companies need to transform into something new. It is this idea of continuous transformation that makes you an innovation company,” said the Director at Global Startup Acceleration of KITA, Phil Jae Park.

Introducing the KITA Open Innovation Program

The KITA Global Scale-Up Program aims to develop unique and distinguished examples of successful open innovation through three projects: Fortune 500 Connect, Startup Test Bed, and NextRise.

Fortune 500 Connect

This project matches startups with open innovation teams or corporate venture capital (CVCs) of multinational companies. Therefore, open innovation with multinational companies represents ideal methods for acquiring investment or developing international outreach for startups.

A total of 206 startups were matched with 21 companies, including BASF, Lego, Chanel, and BMW in the previous year. This produced 16 successful cases of investment, technology sales, supply contacts, an accelerator program, and more.

Investment

Beiersdorf AG, a German company famous for its Nivea product line, invested 25% of its shares in the beauty platform startup LYCL.

Technology Sales

BASF and Korean AI beauty device company WayWearable signed a contract for the introduction of technology. Therefore this allowed for the transfer of the technology of the Korean startup to the German company.

Supply Contact

An anonymous Korean cosmetics startup signed an NDA with Chanel for the supply of packages to the company. In addition, another anonymous Korean cosmetics startup signed a supply contract NDA with Daimler AG of Germany.

Accelerator Program

PANDA, a natural cosmetics startup was selected for Beiersdorf AG’s accelerator program for mentoring and cooperative programs.

Furthermore, established Korean companies that are interested in cooperating with startups have been matched with startups. This was done through the KITA business matching program. For example, Dongwon Industries are cooperating with Korean autonomous driving robot startup Twinny. They will focus on robot usage in logistics areas. In addition, Dongwon Home Food will cooperate with open-kitchen startup Open the Table. Sample tests have been completed and purchase plans have been announced.

Future Plans

KITA is the largest supporter of open innovation in Korea and an organization with experience in multiple projects from 2019-2022. Therefore, they have brought an increase in international companies that have sought out potential cooperation programs. Their focus for 2023 will be to continue matching large to medium-sized established enterprises both local and international with Korean startups. So far KITA has done business matching discussions with 9 large companies. Some of these companies include L’Oreal, Bayer, and 30 medium-sized EU companies.

COEX Startup Test Bed

KITA is the first private project that supports startups by establishing their proof of concept (POC). Furthermore, they offer startups their first gateway to successful sales. They do this by offering the multipurpose facility of COEX as a testing site for the Fourth Industrial Revolution technologies. COEX Startup Test Bed offers internal R&D technology validation, references/delivery, demonstration, and feedback.

KITA launched the COEX testbed project back in 2019. They helped 4 main business operators in COEX discover new solutions that could innovate their existing services while providing startups with the opportunity to conduct proof-of-concept in the real world.

Internal Technology Validation

SoCar, a car-sharing company, tested its vehicle location search technology using 44 cars on the COEX outdoor parking lot.

Delivery and Reference

Interbrid, a company that specializes in new advertisement technologies, plans to demonstrate its technologies for three months prior to the delivery in indoor spaces within COEX. In addition, AI startup DOGONG plans to deliver its robots that replace night-time security personnel after a three-month testing period.

Demonstration and Feedback

Twinny, a startup that specializes in indoor autonomous driving robots plans to test and acquire feedback on its products on sloped areas within COEX.

KITA  and Socar Launch the First Private Testbed Project

KITA signed an MOU with Korea’s largest car-sharing platform Socar. Socar will join the COEX testbed project which is aimed at supporting startups with testing out their technology and solutions in real-life environments. Dong Ki Lee, the executive managing director at KITA, and Jong Phil Won, the Chief Technology Officer at Socar agreed to their mutual commitment to cooperating on the startup testbed project.

Socar’s Vehicle Identification System

Socar has developed a new vehicle ID system to resolve the problems that many users had experienced when trying to find their rented cars in crowded parking lots. Since Socar is a startup, they found it difficult to secure a proper place to test out the viability of their new technology in a real-world environment. Therefore the signing of the MOU with KITA is perfect for Socar as it will allow them to conduct the much-needed PoC verification in one of the most popular COEX parking spaces. Socar will demonstrate its vehicle identification system in the rooftop parking lot of COEX for 3 months. The parking space has more than 600 individual lots.

Socar’s new vehicle identification system will make it easier and error-free for customers to identify and return their rented cars. Furthermore, it is expected to considerably improve the efficiency of business operations.

COEX Test Bed Project

The COEX Test Bed project will focus on acquiring overseas testbed sites and working with private shopping malls for testbed sites. Therefore they will actively acquire institutions and landmarks overseas to support the PoC of Korean startups that seek to enter the market in that country. In addition, they are currently developing potential testbed sites in Spain, Luxembourg, Indonesia, and Dubai. Furthermore, they will seek cooperation with private shopping malls and major Korean retailers that are looking for digital transformations through retail 4.0.

KITA and General Trading Company Create Overseas Testbeds for Korean Startups

Overseas testbeds are essential for Korean startups. The existing cooperation method that was based on business matching between large enterprises and startups mainly depended on conceptual inference rather than real-life applications. Furthermore, only a few companies had the opportunity to prove their technology. Startups in Korea that passed large enterprises’ conservative/objective decision-making standards were endowed with the opportunity to prove their technologies’ competitiveness ex post facto. Therefore, most startups lost their chance to cooperate. This made it relatively easy for large enterprises to avoid risks, which in turn resulted in fewer cooperation opportunities for startups.

Promising startups are missing out on an opportunity for collaboration with large enterprises due to the misalignment of opinions or misjudgments made by different teams/managers at these large enterprises. Examples of causes of failure include underestimating cooperation potential and slow decision-making because of the systemic verification-based approach typical of large enterprises.

The Need to Establish a New Support Model for Startups (Proof-of-Concept)

The Proof-of-Concept (PoC) model will be the first gateway for the global scale-up of Korean startups. Landmark facilities and infrastructure (large shopping malls, airports, stations, etc.) are to be provided as testing sites for the 4th Industrial Revolution technologies. This will be done in order to gain opportunities for technological validation, purchase, and investment.

Venture Capital has provided resources to startups for business development and has supported innovation through sandbox programs. These sandbox programs allowed startups to use large enterprises’ internal data and commercial facilities as testing sites for their new technologies. Now the purchasing method has increased in popularity in order to conveniently check the technological viability and adjust the depth of cooperation along the way.

KITA’s Overseas Testbed Cases in Europe, North America, and Southeast Asia

Europe

Currently, KITA is securing landmark facilities through private consulting firms in Spain and Luxembourg. They signed MOUs with shopping mall stakeholders as well as support government agencies during the second half of 2020.

North America

KITA is preparing to execute plans in North America in 2021. They will sign an MOU with companies based in the United States (Walmart’s Walton Family Foundation) and Canada (Private VC).

Southeast Asia

KITA is deliberating on the possible cooperation with YCH (a large logistics company in Singapore), E.LAND (an apparel manufacturing company in Shanghai, China), and Stan Group (a real estate group in Hong Kong) for the first-proof-test-and-later-invest model.

Cooperation with LG International Corp.

KITA plans to cooperate with LG International Corp. to supply and spread the cooperation model between general trading companies and startups utilizing overseas testbeds for PoC. Therefore, they will aim to introduce a new framework for discovering and supporting startups by combining KITA’s knowledge of supporting startups and the trading companies’ support for startups’ global market entry and international networking capabilities.

KITA will provide advice on models to:

• Support overseas PoC
• Discover startups
• Propose government policies related to the support framework
• Assist the selected startups through vouchers

LG International Corp. will discover overseas testbed partners and support startups’ overseas consulting. The benefits for overseas testbed partners include enhanced competitiveness of multiple complex facilities and a reinforced image as a cutting-edge infrastructure. In addition, the benefits of ventures/startups include a secured reference, secured data through scale-up, and secured consumers’ business site feedback.

Procedure for Pursuing Overseas Testbeds for PoC

1. Discover foreign landmark companies and public facilities or general companies in need of open innovation.
2. Jointly select external experts in cutting-edge high technology, efficiency-boosting technologies, etc.
3. Test, apply, and consider the adoption effects to deploy the relevant technology in the field or extend the testbed.

The relevant startup will be responsible for bearing the testing costs. However, when a foreign partner finally selects which startups to partner with for testbed execution, it shall use a startup voucher (30 Million Korean Won per company). This voucher will be provided by the Korean Ministry of SMEs and Startups. Testbed execution entails additional developments, installation/dismantling costs, local agency liaising costs, and others.

Through this cooperation, trading companies will be able to establish a new role as a leading pioneers in supporting startups for their business growth and global market entry.

NextRise: Korea’s Largest Innovation and Growth Fair

NextRise is Korea’s largest startup fair. A joint investment between KITA and Korea Development Bank launched NextRise Seoul. They brought in angel investors, accelerators, VCs, multinationals, and many more from the tech startup ecosystem. Therefore, NextRise has quickly become a major international event with 21 major companies in Korea and 100 international experts/investors in attendance. The startup fair brought in 8,000 visitors in total. Furthermore, the event brought in 100 experts from 45 organizations. As well as, companies from 15 countries, 493 startups, and produced 332 1-to-1 meeting sessions.

Major global companies like AWS (Amazon Web Services), BMW, Benz, POSCO, and many others participated in the event. There were a total of 102 sessions taking place online and offline. In addition, there were workshops for startups on topics such as strategy, partnerships, and business development. The aim of the event was to continue to strengthen connections with global Fortune 500 companies in order to help startups in Korea scale up.