[Viewpoint] Three Reasons Why Kakao Became One of Korea’s Top Three Companies

Seoyong Koo, Dean of the Graduate School of Business, Sookmyung Women's University

The news in August 2021 that self-made entrepreneur Kim Beom-su, chairman of Kakao, became the richest stockholder in South Korea is a clear example showing hope in Korean capitalism. Since launching KakaoTalk in March 2010, Kakao has written an astonishing success story by becoming the 3rd largest company by market capitalization on the KOSPI and the number one company where university students want to work, all within just over a decade. There are three reasons behind Kakao’s rapid rise to become one of Korea’s top three companies.

First, Kakao is a representative mobile platform company in Korea. Currently, in the United States, six out of the top ten companies by market capitalization?Apple, Amazon, Google, Facebook, Tesla, and Alibaba?are platform-based tech companies. Over the past year, leading companies have shifted from pipeline businesses to platform businesses. Platform services do not create something entirely new; this is called ‘friction detection,’ where they identify inconvenient points caused by existing services and enter the market by resolving them. Compared to pipeline businesses that generate revenue only from consumers, platform businesses provide a space for interaction between suppliers and consumers, generating revenue from both sides. Through the ‘network effect,’ increasing the number of users initially with free services eventually leads to tremendous acceleration. Kakao absorbed early losses by offering free messenger services and was able to snowball its revenue by launching services like emoticons, gift sending, and Bizboard.

Second, Kakao’s management philosophy and corporate culture are outstanding. Chairman Kim emphasizes creating a company where ‘culture’?not people or systems?works effectively. He holds the belief that a ‘better world’ can be created through business as his management philosophy. ESG (Environmental, Social, and Governance) has become the new constitution for companies worldwide. Like someone who has seen the future in advance, Chairman Kim adopted a mission to make the world better as his business philosophy. At Kakao, the enormous number of about 120 affiliates are not managed by a control tower or management headquarters planning or controlling them. This nomadic style of management is called ‘rhizome management.’ A rhizome is a ground-covering plant whose branches touch the soil and grow sideways and into roots, making it impossible to distinguish between trunk and branches, contrasting with trees that have clear hierarchical relationships between roots and branches. A horizontal corporate culture that values collaboration is the new value we should pursue. This is similar to the ‘Amoeba Management’ of Kazuo Inamori, the management guru and chairman of Kyocera, who is famous for splitting organizations of more than ten members into new companies.

Third, the COVID-19 pandemic effect shifted our lifestyle to be centered on non-face-to-face interactions. Kakao’s stock price has soared 3.5 times in the past 12 months, making it a so-called ‘rocket stock.’ The decisive event of the pandemic acted as an unexpected stroke of luck, or ‘serendipity,’ for Kakao, creating a record in Korean corporate history as the fastest company to reach the 3rd largest market capitalization. Going forward, we hope that entrepreneurs with world-class management philosophies like Kakao’s leadership and who develop platform businesses on the global stage will continue to emerge.

This content was produced with the assistance of AI translation services.