A CASE STUDY ON KAKAO’S RESILIENCE; BASED ON FIVE LEVERS OF RESILIENCE THEORY MINZHEONG SONG Media and Advertising Department, Hansei University, South Korea E-mail: [email protected] Abstract - The purpose of this study is to prove the Korean Internet company, Kakao’s resilience capacity. For it, this paper reviews the previous literatures regarding Kakao’s business models and discusses ‘resilience’ theory. It investigates Kakao’s business and organization and shows that five levers of resilience are a good indicator for a successful platform business evolution. First lever, coordination that makes Kakao to restructure its silo governance in order to respond to actual business flow. Second lever, cooperation where Kakao provides creative people with playground like KakaoPage. Third lever, clout where Kakao shares its data with 3rd parties by opening its API of AI to 3rd party developers. Fourth lever, capability where Kakao establishes AI R&D center, KakaoBrain as multi-domain generalist for developing diverse platforms tackling customer needs. The fifth lever, connection where Kakao continues to expand its platform business to the peripheries and shrink its core by open the platform to other industries. This study proposes Internet companies to be a resilient platform utilizing five levers of resilience for forming successful platform and contributes to the agile innovation of platform with ecological sense. Keywords - Kakao, resilience theory, business model, agile innovation I. INTRODUCTION physiological significance. In physics, the resilience of matter refers to the force that is transformed by Compressive Internet firms are expanding their external forces and then returns to its original shape business domain from PC and mobile applications to and size. Likewise, the firm’s resilience also means Internet of Things (IoT) and Artificial Intelligence the ability to restore the firm’s damage from an (AI). For such firms, overseas expansion is inevitable, unexpected change back to its previous state. given the limited growth potential of the domestic Resilience in this respect is focused on strategies or market. In this environment, global players are competencies that can quickly return to a certain level investing in human resources and mergers and of performance. The second is the resilience of an acquisitions (M&As). However, overall the business extended meaning that develops new competencies environments are compressed with the keywords such beyond the recovery and creates new opportunities. It as complexity, high-tech, agility, openness and is the resilience of ecological meaning. Firms with slowdown [1]. As the complexity of modern society these resiliencies continue to evolve as they have the increases, the information flow is easier as capacity to transform change or unanticipated information and communication technology (ICT) challenges into opportunities. A resilient company develops. In addition, changes in laws and does not focus solely on solving the difficulties that it regulations, the roles and policies of governments, faces by using resilience as its core competency, but changes in the competitive structure due to M&As, turning it into an opportunity to build a successful diversification and globalization of consumer needs, future. From the perspective of corporate resilience, it and technology convergence are also increasing the is necessary to focus more on the development complexity of modern society. This is an important through overcoming the crisis rather than merely task in business management. Due to the rapid restoring the state before the crisis. As a result, firms convergence of ICT-based industry convergence and with high levels of resilience in the ecological sense the creation of new value, companies need to develop successfully overcome the risks associated with a products and services that are completely different complex economic and business environment and from the existing ones and they must strive to secure effectively achieve the firm’s ultimate goals. superiority. Corporate innovation is related to the With solid growth in its core revenue sources of ads, strategies and resources that the firm pursues and the content, and commerce, Kakao is enjoying the growth core competencies it has. As a method, the integration of revenue and operating profit thanks to the mobile of production processes, products, services, ad revenue. However, game revenue growth was technology, and industry can be considered. sluggish, as Kakao platform games were Companies are in position to spur on building overshadowed by the popularity of mobile sustainable competitive advantage and achieving MMORPGs. Kakao tries to develop new businesses substantial results by establishing strategies and using like KakaoMobility. It was recently launched and resources related to the utilization of ICT. Internet Kakao has a 69% stake in this. KakaoMobility plans companies confronting those business environments to further monetize KakaoTaxi by advancing into should be resilient and there are two concepts in B2B taxi services and also launch a parking app business and organizational resilience. The first is the called KakaoParking. Recent KakaoBank in which Proceedings of 102nd The IRES International Conference, Sydney, Australia, 4th-5th February, 2018 63 A Case Study on Kakao’s Resilience; Based on Five Levers of Resilience Theory Kakao owns a 10% stake, has displayed impressive KakaoTaxi has been considered an innovative service growth since its launch. Kakao plans to link to solve a mismatch between supply and demand in KakaoBank to its KakaoPay service. the taxi industry, and also regarded as a symbolic model in the O2O business. Based on the conjoint The purpose of this study is to prove the Korean analysis, this study draws three attributes: representative Internet company, Kakao’s resilience Convenience, informativeness, and trust. capacity. For it, this paper will firstly review the Convenience was defined as a convenience for previous literatures regarding Kakao’s business consuming a product or a service, and models and discuss ‘resilience’ theory. Then, it will informativeness was a feature to help consumers and organize the research questions based on the providers recognize the others’ information before theoretical background and explain the research selecting them. And, Trust was defined as an attribute methodology. With this backdrop, it will investigate to make customers use taxi service without the case of Kakao’s business and organization. concerning safety. The result of this study reveals that trust is served as the most influential factor, meaning II. DETAILS THEORY AND RESEARCH that taxi consumers put a lot of weights on trust DESIGN compared with the others. Also, informativeness is evaluated as a powerful factor no less than trust. This 2.1. Previous research about Kakao (2012~2016) implies that removing opacity of existing taxi service The investigation period “2012~2016” is based on the is regarded as a significant change. Lastly, this study diversification strategy of KakaoTalk from instant found out that convenience functions as a meaningful messaging (IM) to Social Network Service (SNS). factor in estimating customers’ welfare resulted from During that time, lots of the academic research paper KakaoTaxi. about Kakao can be found. So, the research about Kakao is firstly introduced in this paper. In terms of 2.2. Theoretical background the diversification strategy, Chung [2] has dealt with “Resilience” is a term with the meaning ‘to jump SNS evolution with KakaoTalk. As of 2012, it was back’ or ‘to spring back’, derived from the Latin evolving into a SNS company based on its IM word ‘resilio’. It means a property that returns to its service, has successfully established various services original state when an impact is applied and such as photo-based KakaoStory, game marketing deformed. In 1961, the American Psychologist, platform, game center, etc. and it was also evolving Norman Garmezy began to study the theory of into a social media platform through news, avatars resilience, which was used academically. In the and app stores through friends. plenary panel at the 2013 meeting of the International Han and Cho [3] also handled use case of Kakao’s Society for Traumatic Stress Studies, S.M. Southwick Kakaotalk as platform business model in 2015. This et al [5] discussed about the resilience researches and study discussed how to create a value proposition and multidisciplinary experts provided insight into several how organizations using the platform can cooperate questions, and most of the proposed definitions and the use case indicated, a preparation, spread, included a concept of healthy, adaptive, or integrated evolution (PSE) curve is a successful platform positive functioning over the passage of time in the business evolution. This curve is composed of three aftermath of adversity. The panelists agreed that phases: a preparation phase that establishes the resilience is a complex construct and it may be platform and sets the target group, a spread phase defined differently in the context of individuals, where the firm provides killer content, such as families, organizations, societies, and cultures. In KakaoGame, a low pricing strategy, and terms of the determinants of resilience, there was a reinforcement of the platform rules in the early stages consensus that the empirical study of this construct of the platform; and an evolution phase where the needs to be approached from a multiple