Galapagos Island Effect in Technology: Japan, China & South Korea

The first time I went to Japan in 1989, I was completely blown away and started a long love affair with the country. Walking around Akihabara, aka “electronic town” district in Tokyo where every and any kind of consumer electronic product was available. These were the days of Sony Walkman. Going back again as young adult in 1997/1998, Japan was a leader in smartphones where the Docomo I-mode was the precursor to Apple iPhone and its rich ecosystem.

I saw similar advanced consumer technology developments in South Korea between 2003 and 2009, where Video Games, Mobile payments, Social Networking was literally 5 years ahead of where the rest of the world was due to their crazy high BB and Smartphone penetration.

I also don’t need to spend much time talking about the advanced tech ecosystem of China where ecommerce is far more dominant than in the USA or Western Europe. Advanced smartphone penetration and over 1.2 billion users on 4G is leading to a massive online population with its own separate online world and services.

Take Wechat for example as described in Wikipedia:

China’s “app for everything” and a “super app” because of its wide range of functions. WeChat provides text messaging, hold-to-talk voice messaging, broadcast (one-to-many) messaging, video conferencing, video games, sharing of photographs and videos, and location sharing.

Think Facebook + WhatsApp + Venmo + Tinder + Instagram + Skype among other services in One app. So many people use WePay and Alipay that young kids do not know what paper cash is.

Yet why have we not seen these developments or big players from these countries in the rest of the world. I think the reason is due to the Galapagos Island syndrome. For naturalist fans out there, the Galapagos Islands situated 906 kilometers off the coast of Ecuador where the most unique flora and fauna exist due to its isolation from the rest of the world. Basically it’s an ecosystem that is so different from any other that the lifeforms on the island can only exist there.

This is exactly the case in China, Japan and South Korea. Highly advanced technological countries with unique and homogenous cultural characteristics, top notch infrastructure like high speed Mobile broadband, protective regulatory regimes leading each country to develop and evolve unique services & products. The homogenous cultures in each country leads to fast diffusion and adoption of products and services. But this homogeneity also leads these same technologies and services to become stranded in their home markets. That is why products and services like Kakaotalk, Wechat have not done well outside their respective countries of South Korea and China.

Line may be an exception as it is originally from Korea but has become dominant in Japan, Taiwan and Thailand. Another counterpoint is the dominance of Apple iPhone in Japan in recent years which holds a 60% market share compared to 50% in the USA & Canada. I should note, it is one of the only three markets in the world where Android is not the dominant mobile operating system. This does show that it is possible for foreign companies to crack these markets.

For technology folks whether investor or operator, there is much to learn from these countries when it comes to technology innovations and business models. But we need to understand the X-factor of what makes each place unique. And more importantly what the gap that needs to be bridged, if these products can be adopted for use in the rest of the world.

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