Digital transformation is driving innovation across the global economy, but in South Korea it remains in its infancy, as firms are now just beginning to introduce or apply relevant technologies. Against this backdrop, for this study we perform a comprehensive investigation into the current status of digital transformation in Korea through both a quantitative empirical analysis and a qualitative evaluation via a corporate survey. The purpose of this study is identify the implications for digital transformation policy and innovation carried by the results of the analyses.

Digital transformation through the use of digital technologies such as artificial intelligence(AI) is increasing the level of digitization of products and services, altering market mechanisms, and birthing new ways of value creation. In the manufacturing industry, digital linkages and better integration of related firms is creating new value and generating new profits through automated flexible production systems, superior supply chain connectivity, and data-based preemptive diagnosis of potential problems. Meanwhile, firms across the service industry is a rapidly transitioning to innovative new platform-based models that involve consumers, producers, and platform providers, and based on the data collection.

In addition, digital transformation is emerging as a means of addressing  pressing industrial and socioeconomic issues as well. Digital technologies have led to safety improvements at industrial sites, and have helped alleviate shortages of labor amid a demographic crisis. The digital transformation has also made it easier for firms to comply with ever-stricter environmental regulations.

With the potential of digital transformation clear, major countries have established and are actively promoting policies industrial digital transformation policies, with measures in place to foster new digital technologies and industrial intelligence, and to internalize AI technologies. The Korean government too has sought to pursue industrial digital transformation as it sweeps the globe. The government’s main digital transformation policy is the Comprehensive Industrial Digital Transformation Plan, promulgated in January 2023, which espouses a vision of Korea becoming a global industrial powerhouse through the internalization of industrial AI. However, many analysts have pegged the overall level of digital transformation in Korean industries to be lower in comparison to peer nations, as many digital technologies are still being introduced or just not being applied.

For this study we investigate the state of digital transformation in Korea through an empirical analysis and a conduct survey of companies representing a broad swath of the economy to get a better grasp on what kind of policies the private sector is looking for. We also analyze digital transformation policies being implemented by the governments of major economies and review some corporate case studies of digital transformation. We also assess the current status, major issues with, and performance of industrial digital transformation in Korea as generative AI ‒ best represented by Open AI’s ChatGPT, which launched in late 2022 ‒ is seeing breathtaking growth and adoption economy-wide. Based on the results of this comprehensive analysis, we offer a suite of policy proposals designed to vitalize the industrial digital transformation in Korea. We argue that industrial digital transformation must ultimately be promoted by the private sector, and so the government should assume the role of a facilitator by creating conditions that encourage organic digital transformation at companies. In other words, the government should strive to establish both the infrastructure and legal and institutional basis for activating digital transformation in the private sector.