[Market Pulse] Surpassing the 88% Graveyard…‘Intangible Assets’ Open the Door to AI Leadership

Turning Failure into an Asset, Prioritizing Investments in Organizational Culture
Controlling Uncertainty with the ‘ISO 56000 Innovation Standard’
Enterprise-Wide Literacy Investment and Paradigm Shift

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The recent extreme price turbulence caused by artificial intelligence (AI) technology stocks, which has shaken both the Korean stock market and global capital markets, serves as a grave warning for us. There are doubts about the short-term profitability of American big tech companies’ massive AI infrastructure investments (CapEx). Additionally, the unprecedented volatility of leading Korean semiconductor stocks linked to these investments demonstrates that capital markets are beginning to feel fatigued by the outward expansion of technology. Already, the head of a Korean cloud service provider delivering AI services to 8,000 small and medium-sized enterprises has voiced concerns about the chaos, noting, “88% of companies adopting AI end up failing.” Failures in AI transformation (AX), which often involve investments of tens or hundreds of billions of won, are typically not due to algorithm flaws or server capacity shortages. Rather, they frequently stem from overlooking the huge non-financial domain of “human and organizational culture” behind the technology. Without first investing in reshaping the sociocultural foundations of organizations—a type of atypical investment that goes beyond mere technology adoption—the capital poured in by governments and enterprises will collapse helplessly in the face of market volatility, becoming nothing more than an expensive mirage.

In 2011, IBM Watson made a splash with promises of medical innovation and received trillions of won in investment, but it ultimately failed in the market after being deployed unilaterally without considering actual medical workflows or the contexts in which clinicians operate. Many Korean companies have invested large sums in building dashboards or implementing simple chatbots as proof of concept (PoC), only for these tools to become unused and useless due to a disconnect from real-world business operations. Leading companies that have overcome this gap focused their investments on communication processes that embed their own specific business context into the AI agent stack. They built flexible organizations where AI data scientists and field experts work as one team, enabling them to finally begin achieving substantial financial outcomes.

In light of these experiences, sustainable success in Korea’s AX movement demands, first and foremost, the establishment of “psychological safety” that turns failure into an asset for innovation. To endure an 88% failure rate and turn these failures into a foundation for unique technological capabilities, organizations must invest in cultures that encourage and transparently share failures. As research from Harvard Business School has shown, organizations that hide their failures can never overcome the technical limits of AI. Especially during periods of market correction, it is crucial to have non-financial infrastructure that transforms the data from failed projects into organizational assets rather than discarding it.

Second, it is essential to invest in “enterprise-wide AI literacy” initiatives that focus on changing people rather than just technology. Messages like “a significant portion of tasks will be automated” are perceived as existential threats by on-site workers. Therefore, it is important to foster trust that AI is not a threat replacing jobs, but a “capable assistant” maximizing personal productivity. Continuous literacy training and change management for all employees—not only IT staff—and generous investment in intangible assets are needed to overcome resistance at the frontline. Third, “convergent governance” that removes departmental silos must be established. AX projects driven unilaterally by IT or data departments will inevitably fail due to disconnect from operational reality. Organizations must be designed so that business experts familiar with the company’s actual context and AI data technologists can collaborate continuously. While redesigning communication costs and collaboration processes between departments may not be recognized as immediate financial expenses, they are the social capital that ultimately determines the success or failure of AX.

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Fourth, “ISO 56000 Innovation Management Standard” should be adopted to contain uncertainty, since speculation about bubbles in the capital market and vague initiatives only serve to increase the cost of failure. The ISO Innovation Management Standard provides an optimal framework for managing the high degree of uncertainty associated with AI through a systematic and repeatable system. By scientifically managing the entire process—from generating AI innovation ideas to deriving business outcomes—organizations can achieve “predictable governance” that safely internalizes collaborative systems between humans and AI, rather than stopping at one-off technology adoptions. This can be witnessed at the ISO general assembly to be held in Seoul this coming November. Furthermore, the government is urged to implement a full-scale “negative regulatory” approach and offer institutional safety nets. Expanding regulatory sandboxes broadly will enable companies to continue non-traditional technological experiments despite 88% risk of failure, without facing legal ramifications, thereby building an institutional safety net.

Only those organizations with cultures capable of withstanding failure can attain technological dominance. The weight of the crown of an AI powerhouse is not about having the biggest capital, but about having cultural depth capable of embracing 88% failure, supported by flexible policies. Now, as capital markets fluctuate and talk of a technology bubble resurfaces, is the perfect time to return to fundamentals. Implementing a technology means little beyond signing a license agreement, whereas true business transformation begins when human attitudes, organizational constitution, and outdated institutions are truly reformed. It is time for Korea’s AX movement to move beyond dazzling stock price trends and hardware-driven expansion. The paradigm must shift to focus on the most human, “invisible investments” that never appear in the books, “scientific innovation management based on global standards,” and “bold regulatory innovation.” When we build a sociocultural foundation that treats even failure data as assets and establish an unobstructed policy environment, we will be ready to move beyond the graveyard of price chaos and rise as a confident global AI powerhouse.

Sungjoo Kang, Visiting Professor at Sejong University (former Head of Korea Post)

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