Sharing skills, resources and knowledge to increase growth and respond to competition
According to Gartner, industry convergence represents the most fundamental growth opportunity for organisations, redefining the boundaries between sectors. An IBM study published in 2016 revealed that two thirds of global CMOs saw industry convergence as their greatest business challenge, and 60 per cent expect more competition to come from companies outside of their sector. Big platform companies like Amazon and Google, for example, now find it easier to move into other industries. Here are five examples of existing industry convergence.
1. AgTech and FinTech
Agriculture is looking to FinTech solutions to solve some of farming’s fundamental problems. This year, Australia suffered the worst drought in the country’s history. Agrihive, a collaborative organisation formed to tackle agricultural challenges, launched Farmecco to maximise the net wealth of Australian farmers. Farmecco collects farms’ financial details, creating live reports to inform farmers about the sale and price of units. This information can be used in negotiations with lenders, accountants and law firms. In less developed areas, many smallholders don’t have adequate records to apply for bank loans. FarmDrive addresses this issue in Kenya by collecting data from the farm to generate a credit score that can be used for applications. There are now also specialist insurance providers like Crop Pro Insurance, and payment platforms specifically built to connect farmers and distributors. Applying financial data management tools to agriculture is making the industry less unpredictable, therefore positively impacting response and planning.
2. Retail and Healthcare
Healthcare has shifted to a patient controlled model. Instead of being told what medication to take and when to take it, some patients now want to understand and monitor their own conditions. Providers are adapting care to reflect these consumer values – and who better to offer these services than the major retail businesses who live and breathe customer experience? Walmart, the world’s largest grocer, now offers a number of health related services including screenings, immunisations and insurance plans. Multinational consumer goods company Procter and Gamble is also a leader in consumer directed health care, and conducts multiple medical research programmes. This has forced traditional healthcare providers to take on an advisory, educational role as well as a prescriptive one.
3. Tech companies and Autonomous Vehicles
Giant tech companies have the contacts and resources to enter pretty much any industry they choose. However, one standout choice has been autonomous vehicles. The most obvious example is Google’s self driving car division, Waymo, which was launched in 2009. The company has partnered with automaker Fiat Chrysler, transportation startup Lyft and fellow tech firm Intel to merge expertise. Intel itself has collaborated with Tesla to provide processing modules. Chinese technology company Baidu has also been publicly testing self drive technology since 2015 and has dedicated $1.5bn to its development. Baidu plans to mass produce self driving cars in 2021. While the efforts of big technology corporations may threaten traditional automakers, they also provide opportunities for collaboration and open innovation.
4. Manufacturers and IT
Manufacturing companies are often disrupted by innovative technology. In order for manufacturers to remain successful, they need to understand how these systems work – and even how to develop them. IBM, for example, transitioned from a hardware manufacturer to a software provider, adding IT expertise to enrich its existing business model. General Electric (GE) has also taken on an IT role, creating a crowd sourcing model for consumer appliances and teaming up with DARPA to launch a social network for collaborative innovation. Manufacturers are realising that information technology has become an integral (perhaps even necessary) part of production. This in turn can lead to new opportunities and partnerships, driving product quality and therefore revenue.
5. Telcos and Media
Telecommunications companies and media giants are converging to fend off competition and diversify their services. Verizon, for example, has acquired Yahoo’s web media business to complement its advertising and content. AT&T and Time Warner are also attempting to merge, despite efforts by the US Justice Department to stop it going ahead. Time Warner is motivated by a desire to reach younger audiences via smartphones, and like many other telcos, AT&T wants to move into video. Sky has taken matters into its own hands by creating its very own original dramas as a response to the rise of Netflix and other rival broadcasters.
In an increasingly connected world, industries no long exist in separate spheres. Industry convergence is now a primary consideration for business leaders, who see the trend as both a threat and an opportunity. Although convergence is likely to lead to far more competition, organisations can prepare themselves by hiring employees with a wide range of relevant skills, entering carefully selected partnerships with other enterprises, and by working with consulting firms and specialists. Building an outward looking strategy is essential to handling the disruption that has and will continue to come from convergence.