Sharing skills, resources and knowledge to increase growth and respond to competition
Industry convergence is a fundamental growth opportunity for organisations. An IBM study of 2016 revealed that two thirds of global CMOs saw industry convergence as their greatest business challenge, while 60 per cent expected 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, we list 10 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.
6) FinTech and Healthcare
The convergence of FinTech and HealthTech has improved access to services and encouraged personalisation in both the financial and healthcare sectors. FitSense, for example, is an online analysis platform that uses data from wearables and smartphones to lower users' insurance premiums. The information can include BMI, stress levels, and sleeping patterns. The healthier you are, the lower your insurance costs will be.
FinTech also has an important role to play in mental healthcare. According to Money and Mental Health, those with mental health problems are three times more likely to be in unmanageable debt. By analysing user spending habits and financial health, there is an opportunity to detect deterioration in mental health.
7) Ecommerce and IT
It comes as no surprise that Amazon, the ultimate ecommerce company, has moved firmly into the Software as a Service (SaaS) market. Through Amazon Web Services, the company is now just as much an IT provider as it is a seller of consumer goods. Microsoft, which is at its core a computing company, has taken the opposite approach by developing an ecommerce platform via Azure. The platform offers personalised marketing solutions and scalable ecommerce web apps. In fact, this example of convergence is far from new – the tech company first released Microsoft Commerce Server in the mid 1990s.
8) Pharma and Quantum Computing
The field of quantum computing is still very much in its infancy, but it is already converging with different industries to deliver better insights and information. In the pharmaceutical sector, for example, traditional drug discovery and research is notoriously expensive, and can take a number of years due to the complexity of the clinical trials process.
In collaboration with quantum software company 1QBit, Biogen has applied quantum computing to the comparison and analysis of molecules. In contrast to classical computers, the quantum method can run analysis on larger molecules and to a greater level of accuracy. As well as accelerating the process of drug discovery, this means that existing drugs can be made more effective.
9) Energy and Computing Companies
The US Department of Energy is undertaking a groundbreaking project in partnership with multinational chip manufacturer Intel and high performance computer specialist Cray. The initiative, made public this March, aims to build the world's first exascale supercomputer. Exascale systems are capable of carrying out one billion billion (one quintillion) 'floating point operations' (FLOPs), which are a measure of computer power. For context, the average consumer computer can achieve 7.5.
The computer, named Aurora, will aim to tackle a range of challenges including the development of reliable solar power. By searching for new materials, Aurora is hoped to spur the creation of more efficient organic solar cells and drive the renewables revolution.
10) Ecommerce and Financial Services
An Accenture survey of 6,000 insurance customers found that one in four would consider buying insurance from an online provider like Amazon. Interestingly, this hasn't gone unnoticed by the ecommerce leader, which is now pursuing the Indian insurance market. According to the company, they have received a corporate agency license from the Insurance Regulatory and Development Authority. As well as Amazon, Indian ecommerce company Flipkart has their eye on insurance. In partnership with Baja Allianz, Flipkart already offers smartphone insurance and has plans to expand. Aside from insurance, Amazon also has a loans service through which SMEs operating within the Amazon marketplace can apply for short term credit.
In an increasingly connected world, industries no long exist in separate spheres. Although convergence will create competition, organisations can prepare by hiring employees with a wide range of relevant skills, entering carefully selected partnerships, and working with consulting firms and specialists. Building an outward looking strategy will be essential in handling the disruption that will continue to come from convergence.