Industry convergence – the blurring of two or more previously distinct industries and sets of participants – is one of the more remarkable consequences of disruption. Disruption reconfigures and democratizes information, creates new levels of complexity, and takes place at unprecedented speed. In turn, barriers to entry are lowered.
Disruption dramatically alters the “invaded” industry’s basic and often long-held characteristics. The converged industry is redefined.
Technology underpins convergence
Technology companies – both start-ups and existing titans such as Google and Apple – are disrupting industry spaces and uprooting incumbents. Several reasons are behind this phenomenon:
- The growing software content of products and services confers an advantage on companies that excel at code and algorithms as they enter new competitive spaces.
- Opportunities to substitute digital platforms for physical world ecosystems catalyze convergence. Uber has disrupted the taxi industry and could do the same for package and prepared food delivery.
- Technology companies tend to be asset-light; industry incumbents are saddled with legacy costs in real estate, IT infrastructure, supply chains, and other hard assets.
Customer empowerment drives demand for novel solutions
Just as every company is now a technology company; every company – whether B2C or B2B – is also a consumer company. The rise of digital technologies have democratized consumer access to knowledge, given customers a more powerful voice, allowed more informed decision-making, and enabled greater choice between providers.
One such example is the power and utility space. Renewables, smart metering and smart grids are reshaping the sector. But customers themselves are also redefining the industry. In addition to demanding greater price transparency and competitive pricing, as well as energy-efficient, environmentally friendly solutions, today’s customers are actually becoming producers of energy through residential solar installations, in effect, competing with utilities.
Companies should seek opportunity beyond their own industry walls
In a converging world, all industry spaces will be hotly contested. As boundaries break down, incumbent companies will face competitive threats from start-ups with disruptive business models and from formidable companies in previously unrelated sectors.
For those companies that look beyond traditional industry borders, asking not what they can sell but what problems they can solve, convergence represents a major growth opportunity. Indeed, industry convergence should be considered alongside more traditional market considerations as companies strategize, plan and allocate investments for future growth.
Industry convergence is the disruptive blurring of two or more previously distinct industries and sets of participants
- Source: Don Butler, Ford Motor Company, Digital Transformation and the Automotive Industry, CXO Talk, 8 May 2015,