Though consolidation and diversification lead competitors to enter new unrelated industry categories, industry convergence is what happens when disruption takes place. It reconfigures and democratizes information, creating new levels of complexity at unprecedented speed. By altering the "invaded" industry's basic characteristics, the converged industry is redefined.
Technology companies of any size are disrupting industries and uprooting incumbents. While incumbent industries lack the digital savvy and are burdened with regulatory constraints, technology companies are software experts and asset-light.
The automotive industry is a perfect example of how technology disrupts a traditional sector, leading to convergence. Value in cars are shifting from 90% hardware-based to 50% software- and experience-based. Vehicle became rolling software platforms, able to deliver services based on data, sensors and analytics.
Now, every company is a technology company and a consumer company. A good example is the power and utility industry, that has seen renewables, smart metering and smart grids reshape the sector. The distributed energy revolution allows residential, commercial and industrial customers to generate and store their own electricity, as well as selling it back to the grid.
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.
In the face of challenges such as climate change, rapid urbanization and soaring health care costs, which are beyond the scope of any single organization or industry, the future of competition will shift from company versus company, in a single industry, to cross-industry ecosystem versus ecosystem.
In this context, organizations need to think differently. 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.
Nobiletec is a multi-national consultancy firm specializes in B2B, B2C and P2P FinTech solutions.