Which industries will be most affected by convergence and why?
The future belongs to those who are willing to think differently and look beyond their own industry borders
100 companies from 16 industries came together at the EY Convergence Lab on 26 April, in the San Francisco Bay. It was the start of a journey that will transform the way we do business in the future. In her latest blog, Alison Kay, Global Vice Chair of Industry talks about shattering industry boundaries and creating new business models. Are you ready for the future? - Read more.
Every day, the effects of disruption are driving industries to converge, profoundly altering the business landscape.
Technology firms are building cars. Retail companies are providing health care. Telecommunications operators are offering financial services.
While no industry is immune, three in particular — health care, mobility and financial services — are being affected by convergence, according to a recent Wikistrat crowdsourced simulation, held in collaboration with EY.
Nearly 60 analysts worldwide explored the topic of industry convergence as part of the simulation, using an online collaborative platform to get more minds tackling better questions. Over the course of nine days and three phases, participants mapped out 46 in-depth scenarios.
The scenarios aimed to determine which industries are most ripe for convergence, and how these developments will transform not only the way we do business, but the way we live.
So what’s driving this convergence?
Why are health care, mobility and financial services on the front lines of industry convergence? All are industries where disruptors from other sectors are redefining value, services and the customer experience, according to results of the simulation. Another key observation from the crowd was that industries with high customer pain points are also ripe for convergence. In some cases, unforeseen competitors can swoop in with superior products or experiences, or address parts of the market that have been traditionally unserved or underserved.
Technology is a key driver. In health care, for example, technology companies and telecom providers are converging with the life sciences and pharmaceuticals industries to enable wellness and reduce health care costs. The opportunity for technology solutions to improve health care access and delivery to underserved and unserved populations in developing markets was identified by participants as a bright spot.
The crowd also looked at convergence in the financial services world. Artificial intelligence — combined with asset allocation models, smartphone technology and risk management tools — is one way in which Silicon Valley is converging with Wall Street, by enabling the delivery of financial services and democratizing wealth management.
Technologies that provide a platform for enabling new value propositions, such as the Internet of Things and revolutionary innovations, including 3D printing, will drive future convergence. The crowd speculated that advancements in nanotechnology, materials and other technologies would stimulate convergence at a deeper level than the market itself, that is, at the R&D level.
Increasingly, empowered customers are redefining what’s important to them. For example, they are gaining greater control over their data and demanding better services in exchange for it. Customers also want experiences, not just products and services.
Changes in consumer expectations open the door to new competitors that can erase traditional pain points and bring superior customer understanding and engagement. Incumbents must respond or lose out.
“New technologies are increasingly allowing us to substitute experiences for goods consumption in consumer spending. That, in turn, is forcing major branded players to rethink their product strategies,” said one of the participants.
Seizing the upside
In an era of convergence, industry boundaries will become increasingly blurred. Companies will face competition from start-ups and established businesses, some from unrelated sectors and even some who may have been partners in the past.
But the news isn’t all menacing. Convergence may be rendering conventional value chains obsolete, but it also offers huge opportunities for growth to those willing to seize the upside.
The future belongs to those who are willing to think differently and look beyond their own industry borders to identify new problems to solve, engage customers in creative ways and form unexpected partnerships.
Recently, at Innovation Realized, EY convened some of the world’s greatest innovators and disruptive entrepreneurs to explore how disruption can be reframed as an opportunity for all businesses. Follow #BetterQuestions to get involved with some of the questions and issues they tackled.