1. Industry Consolidation
Consolidation—the combination of like entities in like
industries—was the watchword of the '80s and early '90s. Today, however,
consolidation has given way to convergence, driven primarily by changing
relations between businesses and consumers. Convergence is dissolving the
boundaries that traditionally kept certain businesses apart, and is
redefining many industries and markets.
What is driving convergence? Customers,
empowered by technology. Today, the Internet can bring a nearly limitless
number of sales channels into every household. This two-way electronic
pipeline not only enables businesses to reach far more customers than ever
before, it also gives customers means to express their wants and needs, to
embrace companies that satisfy them, and to reject those that do not. Their
choices are driving and accelerating convergence by compelling businesses to
repackage products and services into new offerings.
The Internet offers great opportunity to
companies that can change. To others it poses a significant threat. The
Web's limitless channels are for sellers—but they also let buyers search
those channels with ease for the products and services they want at prices
they are willing to pay. Therefore, successful companies in converging
industries must take steps now to seize the opportunity and neutralize the
threat.
First, they must redefine their approach
to marketing. Companies can market successfully not by selling a single
product to undifferentiated legions, but by capturing a limited set of
individual customers and selling them a greater quantity of packages
tailored to their express needs.
Second, they must fully exploit customer
data to gain a better understanding of consumer trends and use it to
reconfigure their offerings. The Internet, with its unprecedented ability to
capture customer behaviour, is, of course, a rich vein; but savvy companies
will also pay closer attention to more traditional sources of information,
such as point-of-sale data, stored in and later mined from conventional data
warehouses.
Third, they must become more agile and
flexible, and keep a sharper eye on core competencies. Succeeding in
converging industries means being able quickly to redefine a business based
on customer needs; to refocus capital away from non-core activities; and to
use the Internet not only to communicate more quickly with suppliers and
vendors, but also to establish strategic alliances with business partners
that add value up and down the supply chain.
Last, and perhaps most important,
successful companies in converging industries must be led by courageous
decision makers who are on top of their markets, understand their customers,
and have the vision to know when even successful businesses have to redefine
themselves.
Finally, they must have the courage to
act on that knowledge. Their competitors surely will.
