Convergence unlocks adjacent growth
March 3, 2022
In prior blogs on transformation in the High Tech industry, we reviewed the need for flexible and resilient supply chain, As-a-Service (AaS) models, and reinvention of the product portfolio to take advantage of smart, connected platforms. In this blog, we’ll now address the need to exploit industry convergence to expand the boundaries of competition.
Many hardware product categories in the high tech industry are quite mature and the mid-term forecast for annual growth rates is less than 5% in many areas including smartphones, servers, storage and printing. To enable double-digit, long-term growth, trailblazers in the high tech industry must enter into new industries and new parts of the value chain. High tech leaders that can orchestrate a strategic industry convergence will expand their total addressable market to enable longer-term growth.
Global opportunities for convergence are real and significant. In an Accenture survey of High Tech industry executives, 87% agreed that convergence is a growth enabler. High tech companies are also well-positioned to expand industry boundaries as they have a history and culture of innovation that exceeds traditional incumbent players. In addition, they already sell their current products across multiple industries, giving them an easier entry and access that a totally new entrant. High tech players could leverage their existing footholds, customer bases and distribution channels to secure competitive positions in new industries.
Multiple industries are ripe for technology-led disruption that fit well with high tech company skills, including automotive, building infrastructure and healthcare. High tech leaders are investing outside of their core industries to unlock new growth and quickly become respected rivals in adjacent industries.
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Smart mobility
Autonomous boats, cars, trucks, drones, public transportation, military vehicles*
Connected infrastructure
Edge- and 5G-enabled smart buildings, smart grid, energy/utilities management*
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Digital health
AI-powered smart hospitals, fitness wearables, COVID-19 contact tracing & wallet apps*
*Source: Accenture research
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What should companies do today to realize these opportunities?
- Examine how industry convergence and escalating end-user expectations create new opportunities for growth
- Prioritize and invest in cross-industry expansion opportunities to stimulate revenue growth
- Engage with new partners in an expanded ecosystem to speed time-to-market and future-proof portfolios with flexibility
It’s no secret that one High Tech industry convergence trailblazer is Apple. In recent years, they pushed cloud-based offerings to transform segment boundaries including music services with Apple Music, entertainment services with Apple TV, and payments with ApplePay. While Apple continues to invest R&D into hardware manufacturing as well as software production, the company leverages its ecosystem of individual and corporate Apple developers to offer a myriad of customizable end-user experiences.
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Pathways to unlock convergence
High tech players have four pathways to unlock value creation in dynamic industry ecosystems:
- Create new solutions —approach R&D and product development from a customer-centric lens in target new industries (e.g., healthcare, smart mobility) to build compelling, new solutions
- Leverage installed base to expand into new adjacent markets — Capitalize on the installed base and expand product/service capabilities to explore new segments that align with demand sensors.
- Enable new strategic alliance — Design and operationalize an alliance innovation hub to do R&D and commercialize new joint offerings at scale, without cannibalizing existing offerings.
- Leapfrog through mergers & acquisitions — Acquire new capability sets (e.g., intellectual property, team talent, segment relationships) in growth markets to reinvigorate existing portfolios and to accelerate release of new offerings.
High tech leaders that target and invest in these new industry convergence opportunities are positioned to thrive with expanded boundaries, profits and valuations.
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