Expanding industry boundaries

In this blog series, I’ve been exploring the concept of reinvention in High Tech, including why it is essential now more than ever, and the 5 capabilities needed to drive innovation and accelerate reinvention.

In the Case for Reinvention, I explored the possibilities of reinvention in high tech, outlined why reinvention is particularly critical for high tech companies, and outlined these capabilities needed to drive reinvention.

In my previous blog, Vectors for Growth and Innovation, I talked about the pivot toward subscription-based revenue through bundled offerings as a way for high tech companies to innovate and grow.

In this most recent blog - in keeping with the theme of growth and innovation in high tech - I am examining how companies have expanded industry boundaries and created industry convergence to create new avenues of growth.

New tech and business models are driving an increase in mergers and acquisitions.

In 2023, interest rates went up, and we saw a decrease in the number of mergers and acquisitions. But as Accenture anticipated in January, we could be seeing a resurgence, with generative AI (Gen AI) playing a key role in that, as C-suites add M&A to the top of the list of functions they’re looking to reinvent within the next 3 years.

Industry convergence and high tech

Industry convergence occurs when seemingly disparate fields and ways of thinking merge, and industry boundaries are shifted from individual products to cross-industry value experiences. It leads to M&A, partnerships and alliances as companies seek to acquire new technologies and capabilities to gain competitive advantages.

Two recent examples of industry convergence, made possible by high tech company innovation are global digital payments and automotive technology and infotainment:

Global Digital payments: Banking, telecommunications (mobile), consumer technology, governments, and social media companies have converged into providing global digital payment solutions, making it easier and faster to move money across banks, people, and businesses than ever before. Revenue associated with this market is expected to reach nearly $15T by 2027.

Automotive Technology convergence: First came proliferation of EVs, then the race for autonomous vehicles, and now the rise of vehicles as infotainment – all these developments require the convergence of multiple industries to succeed (automotive, energy, consumer tech, gaming, semiconductors, media, telecommunications, network equipment companies). The global automotive software market is projected to reach $78B by 2030.

The next wave of industry convergence is already here: the rise of Generative AI.  High tech companies again play a pivotal role by supplying the technology backbone needed to enable Gen AI.  Generative AI has quickly become a part of nearly all industries, and its potential to automate tasks, improve decision-making and create new products and services, is game-changing.

Convergence through mergers acquisitions

A common way for high tech companies to accelerate the path of industry convergence is through M&A activity.  While collectively high tech companies have a reach that extends into nearly every industry across B2B and B2C companies, as individual enterprises, they often need to acquire companies with the technology innovation or access to key customer segments for industries they are looking to expand to.

In 2023, interest rates went up, and we saw a decrease in the number of mergers and acquisitions. But as Accenture anticipated in January, we could be seeing a resurgence, as C-suites add M&A to the top of the list of functions they’re looking to reinvent within the next 3 years.

Through these acquisitions and partnerships, participating companies were able to expand their technology innovation, servicing capabilities, and customer reach at a greater pace and scale.

Convergence through ecosystem partnerships Cloud innovation

In addition to M&A, expanding industry boundaries is often accomplished through developing partnerships around technology solutions, a significant example being integration with cloud and smart devices.

High tech and cloud computing have caused a rapid digital transformation in many industries and in various ways, including how companies operate internally and how they create new offerings. Healthcare, Finance, retail and manufacturing companies are using cloud technologies to make their operations more efficient, improve customer experiences and grow their businesses.

Revisiting the example of Automotive technology convergence, OEMs (Original Equipment Manufacturers) and Tier 1 suppliers have been increasing where and how they partner to adapt to shifting macroeconomic factors and the ever-expanding use of technology in vehicles. For example, we’ve seen a rise in partnerships between:

• Semiconductor manufacturers and automotive companies as they look to simplify and secure their supply chains.

• Partnerships between OEMs and Tier 1s to improve collaboration, simplify, and modernize software development, electric architecture, and functional upgrades to better meet evolving consumer needs.

As the shift to EV and to self-driving vehicles is projected to continue, so too can we expect to see greater and stronger ecosystem partnerships. After all, key components of automotive cockpits – from external sensors to video displays to gaming systems - are manufactured by high tech companies.

By opening the aperture of M&A deals to include different types of deals and with new industry partners, high tech companies can reinvigorate portfolios and accelerate entry into new spaces.

In my next blog, I will explore how high tech companies are creating and delivering winning consumer and customer experiences by placing the customer at the center of their processes, products and platforms.