When someone is said to have “painted themselves into a corner” – it literally refers to an instance when someone paints a floor and leaves himself or herself no pathway to a door. The painter had covered the floor with wet paint to only discover he or she had not devised or created a pathway to the exit of the hall. Now, he or she is left with two options, wait for the paint to dry before leaving the spot, or walk through the wet paint.
The same analogy applies to organizations and business leaders that have driven their organizations into a place with no viable alternatives of moving forward in the near future or adjacent maneuvers with their current strategic moves and blind-sided to new realities.
TECHNOLOGY CONVERGENCE AND EXPANDED BUSINESS INITIATIVES
Evidently, business initiatives that once seemed outlandish at some point in time don’t seem crazy anymore today with the technology advancement that was once like a thing from a science-fiction movie or sheer fantasies are now at our fingertips now than ever, and with increasing prospects of various sorts of technologies in development and application to different industries and sectors with varying capabilities – have come to become a great part of our lives as end users or an extension of ourselves.
I remember my first dial on fixed line telephone in early 90’s, to getting plugged to a Sony Walkman music player, to my first use of a desktop computer in the late 90’s, my Floppy Diskettes as storage medium for my thesis, to my wow experience of a Smartphone in the late 2000’s, or my first attempt at powering an electric farm, to my first witnessing of how electrical components and relative features are etched on a PCB in a manufacturing company, and to seeing an array of robots working autonomously in inch-perfect precision in assembly lines.
Fast forward to today, what started with our mainframe computers soon evolved to be more than a computational device – personal computers, fixed line telephony soon became our mobile phones and expanded to a powerful device not only for calls and SMS, but an expansive connectivity set, and ultimately developed into an enabling or integration platform.
Soon, these devices and machines soon took upon a different definition, usage and other capabilities with peripherals that could be easily built upon – transcending their earlier occupied engineering, functionality and business-linked space.
WHAT’S CONVERGENCE? BLURRING OF BOUNDARIES
Not only as technological advancement changed our personal lives and the business world, or its evolution over the past few years in terms of new product development, clever engineering or new market creation, we have seen the convergence of technologies and unusual blurring of boundaries between industries, changing market ecosystem, and societal landscape.
In a very simplified and generalized form for understanding:
Convergence = Merging of more than one distinct & different technologies, systems, industries, and devices into a unified piece (Sources: ITU, WiseGeek, WhatIs)
For example, sectors and processes that originally operated largely independent of one another now evolve together in a unique process or device able to execute a multiplicity of tasks. i.e. telecommunications + information technology + transport + media + healthcare + manufacturing = TC.
And evidently, this trend is on the rise in an increasing rate than ever. i.e. most hardware and related platforms are now being developed with a convergence format in mind. Some of the generalized implications of convergence:
- Industry boundaries become blurred in a technological convergent environment, allowing business providers to offer services in multiple markets like never before
- Convergence enables adjacent markets exploitation
- Convergence has lowered barriers of entry to the market for new entrants and providers. Opportunities in the markets that were not accessible before are now available at a much lower cost.
- Emergence of efficient operation and increased returns on investment (ROI)
- Convenience and simplicity with new services development and market expansion via convergence.
- New disruptive markets are created that did not exist previously. i.e. Internet-enabled platforms and services, Wearables, e-Health…etc
END OF EFFICIENCY-ENABLED COMPETITIVE ADVANTAGE
In the past, managers’ or business leaders’ primary responsibility was to increase efficiency – utilize organization’s assets (human capital & resources) and capital structure in a profitable way via the value chain to achieve a sustainable competitive advantage with the holy grail of continuous cost-cutting measures.
The above business function that derived its propagation first from Ronald Coase in his influential article in 1937, The Nature of Firm, which stated that firms exist to economize or minimize transaction costs (with varying sources of transaction costs such as informational cost, learning prices…etc). A concise and summarized version of this in Kellog’s summary publication of Coarse: “The Nature of the Firm”. This was later built upon by Michael Porter with the concept of firm’s optimization along the value chains via scaling in the early 80’s which had set a precept for building competitive advantage.
In summary, the business function blueprint indicated that efficiencies could be created along the entire value chain through either operational excellence or bargaining power with suppliers and customers by increasing scale and while costs are further reduced as firms moved up the experience curve with an argument that bigger was better. This blueprint was set and held in a relatively stable business environment and the world, where access and scale advantage gives the lead and bigger (scale) was smarter and better.
While there are still some advantages to scale, the disadvantages in a convergent & disruptive environment outweigh its current advantages and thus presents considerable challenges for managers and business leaders.
RISE OF ECOSYSTEMS-ENABLED CONVERGENCE FOR TRANSIENT COMPETITIVE ADVANTAGE
In today’s world, the age of stable business environment is long gone – disruption and dynamic competition is now the new. There is a need to realize that competitive advantage is no longer the sum of efficiencies a firm or organization could achieve as we no longer compete in isolated industries and territories, but rather in an ecosystem with fast eroding boundaries and structures.
Just as Rita Gunther McGrath argues out in The End of Competitive Advantage book that the emphasis has transcended the notion of how much or which assets you own as an organization or business, but what you can access.
Moreover, dramatic changes in business have unearthed a major gap between traditional approaches to strategy and the way the real world works now. Instead, organizations need to forge a new path to winning: capturing opportunities fast, exploiting them decisively, and moving on even before they are exhausted with a new set of practices based on the transient competitive advantage, “planning to learn” rather than “learning to plan”.
For example, someone in an unheard location somewhere could wake up in the morning with an idea, design a product online, get bids to manufacture it, finance it via crowdsourcing, promote it and arrange shipping in the cloud—all without ever leaving his or her living room. In today’s business world, access to capabilities trumps for transient competitive advantage.
Achieving any meaningful head-start in today’s business landscape of continual convergence needs business leaders and traditional organizations to rethink their business strategy in this light.
Get a grip on the new realities of our disruptive age, leverage convergence for transient competitive advantage by widening core ecosystems (networks and interdependent connections) in terms of information, consumers/customers, partners, talents, collaborators and etc, or paint yourself into a corner by staying on the same old industrial economy model – minimizing transaction cost focus, and see what happens in the nearest future.