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  • Why crossing industries can be more than worth the risk

  • “Digitization is a double-edged sword. Sure, your business can be hurt and you can go away very fast, but on the flip side, you can disrupt the market you’re in very quickly.”

    ZEUS KERRAVALA, FOUNDER AND PRINCIPAL ANALYST, ZK RESEARCH

  • Even companies born digital are entering other spaces. Social media company Snapchat joined forces with the eyewear industry to create its Spectacles product. The wearable sunglasses enrich the customer experience by allowing users to snap videos using their sunglasses and then share the files on Snapchat.

    Another way of getting a foot in new industries is through acquisitions. On March 13 Intel announced it has purchased Israeli technology company Mobileye for about $15 billion, to capitalize on the data opportunities in the autonomous vehicle market. Mobileye makes the chips for cameras in self-driving cars. “They’re paying a huge premium in order to catch up, to get into the front of the line, rather than attempt to build from scratch,” Mike Ramsey, an analyst with technology researcher Gartner, told Bloomberg.

    Finding the right partnerships

    Perhaps the most explored route to competing in new industries is through partnerships. Overcoming discomfort with alliances and a reflexively proprietary mindset is proving to be a hurdle for many companies that are eyeing industry convergence. There is not, however, a lack of awareness. In PwC's 2016 CEO Pulse, 56 percent of CEOs surveyed predict a large existing player from another industry will move into their industry.

    “Most businesses like to keep their strategic crown jewels under lock and key,” King said. He commonly sees executives who “are not as familiar with collaborative processes as they should be, especially when it comes to working with companies that are direct competitors.”

    In the 2016 “Embracing a Digital Future” report, from Dell and Vanson Bourne, 46 percent of respondents cited competition from peers as a motivation to transform their businesses.

  • “Most businesses like to keep their strategic crown jewels under lock and key.”

    CHARLES KING, PRESIDENT AND PRINCIPAL ANALYST, PUND-IT

  • Every business must become digitally focused to survive and grow, and a key driver of digital transformation is the openness of company leaders to find viable partnerships for growth. To form a successful partnership, companies must place their bets in the right place at the right time and consider providing at least one of the following values for the customer.

    1. Combine services to make experiences easier: A combination of the health care, insurance, technology and retail industries, telehealth provides the convenience of allowing patients to consult with a clinician and fill prescriptions in a retail setting while using medical sensors to send vital data to clinicians. American Well’s telehealth system allows doctors to connect with patients remotely in a clinic located in pharmacies. In one partnership, the company has joined efforts with Cleveland Clinic and CVS MinuteClinic, which are walk-in clinics within CVS retail stores. “This three-way partnership is significant in that, for the first time, Cleveland Clinic doctors will be available to MinuteClinic customers in Ohio via telehealth, creating a highly impactful combination of services that greatly enhance the patient experience,” said Dr. Ido Schoenberg, chairman and CEO of American Well. “This is the future of telemedicine — or simply, medicine.”

    2. Create unexpected product alliances: Wearables are an example of how those partnerships can function and add value to the respective businesses, as seen with Intel's acquisition of Recon. At the SXSW conference, held mid-March in Austin, Google and Levi's unveiled their Commuter smart jean jacket. It allows users who bike to work to receive phone calls, view the time and look up directions just by tapping and swiping their sleeves. Companies such as Under Armour and Nike have also partnered with tech companies by offering wearable computing products.

    3. Build customer synergies: A key aspect of partnering across industries is maximizing the synergies that occur through technology to create unique customer experiences. The Absolut Company, the Stockholm-based beverage company, has collaborated with Facebook, Lyft and Gratafy, an ecommerce platform that helps brands geotarget customers. Using Gratafy technology, Absolut's bot selects customers over 21 in Chicago, Denver and Washington, D.C., sending them free cocktail coupons to be used at bars. If customers opt in to try an Absolut cocktail in one of 50 restaurants or bars, they can get a Lyft ride home up to $20.

    When considering a partnership, companies must also know when to abandon a new partnership if a deal doesn't create enough value to scale. “Test first and if you see a market there, then expand,” said Scott Jordan, co-founder and CEO of ScotteVest, which makes clothing with specialized pockets for mobile devices. “Don't just jump on bandwagons just because they seem appealing.”

    When ScotteVest was considering partnering with ICP Solar Technologies to incorporate solar panels in its Solar ScotteVest, it took a slow approach to limit overall risk. The panels allowed users to charge their mobile devices. “We started small, tested the market, and capitalized on the PR opportunities and interest of the press in convergence while not investing heavily in a consumer product that would have put me in a position for failure,” Jordan said.

    When ScotteVest didn’t sell more than 200 units, it pulled the plug on that partnership. “There wasn't enough fundamental business case for it beyond military applications or sporting or camping needs,” Jordan recalled. Jordan knows his company’s limits as far as convergence. “If I had gone as large as others into the space of building in sensors into jackets, which has been a hot button for years, I would not still be in business,” he said.    

    Making the business case for convergence

    Digital transformation can be uncomfortable, but if companies keep their customers' needs in mind when they partner with companies in other industries, they'll have a better chance at success.

    Companies “need to constantly be trying to disrupt the status quo and understand if there's a better way,” Kerravala said. “Because if they don't, someone else is going to come along and do it.” Kerravala recommends that when C-level executives are considering whether to unite with companies from other industries, they should ask themselves: “How does bringing these two industries together really change the game?”    

  • Companies “need to constantly be trying to disrupt the status quo and understand if there's a better way. Because if they don't, someone else is going to come along and do it.”    

    ZEUS KERRAVALA, FOUNDER AND PRINCIPAL ANALYST, ZK RESEARCH


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