The End of Conventional Industry
Sectors
These days, few people expect to work for a single company
throughout their career. But what about the expectation that companies will
remain in one industry forever? Is that, too, becoming an artifact of the past?
In a
new PwC report called “The
Future of Industries: Bringing Down the Walls,” we
look at how the boundaries among sectors are shifting. The pace of
technological change is creating at least the prospect of a new industrial
order, in which most companies no longer operate within the comfort zones of
their established sectors. Already, a few companies (Apple, Amazon, and GE,
among them) have boldly and successfully moved into new industries. Now just
about every other company will have to do business that way.
Consider the telecommunications and automobile industries. Until
the past few years, a telecom company based its business primarily on routing
calls and data. But now, almost 25 years after the launch of the World Wide
Web, telecom companies have become entertainment content companies.
Technological change has taken them across industry borders.
Many expect a similar transformation to unfold for automakers.
After more than a hundred years of selling cars, automotive companies are
eyeing a future where they’re facilitating mobility on demand. Consumers will
order cars from mobility services to suit their immediate needs: a spacious
wagon for a weekend away with the family or a microcar for a solo trip into the
city. Add in the driverless dimension and the potential for car-sharing, and
it’s not difficult to see a future where owning a car becomes the exception
rather than the rule.
Meanwhile, the century-old electric utility industry is at the
nexus of an emerging business category that could be called “smart
infrastructure.” It starts with wiring homes for security and temperature
control, and expands to embrace a diverse range of integrated and automated
services, including lighting, music, and locating misplaced items. The power
utilities that provide this type of product and service — alone or in
collaboration with one another — will also operate at a broader scope, that
might cover larger-scale energy management, monitoring of building maintenance,
city resource management, transportation efficiency, and eldercare. These will
all take advantage of the same software solutions and analytics. The utilities
have the potential to capture several new sources of value in this future, but
they should expect to face strong competition from other players, including new
entrants.
Home-repair and hardware companies are also exploring new sectors.
Companies that manufacture seals and gaskets can now add sensors to their
products to enable predictive maintenance and other forms of security and
monitoring. By warning that a piece of equipment is about to fail, these
sensors allow homeowners to prevent a costly or complex repair. The healthcare
industry is moving toward its own adaptation of the Internet of Things (IoT).
Sensors on a patient’s body or within a physical environment and other sources
of information provide data that health professionals can use to provide early
diagnostic or real-time follow-up services. With the involvement of technology
players and personalized medicine, the traditional boundaries separating
technology, healthcare, and pharma are coming down.
If your company is falling into the trap of thinking that it can
stay in the same industry forever, or even for the next two decades, you risk
losing out to more flexible competitors. You can avoid this trap by taking on
an outcomes mind-set. Instead of thinking of your company as providing a
particular type of product or service — electric power, health records
management, or automobile components — think of it as a producer of outcomes.
The customer needs to get somewhere, so you’re not a car company; you’re a
facilitator of that outcome. The house is cold, so you help make it warm,
possibly without supplying the necessary fuel. Many of the changes taking place
today have come about because a few leading companies have replaced their
products with outcomes. Customers, in turn, are making fewer purchases to
accumulate physical things and more purchases to achieve outcomes, convenience,
and value.
The race is now on to develop and expand the platform ecosystems
to deliver such outcomes. Leading companies are strengthening their positions
as platform providers in a wide range of industries. GE and Siemens, for
example, have each developed a cloud-based system for connecting machines and
devices from a variety of companies, facilitating transactions, operations and
logistics, and collecting and analyzing data. GE lists no fewer than 10
different industrial sectors that it is targeting with its Predix industrial
operation system.
The IoT will greatly intensify the focus on outcomes, convenience,
and value. In consumer products manufacturing, for example, the IoT makes it
possible to get feedback directly from consumers and develop more personal
relationships with them, potentially bypassing retailers and redefining sector
boundaries further. The time is coming soon when digital fabrication will make
it possible for a single factory to build everything from airplane parts to
garden ornaments.
Companies in all industries will need to be ready to stretch their
horizons. Technological change is already changing industry footprints in
unprecedented ways. This doesn’t necessarily mean the borders will disappear
among all industries. But if you are a business leader, you should expect your
company’s sector to be transformed, probably within a decade, by the shockwave
of technology change that is upon us.
Norbert
Schwieters
http://www.strategy-business.com/blog/The-End-of-Conventional-Industry-Sectors?gko=27d9e&utm_source=itw&utm_medium=20170110&utm_campaign=resp
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