Industry redefinedIndustry convergence is the disruptive blurring of two or more previously distinct industries and sets of participants

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With traditional consolidation and diversification ...

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The “invaded” industry’s basic, long-held characteristicsc are overthrown

The converged industry is redefined, becoming something altogether different.

Disruption

Cons

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Div

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Barriers to entry fall

c. The role of ecosystems

4

The upside of convergence

The world faces big global challenges …

… beyond the scope of any single organization or industry to address effectively, causing the future of competition to shift.

3a. The role of technology

The three drivers of convergence

Technology companies — both start-ups and big tech companies — are disrupting industry spaces and uprooting incumbents

Example: Industry redefined

Driver DriverlessR

1 3

2 4

5 New and nontraditionalcompetitors

Gender disparity Climate change

Core industry activities Value chain fundamentals

Customer proposition Dominant economic characteristics

Tech company advantages:

Growing software content of products and servicesDigitally savvy — excel at codes and algorithmsSubstitution of digital platforms for physical world ecosystemsAsset-light vis-à-vis incumbents

Reconfigures/democratizes industry information

Creates new complexities

Takes place at speed

Company fromIndustry

Company fromIndustry

Company fromIndustry

Company fromIndustry

Industrynew

DB

CA

Rising health care costs

Yesterday Tomorrow

Automotive Mobility

Hardware

10%Software

90% Hardware10%

Software90%

Vehicle manufacturersand suppliers

Who will “own” or be part of the mobility industry — moving goods and people — of tomorrow?

Yesterday Tomorrow

Example: Industry redefined

Centralized utility

Distributed energy

Tomorrow’s customer

Energy supplier

Home to grid(H2G)

V2H

b. The role of customer

Digital technologies have given consumers:

Democratized access to information

More informed decision-making

Powerful voice

Greater choice

Empowered consumers with more choices:

Redefine what’s valued

Eliminate industry boundaries

Become center of evolving industries

Traditional industries with high customer pain points are vulnerable to convergence

Passive ratepayer

Yesterday’scustomer

Home energy management

Technology companies

Automotive companies

Security companies

Retail companies

Consumer product companies

Telecom companies

Utilities vs.

Vehicle to grid(V2G)

Massive urbanization Income inequality

Company

Companyvs.

vs.

Ecosystem public/private Ecosystem public/private

Consumers Entrepreneurs

SocietyIncumbents

Reduced pain points and superior solutions and experiences

Source: Don Butler, Ford Motor Company, Digital Transformation and the Automotive Industry, CXO Talk, 8 May 2015, https://www.cxotalk.com/connected-vehicles-automobiles-technology-platform-don-butler-ford.

Lower barriers to entry

New cross-industry opportunities; option to acquire or partner with new competition; business model reinvention

Potential to leverage collective cross-discipline intelligence to solve global problems

Disruptive convergence redefines the “invaded” industry

Industry same

Industry same

Co. B

Co. C

Company AIndustry sameCompany A

Co. B

Co. C

... key industry characteristics stay the same