CONVERGENCE

CONVERGENCE

In certain instances, the entry requirements for different markets become very similar, enabling fi rms to participate easily in multiple industries, spreading risk and gaining benefi ts of scale.

The idea 

As companies grow and establish themselves, they typically acquire a signifi cant number of assets. These factors of production (such as employees, land, or machinery) may have multiple uses, allowing them to be used to produce a variety of products in a cost-effective way. In this way, a valuable competitive edge can be gained when entering new markets.

This tactic was employed by a large number of utility companies in the 1980s and 1990s that, following industry deregulation, realized they had the means of production to operate in the gas, electricity, telephone, and water markets simultaneously. They put their large number of core competencies—including call centers, advanced metering and billing services, and maintenance vehicles—to full use in a variety of markets, increasing their effi ciency and turnover.

Are you certain your organization is doing all it can to serve customers, using all the resources at its disposal? By recognizing all the possible uses of assets, an organization can get the most from its resources, spread fi nancial risk, and increase convenience for customers.

In practice 

• Customer loyalty and a trusted reputation are valuable resources that can ensure your success when deciding to offer new services. 

• Take full advantage of convergence by cross-selling products to customers. 

• Hire specialists with expertise in the market you wish to enter; just because your fi rm is successful in one industry does not guarantee success in another.