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Strategic Choices in Converging Industries

September 10, 2013 | Fredrik Hacklin, Boris Battistini, Georg von Krogh | Strategy
As industries converge and seemingly unrelated businesses suddenly become rivals, managers must understand the new challenges and the long-term implications. "Convergence significantly affects the evolution of industry sectors and severely disrupts a company's Capabilities," write authors Fredrik Hacklin, Boris Battistini and Georg von Krogh, all of ETH Zurich. A six-year study by the authors of convergence in the telecommunications, information technology, media and entertainment sectors shows that savvy companies choose one of four strategic paths to battle convergence: they become a technology pioneer, a market attacker, an ecosystem aggregator or a business remodeler. Ecosystem aggregators, for instance, "tend to be large companies that attempt to exploit the market opportunities resulting from a wave of emerging technologies," the authors write. "In contrast to young companies, they leverage their competences and market experience to establish an 'innovation platform' aimed at complementary products and services. In doing so, they enhance the overall value of the core offerings, taking advantage of what are often called network effects." Hacklin, Battistini and von Krogh detail the drivers of convergence, how to figure out if convergence is happening in your industry and the guiding principles for implementing convergence strategies. They also note that "as companies become older and larger, they need to rethink the assumptions underlying their strategic choices" — implying that thinking about convergence strategies should be an ongoing conversations for organizations.
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