Every week, it seems, big companies are making bold moves into entirely new industries.
Consider consumer goods giant P&G creating online education courses; telco Verizon offering automotive and manufacturing telematics solutions; and grocer Tesco offering video streaming.
In fact, 80% of business leaders say their company will pursue growth outside their traditional industry over the next five years, according to an Accenture survey of 500 organisations in ten economies.
Why? The answer is digital technology, which is opening up traditional industries to new sources of competition and collaboration.
It is also eliminating barriers to entry for both start-ups and incumbents, enabling them to find new sources of growth.
At first glance, many of the digitally enabled bold new ventures appear to be significant leaps from the comfort zone of those involved.
So how do companies identify how they can diversify with digital?
Identify ‘insight capital’
Many companies are sitting on assets that, used in a different industry or customer setting, could become more valuable. Digital makes it easier to share and monetise these assets.
Take Alibaba. Realising that it held a large amount of data on its small-business customers, which often struggle to attract investment and secure loans, Alibaba turned the data into insight by rating the creditworthiness of these businesses and offering them commercial loans.
In the three years to July 2013, it had extended more than $16 billion of financing to 320,000 companies. Compiling an inventory of insight capital can help many companies put data to use and realise opportunities in other industries.
Collaborate to accumulate
Asked how they would develop their business in new areas in the pursuit of growth, 78% of business leaders in the survey planned to use relatively flexible forms of partnership and collaboration, including strategic alliances (63%) or joint ventures (46%).
Such collaborations can work very well. For example, by partnering with Quirky, a start-up that taps the ‘crowd’ to generate innovative ideas on new products, GE gained access to 20,000 inventors registered on Quirky’s platform, who in return have access to thousands of patents from GE’s patent library.
The ability to work with new partners, through a collaborative venture, merger or acquisition, must become a core capability for top executives.
Remember the human factor
Digital technology provides a critical channel with which to engage customers and anticipate their needs. However, technology is most effective when used to amplify – rather than replace – personal interactions.
Asked to name enablers of growth, 80% of the business leaders surveyed cited at least one digital capability, such as social media, mobile computing and analytics.
Still, however, the most popular individual response was ‘personal networks and relationships’, which indicates that even in a digital world, old-fashioned ‘analog’ skills can be critical differentiators.
>See also: Fighting for the digital future
Using digital technologies to explore new territories and identify and address unmet customer needs is a challenge for executives, particularly those in more established and traditional industries.
However, the basic principles remain: identify unique assets; seek partners to complement strengths; and be sure to marry digital’s edge with the personal touch. The opportunities are there for the taking.
Sourced from Tim Cooper and Matthew Robinson, Accenture