|[January 21, 2014]
Companies Pursue Cross Sector Growth as Digital Technologies Dissolve Traditional Industry Boundaries, Accenture Research Finds
DAVOS, Switzerland --(Business Wire)--
As the global economy continues to recover, a majority of companies
intend to pursue growth opportunities outside their own industry sectors
as digital technologies help create new higher growth markets, according
to new research by Accenture (News - Alert) (NYSE:ACN). The research also shows that
most top executives believe the ability of new digital technologies to
dissolve industry boundaries is the most important structural shift
businesses will face over the next five years.
The report, "Remaking
Customer Markets: Unlocking Growth with Digital," includes a survey
of 500 C- level executives in 10 countries, which reveals that while 64
percent say their companies will continue to focus on growth within
their current industry, 60 percent plan to pursue growth in, or in
collaboration with, other industries in the next five years. The report
examines six 'digitally contestable markets' in which established and
new players from multiple sectors are using digital technology to
reshape traditional industries and create higher rates of growth:
Healthcare, education, financial services, manufacturing, retail and
transportation. Among the findings:
While the core healthcare sector in the United States is expected to
grow at 2.5 percent annually between 2012 and 2018, the impact of
digital technology (e.g. remote diagnostics, electronic records
management) will help drive annual growth of 3.3 percent in the
broader market for staying healthy.
The UK's core financial services sector is projected to grow at 2.0
percent per year between 2012 and 2018, but the wider digitally
contested 'paying' market will experience annual growth of 2.9
percent, thanks to digitally enabled trends such as crowd funding,
peer-to-peer lending services and virtual wallet applications.
Germany's retail sector is expected to grow 1.6 percent annually
between 2012 and 2018, but the wider digitally contestable 'shopping'
market will enjoy growth of 2.6 percent per year, due to trends such
as real-time pricing, e-commerce platforms that enable consumers to
become retailers and online sharing and bartering services.
According to the report, the aggregate value of three digitally
contestable markets in 2018, alone - shopping, paying and staying
healthy - will be US$5.9 trillion to the U.S. economy, €747 billion to
the German economy and GBP£519 billion to the economy of the UK.
Despite recognizing the fundamental shifts taking place within their own
industries, only 38 percent of the executives surveyed said that these
shifts would be the primary driver of their company's strategy, while 60
percent said their strategy will be influenced most by broader economic
"Digital technology has been with us for years but is now dramatically
disrupting and reshaping traditional industry sectors," said Mike
Sutcliff, group chief executive - Accenture
Digital, which offers solutions and services across digital
marketing, mobility and analytics to help companies unleash the power of
digital to drive growth. "Although companies recognize the potential of
digital transformation, many are not yet aligning their growth
strategies accordingly. Revenue growth will increasingly depend on their
ability to embrace digital business models to redefine their own
sectors, transform the way they operate and create entirely new products
Working with new partners
The report also reveals how companies plan to participate in digitally
contestable markets in the next five years. Collaboration, rather than
acquisition, is the preference, according to the research. Of those
companies seeking growth beyond their current sector, 63 percent will
create strategic alliances and 46 percent will enter into joint
ventures. Only 39 percent plan to expand into non-traditional industry
sectors through mergers and acquisitions.
Asked what capabilities will be needed for success, executives surveyed
pointed to a blend of digital and "analog" requirements. Digital
technologies were identified as critical enablers, including data
analytics (cited by 50 percent of respondents), mobile computing and/or
app development (48 percent) and social media (46 percent). But,
consistent with the need for greater collaboration, the most important
enabler identified by business leaders is in fact personal relationships
and networks, cited by 58 percent of executives.
The report shows that there is a gap between companies' intentions and
their readiness to pursue new business models, however. Among survey
respondents who classified their companies as being above-average
performers, 80 percent said their businesses were well positioned to
understand trends outside their traditional industry, compared to just
52 percent of respondents representing low-performing companies.
Additionally, 84 percent of respondents from self-classified
high-performing companies said they were well positioned to collaborate
with outside entities to grow in non-traditional business sectors,
compared to only 39 percent of low performers.
"Customers' experiences increasingly rely on services jointly provided
by companies from multiple sectors as banks, retailers and travel
companies work together, for instance," said Mark
Spelman, managing director, Accenture, and co-author of the report.
"Incumbents must be open to entirely new ventures and partnerships that
disrupt their existing business in order to secure future growth. And
while sharing data and deploying mobile or analytics technologies is
important, companies must develop new capabilities and more flexible
strategies to form those more open and collaborative networks that are
at the heart of digitally contestable markets."
Steps to success
According to the report, companies that hope to expand into digitally
contestable markets and achieve competitive success must master
three key capabilities:
Use Digital to Anticipate Customers' Needs: For example, a leading
British luxury retailer uses a data system that makes customer
histories available as soon as those customers enter the store,
allowing shop assistants to offer a more relevant and individual
Be Prepared to Take on Different Roles with Partners: For example, a
Spanish telecoms provider entered new markets by working with a
leading bank to support e-wallet and peer-to-peer payment apps and
with an Italian insurance company to provide "pay-as-I-drive" car
Use Digital to Speed up Decision Making and Product Development. For
example, a U.S. yacht manufacturer partnered with a software company
to prototype its designs through 3D printing, enabling it to make
modifications up to 40 times faster.
"In digitally contestable markets, customers care less and less about
which company or sector provides services, as long as those services
meet their needs," said Mark Spelman. "That creates commercial threats
and opportunities, of course. Policy makers and regulators also need to
respond to the blurring of industry boundaries if they are to keep up
with customer demands and if they are to ensure regulation supports
rather than restricts dynamic new forms of economic growth."
View the full report at accenture.com/customermarkets.
Accenture is a global management consulting, technology services and
outsourcing company, with approximately 281,000 people serving clients
in more than 120 countries. Combining unparalleled experience,
comprehensive capabilities across all industries and business functions,
and extensive research on the world's most successful companies,
Accenture collaborates with clients to help them become high-performance
businesses and governments. The company generated net revenues of
US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page
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