The History of "Convergence"
When the verb "converge" was coined in 1691, it was used to describe the tendency of two lines to approach one another, as tributaries of a river flowing together. Usage in the 20th century has been broader, such as the coming together of fields of endeavour. Convergence, when used in the context of business, means that non-traditional industries are starting to be more alike, with firms in one sector competing with those in another. Deregulation of financial services, for example, creates the potential for banks to compete with insurance companies and enabled banks to compete in the investment brokerage industry. In the utility sector, convergence also creates non-traditional competitors, with gas companies and electric utilities increasingly positioning to compete in one another's industries.
There are various definitions of convergence:
- Coming together to unite in a common interest or focus (Merriam-Webster's Collegiate Dictionary)
- A meeting ground - a process of coming together - for example, a place where two rivers join (US National Research Council)
- The unification of functions - the coming together of previously distinct products that employ digital technologies... The process of digital convergence implies that a computer begins to incorporate the functionality of a communicating device and the telephone takes on the functionality of a computer. (Competing in the Age of Digital Convergence, David Yoffie)
Convergence is important to companies in the technology industry because many firms are following digital convergence strategies. Future growth will derive in large measure from the success or otherwise of these strategies. And when companies manage convergence well, like Apple Corp. has repeatedly done with consumer convergence - products like the iPod owe their success to the deep and early thinking Apple gave convergence. In the context of technology industries, digital convergence means the coming together of sound, video and data for the purposes of transportation, processing, routing and storage, for example. Once information is converted from its initial analogue representation to digital format, a number of benefits can be achieved, including:
- Transportation over a common highway with no degradation of quality, whatever the distance;
- Storage over a lengthy time period without erosion of media; and
- Rapid access to the information from remote locations.
Digital convergence should not be confused with the convergence of products and services. Rather, the data streams from various originating sources flow together as a series of ones and zeros down a common pipeline, such as the telephone lines. This is digital convergence. At either end of this pipeline are the products and services that the products that facilitate the flows and which enable the processing, compression, manipulation, presentation, storage and retrieval of these data. These products and services are likely to become less uniform and will fragment and proliferate at either end of the communications pipeline.
When products and services fragment, so too will market segments, until the ultimate market segment, that of the individual consumer, is addressed practically and economically. Companies already have technology products custom designed, engineered and manufactured for their requirements.
Market segment fragmentation brings with it an associated fragmentation of distribution channels and channels of communication. Consumers, for example, may buy personal computers over the Internet, by telephone, from independent and chain computer dealers and at mass merchandisers among other channels. Marketing communication may be one-way, such as traditional mass media vehicles, including television, radio, catalogues and print media, and, increasingly, two-way, such as the Internet, call centres and fax-back services.
There is another important area of convergence that merits mention here: industry convergence, the phenomenon that occurs when formerly separate industries come together to become one. An example of this is the increasing convergence of financial services and their distribution channels. Regulations, when changed, can either accelerate or retard convergence. In recent years, it has been regulatory change that has given impetus to an increase of industry convergence.