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Digital convergence: End of the journey or fork in the road?

It is not uncommon for some industry observers to group all types of convergence together when they discuss digital convergence and point to the tribulations of firms such as Vivendi, AOL Time Warner and BCE. Little or no distinction is made between digital convergence, industry convergence, product, customer or channel convergence, for example. If it converges, it won't benefit shareholders, they say. That then, would be news to investors in the financial services industry, for example, where deregulation has enabled industry convergence and benefited shareholders mightily. The emergence of global distribution channel intermediaries in a number of industries such as electrical products has similarly aided their stakeholders through channel convergence. Digital convergence has brought with it product and vendor proliferation and divergence in a number of solution areas. The challenge has been one of excess capacity at a time when demand is saturating and niches are narrowing. It is a typical competitive and industry structure challenge, one that need not specifically be associated with convergence. Those who lament current industry profitability for tech products should note that the cumulative profitability for all electronic products ever made was, until the onset of the tech boom, zero.

There remain many opportunities for new value to be created. As companies find new ways to capture the opportunities associated with technology and convergence, new industries are being formed. For example, until recently there was no industry called computer telephony integration (CTI), which is essentially an industry formed by a merging or redefinition of the computer and telephony boundaries. As new industries emerge, so do new giants. Companies such as Siebel with roots in call centre automation, have broadened their base to provide a more comprehensive, customer-centric, convergence-enabled offering.

The strategies being pursued by companies that market technology products are also proliferating. Some computer companies, such as Dell and Gateway, seek out their customers directly, while other successful firms, such as Compaq, historically employed indirect channels of distribution, reaching their customers through a network of computer dealers and other retail channels.

The technology environments within which the companies are participating are also fragmenting, creating new opportunities. For example, while Microsoft has dominated the operating system environment for personal computers, this firm has less relative strength in the Internet arena (where Sun Microsystem's Java language competes with Microsoft's ActiveX) and for hand-held devices (where different operating systems, such as Palm's OS compete with Microsoft's Windows Lite/CE).

There have been a proliferation of alliances among companies seeking to capture convergence opportunities and spread their market and R&D risks, while retaining the capability to address opportunities as they emerge. AT&T has been among the most prolific in participating in alliances. Among the well-known alliances are ventures such as MSNBC, the alliance between Microsoft and the NBC network. In short, convergence can still offer firms with a solid vision and well researched plan viable commercial opportunities.

Worldcom and other similar situations notwithstanding, companies can still achieve enormous returns for their shareholders by thinking of convergence in new ways. Convergence is not just a means to improve efficiency (by cutting duplication, as in the media sector, for example), but for developing effectiveness from new value creation. In this, customer convergence and CRM are closely linked as both offer opportunities to help individual customers obtain the new and unique value each wants. Fast deals were never a substitute for solid strategic thinking. Sound plans were never more needed to make convergence in its various forms pay out for the firm's stakeholders.