It’s the mantra of our era: every company a software company; every company a data company. Does that mean every company now shares the same DNA, part of the same industry? Are companies poised to leach into each others’ spaces, beyond their traditional core products or services?
The fact that Uber, Lyft, and Airbnb are data companies is well known. But you can also look at tech-savvy companies such as Rakuten Ichiba, Japan’s largest online retail marketplace, which also offers financial products and services —incorporating FinTech — such as a credit card, as well as mortgages to securities brokerage, not to mention “e-money usable at hundreds of thousands of stores, virtual and real,” as cited in a McKinsey report. “The company runs one of Japan’s largest online travel portals—plus an instant-messaging app, Viber, which has some 800 million users worldwide.”
Or consider Rappi, a South American e-commerce platform, used by more than 64 million consumers, with affiliations with more than 200,000 independent couriers actively connecting to the app, along with more than 250,000 businesses, including groceries shops, pharmacies, kiosks, and office supply stores. Rappi offers insurance, and has a financial services arm, RappiBank, that offers credit cards, as well as RappiTravel for travel-related services.
L&T Technology Services, a technology services company, launched L&T SuFin —an Amazon-like portal dedicated to industrial products. This move opens new revenue streams for the company and positions it as not just a service provider but also a one-stop solution for industrial product procurement. “We call this phenomenon ‘crosspollinovation,’” says Amit Chadha, CEO and managing director at L&T Technology Services. “Technology enables companies to seamlessly transition into adjacent sectors by breaking down traditional industry boundaries, thereby expanding their horizons.”
This is industry hybridization at its maximum speed, facilitated by digital technologies — particularly APIs. Credit “the standardization the way we think of APIs,” says Benjamin Rehberg, lead at Boston Consulting Group’s Technology Advantage practice in North America. “Specifically, how they’re created and consumed. In addition, cloud technology has been a catalyst because it allows for the elasticity and scalability of capabilities here.”
Thanks to the ubiquity of APIs with transactional services and data, “you can set up an entire business,” Rehberg continues. “Subsequently, you put it on the cloud, and then it has elasticity and scalability. Irrespective of whether the app runs on 10 or 100,000 cars, the app provides a full digitally enabled business.”
A new generation of electronic payment systems has also been a catalyst for industry hybridization — catalyzing “standardized APIs behind ridesharing apps,” Rehberg observes. “In the beginning it was an amalgamation of capabilities that were put together — a payments capability, find-a-device on a map, and so forth. When it came time to combine them for the app, developers were easily able to weave them together because they were available through standardized APIs.”
This acceleration is spurred through a range of events, including partnerships, M&A, and organic growth — or a combination of all of the above. “In certain instances, we see organizations who say, ‘okay we need to transform because the business model we have today could be disrupted,’ or ‘we see an opportunity to create a new business,’’” Rehberg says.
“We have seen this done by, for example, companies who are collecting data on specific use cases or questions, but then leveraging the data in a different way for the creation of new business lines,” he adds. “The bottom line is that this offering is fundamentally changing the way companies do business.”
Chadha sees partnerships are the most crucial driver for hybridization. “Partnerships can come in various forms — from alliances with tech partners to collaborations with startups or niche providers that would bring new capabilities to the table,” he says. “They enable organizations to adopt modern technologies and explore adjacent areas without significant investment.”
Partnerships “are another avenue where certain services are exposed and then consumed by other companies, enabling equal, joint ventures,” says Rehberg. “There isn’t necessarily one or the other at play, but rather a very use case-based answer on what the company needs.”
Rehberg sees M&As as another door to new capabilities. “We observe this a lot with startups who often gain new offerings via acquisition,” he says.
“We are also seeing companies open to getting their hands dirty to innovate,” says Chadha. “This usually involves initiating science or pilot projects to explore the viability of transitioning into adjacent industries.”
Such pilot projects, he adds, “are typically led by trusted company veterans and serve as testing grounds for promising new use cases. Based on the outcomes, organizations may choose to either grow these projects organically or go the M&A route to scale them up. This explains why so many successful startups have been integrated with larger established companies and in some cases the acquired startups become more successful than the original business.”
Digital-native startups have been eating the lunches of industries that are underserving or not serving customer needs. But established companies can also leverage a combination of data and innovative thinking to expand their horizons as well.
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