Forrester First Look at Convergence Fact and Fallacy

10 Mar 2005 - 8:50am
537 reads
Lada Gorlenko

Some recent thoughts from the guys I keep an eye on.

Research & Event Highlights From Forrester
07 March 2005


Convergent Technologies, Divergent Devices

Convergence has been a popular topic for years. The term has scared
executives into bad mergers (anyone remember the $2 BILLION that
Disney lost after buying Infoseek?). We hear about the convergence of
TVs and PCs, voice and data, media and distribution, marketing and
customer service, content and advertising -- and more. Let me dispel a
few myths and shed some light on what we at Forrester think are good
and bad examples of convergence.

Technology convergence? Good. The core components and building blocks
of the digital era are absolutely converging across a broad range of
devices (TVs, PCs, phones, point-of-sale systems) and functions (video
editing, messaging, search, auctions). The technologies we are talking
about include core components like storage, processors, and bandwidth,
as well as a range of supporting technologies like XML tags or
compression standards. The most critical one to watch: storage. The
exponential growth of storage (at constant cost) exceeds that of
processing power or bandwidth, and so will transform many a business
in the next decade (see figure below). (Example: What happens when you
can put the entire New York City phone book on your phone?)

Device convergence? Bad. While core technologies converge, devices
will head in the opposite direction. The most successful new products
will be those that add clear, significant value to a discrete task,
rather than try to be many things to many people. Good examples: DVRs
like TiVo, messaging devices like BlackBerry, or MP3 players like
Apple's iPod. Bad examples: music-photo combos like the iPod photo or
Media Center PCs. In some cases, certain functions of separate devices
will converge for a particular niche audience. But those markets will
be small. Example: Smartphones, which blend PDA and phone
functionality, are coming together, but will appeal to only a small
set of consumers.

Hardware-software convergence? Good. If you think that you are in the
media OR device OR services business, think again. The falling cost of
technology, the proliferation of single-function devices, and the
growing popularity of consumer bundles mean that products (and
companies) of the future will have to blend hardware, software, and
services. Good examples here: Apple iPods, LeapPads, or Starbucks
HearMusic stores. Bad examples: Sony (still stuck on the hardware), or
the range of clueless devices at the recent CES 2005. As more
consumers network their homes, the new power positions will blend
hardware, software, and services -- and spawn a series of surprising

Marketing-service convergence? Good. In a world where consumers are
blocking, skipping, or ignoring ads in record numbers, marketers have
to make the most of each consumer touch. A big part of the solution is
taking a more scientific approach to marketing -- an idea that we call
Left Brain Marketing. Another critical step is blending the service
and marketing functions to maximize sales and serve customers better.
Grocery chain Stop & Shop provides this convergence in the store in
its recent pilot of the "Shopping Buddy," a small cart-mounted
personal shopping device that connects to the store's wireless
network, accesses loyalty card data, and delivers targeted offers to
shoppers as they wander the aisles. Bell Canada takes advantage of
this convergence in its consumer call center, where agents offer
contextual upsells of wireless and Internet services on about 60% of
14 million calls per year.

So, next time someone wants to talk convergence, ask her exactly what
she means. Don't be heading in one direction when consumers are
heading in the other.

By next month, we'll have completed research on Telco TV, B2B
Marketing Effectiveness, Instant Messaging, Broadband, Digital Audio,
as well as our Devices & Access Data Overview. Talk to you then.


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