Rethinking Positioning in an Age of Inter-Industry Consolidation

As industries continue to converge, companies must position themselves against the macro trends driving inter-industry consolidation, not just their current competitive set

Rethinking Positioning in an Age of Inter-Industry Consolidation

 

Back in January we predicted that 2017 would be a big year for inter-industry consolidation and brand extensions that challenge industry boundaries. We noted that, amid shifting preferences and technological change, large incumbents are likely to continue identifying and pursuing synergistic and complementary opportunities beyond their industry. The Bayer-Monsanto deal last year was a prime example of this trend, as are Amazon’s recently announced acquisition of Whole Foods and Ritz Carlton’s move into luxury cruises—and these are just a few of an increasing number of examples. Many execs already have a heightened awareness to out-of-industry threats, with 54% of CEOs surveyed by IBM in 2015 saying that they see more competition today is coming from outside their industry—a more than 10% increase from 2013.

 

Indeed, it’s become almost routine to read about pharmaceutical companies getting into agriculture, e-commerce companies buying grocery stores, software companies invading the automotive business and candy companies moving into veterinary medicine. Deals like these are dismantling the convenient borders demarcating one industry from another, introducing unpredictability and uncertainty for businesses of every size in every sector. One day you’re competing against three or four other cruise lines, whose strengths and weaknesses you know well. The next day, you’re competing against Marriott. One day, you’re fending off Kroger. The next day you have to contend with Amazon.

 

All of these deals were motivated by the need to drive growth in the face of major social, cultural and technological trends—trends like the resurgence of nationalism, the proliferation of automation, rapidly shifting demographics, capital and wealth concentration, increased concern about wellness and sustainability and the democratization of information. Of course, macro trends have always influenced the fate of economies and businesses. But today they’re not just driving Creative Destruction among industries, they’re driving convergence between industries.

 

Amazon, for example, knew it needed to expand its ability to deliver fresh and healthy foods on-demand to stay aligned with the nationwide shift towards better-for-you products. By acquiring Whole Foods, Amazon gains instant product credibility and distribution capacity in this key trend area. Some seem befuddled as to why an e-commerce platform company would want to enter the brick-and-mortar grocery industry. But, Amazon recognizes that it’s not about digital versus physical, it’s about leveraging the trends that catalyze growth regardless of what industry that puts you in or what it means for your core business.

 

In this environment, it’s imperative that execs rethink their positioning strategy and question legacy theories on how competitive advantage is created and maintained. It’s no longer enough to position your company against a narrow set of competitors in a neatly delineated category. It’s no longer enough to compete based solely on cost or differentiation. It’s no longer enough to double down on your core business or rely on your core capabilities to weather disruption.

 

These widely accepted approaches aren’t invalid, just incomplete. In practice, they often fail to account for the macro trends shaping our world, thereby situating companies in the context of the present while ignoring big changes on the horizon. Assessing where your company is positioned vis a vis macro trends, however, can help you identify where future competition might come from and how your strategy should change to more closely align with—or counter—the trends that will drive or hinder your success. This big picture contextual understanding is critical to ensuring the longevity of your positioning strategy, in whatever form it takes.

 

As macro trends continue to push companies beyond their core businesses, industry lines will continue to collapse and competitive sets will continue evolve in surprising ways. Yes, it’s still important to understand your industry’s competitive landscape and position yourself accordingly. But today it’s just as if not more important to understand the trends fueling disruption and develop future-oriented business models that allow you to lead rather than react as industries and competitive sets continue to fluctuate.

 

About the Author

Remington Tonar is a Partner at Brandsinger. He previously ran the technology and startup practices at Siegelvision, a NYC-based brand strategy firm. His background includes roles in technology marketing and product development, IT consulting and tech M&A. He holds graduate degrees in Organizational Communication and Theology from NYU and Loyola University Chicago respectively.