Page 61 - The Fourth Industrial Revolution

of the car standards and a seamless payment process, thus avoiding delays

at the destination. The experience has been enhanced and bundled with the
physical product (transportation of a person from A to B) by optimizing the
utilization of the asset (the car owned by the driver). In such cases, the
digital opportunities are often not translated into just a higher price or lower

cost but also into a fundamental change of the business model. This is driven
by an end-to-end approach, from service acquisition to delivery.

These combination-based business models illustrate the extent of the
disruption that occurs when digital assets and interesting combinations of
existing digital platforms are used to reorganize relationships with physical

assets (marking a notable shift from ownership to access). In their markets,
neither company owns the assets: a car driver owns the car and makes it
available; a homeowner makes his room available. In both cases, the
competitive advantage is built on a superior experience, combined with
reduced transaction and friction costs. Also, these companies match demand

and supply in a rapid and convenient manner, which side steps the business
models of the incumbents.

This marketplace approach progressively erodes the long established
position of incumbents and dismantles the boundaries between industries.
Many senior executives expect industry convergence to be the primary force
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impacting their business in the next three to five years. Once a customer
has established a track record of trust and confidence on the platform, it
becomes easy for the digital provider to offer other products and services.

Fast-moving competitors provoke a disaggregation of the more traditional
industry silos and value chains, and also disintermediate the existing
relationship between businesses and their customers. New disruptors can

rapidly scale at a much lower cost than the incumbents, generating in the
process a rapid growth in their financial returns through network effects.
Amazon’s evolution from a bookseller to a $100 billion a year retail
conglomerate shows how customer loyalty, combined with insights on

preferences and solid execution can lead to selling across multiple
industries. It also demonstrates the benefits of scale.

In almost all industries, digital technologies have created new, disruptive
ways of combining products and services – and in the process, have
dissolved the traditional boundaries between industries. In the automotive

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