In my field of business journalism, writers have traditionally had “beats” that corresponded to specific industries. One might cover energy, autos, airlines, financial services, or media. Similarly, analysts on Wall Street have specialized along similar lines. Rankings and ratings of companies by industry continue to proliferate. But today such categorizations are increasingly an obstacle to understanding rather than useful demarcations for meaningful analysis. Many of today’s most exciting companies do not fall neatly into a conventional category. Business in a technologized age has raced ahead to a new unbounded shape.
At Techonomy we increasingly talk about “the end of industries.” It’s a central example of how technology is transforming business. In an information-saturated age when success depends more and more on software innovation, industry boundaries are becoming meaningless.
We hosted a public online conference to talk about this emerging phenomenon on Monday, August 4. (Our webcast tool, from a company called Youare.tv, enables any participant with a webcam to come onscreen and speak to the entire online group.) I led the discussion with two experts—Arun Sundararajan, a professor at NYU’s Stern School of Business who specializes in the so-called “sharing economy,” and Lou Kerner of The Social Internet Fund, an analyst and investor who made the shocking prediction in 2010 that Facebook would be worth $100 billion by 2014. (He was ridiculed then, but today the social network’s market capitalization is $188 billion.)
Sundararajan says Google is a classic example of the disappearance of conventional industries. “A non-media company took control of advertising,” he says. “Do digital technologies cause industries to converge? We see it with things that can be digitized, where you can represent the product in terms of digital information.” Google’s ongoing evolution shows how a company with software and data expertise and financial resources can target literally almost any “industry.” Its self-driving car, its robot businesses, or its Nest business developing smart home control and measurement appliances are all opportunities that could have been seized by any well-funded company, but go to Google because of the depth of conviction it brings to the transformation of society driven by digital technology and ubiquitous connectivity. In an earlier era, Google would have been called a “conglomerate,” but today that term sounds idiotic. Of course Google is thinking about its business in this broad way. In the end it likely expects it will be able to identify additional opportunities connecting the information generated by the activities of these seemingly disparate businesses.
An emerging group of sharing economy companies further highlight the ongoing destabilization of industry definitions. Airbnb and Uber, the most prominent such companies, emerged between, not inside, conventional industries. Yet they pose fundamental threats to companies still locked in the old models. Initially, Sundararajan points out, the Internet challenged industries whose products could be rendered in digital form, like music, books, and television. Now digital information combined with custom software in the form of apps is reorganizing the way we use things in the physical world. Now bedrooms and autos, among other things, can be deployed in ways more useful to consumers. Traditional industries like hotels or taxi transportation are left scrambling to respond, burdened often by disproportionate cost structures when compared to the new companies.
Now we have the “Internet industry,” which means essentially nothing. It’s an industry defined merely by the transmission mechanism its participants use to conduct their businesses, which can span the complete gamut of human activities. But it remains odd how much advantage companies acquire merely by defining themselves as “Internet companies.” In today’s parlance, it essentially connotes a license to innovate in an unconstrained way. In reality, companies in every industry must seize on the digital opportunity and deploy products and services directly to their customers using the Internet as part of the system.
More and more companies realize this. But the “end of industries” remains an urgent theme because too many companies of all sizes across the economy fail to recognize that a too-narrow self-definition could be fatal.