How an open business model is now the convergence imperative*
Situation
We are looking at a singular juncture in the history of business—a time when technology, content, and distribution are converging at a speed never before seen, and where innovations have fueled a power shift toward consumers that verges on social revolution. Despite the abundant energy in the convergence of the technology, content, and distribution sectors, our analysis shows that many of the companies in these sectors are not achieving returns on capital above their cost of capital, and are therefore struggling to create shareholder value. Management tendencies that exist today—i.e., silos, fiefdoms, slow decision making, forced rankings of business cases, outdated executive performance measurements, and inwardly focused marketing—are impeding value creation in this rapidly changing marketplace.
Perspective
PricewaterhouseCoopers believes that a new and open business model is the way to manage convergence and realize its potential. We believe that virtual walls and barriers must be eliminated both inside and outside a corporation. A different way of doing business is needed, one that both enhances and extracts value from the fusion of value drivers occurring both across and beyond the enterprise. As the market has witnessed, measurable success requires more than combining disparate components. Once gathered, they must be managed differently. Doing this requires new management principles led by an open business model. Characterized by a transparent and rigorous discipline for acquisitions, mergers, internal business units, and alliances, as well as an open approach to opportunity areas such as customer relationships, content, and innovation, the open model we advocate will likely feel neither comfortable nor safe. However, we believe that these open business model attributes enable sustainable shareholder value.
Implications
The convergence of businesses offers a new scenario in which greater value can occur across the lines of business—value greater than any single line of business might attain. Walls in and around business units and partners limit sharing of resources. They block outside opportunity. In the final analysis, they degrade the possibility of value that convergence presents for the enterprise as a whole. To succeed in this environment, companies must eliminate these walls.
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