Blurred lines: Merging industries mean a new need for clarity

A breakout session at the recent HFS Super Summit in New York asked delegates, are industry lines blurring or thickening? These are the highlights of that discussion and our takeaways.

Industry lines are blurring and often being outright broken

Shell, an energy major, sells broadband in the UK. Walmart, the retailer, delivers care. Technology giants, finance firms, retail behemoths, and many others in Exhibit 1 are moving into various parts of the healthcare ecosystem. There are as many reasons for these moves as there are examples.

Exhibit 1. Examples of firms breaking industry lines to enter the healthcare system keep mounting

Source: HFS Research, 2022

Some firms testing new industry waters have transferrable skills that apply horizontally across most industries and value chains. Some are responding to the reality of industry and global dynamics. Some are looking to strategically encompass more of our lives to “connect the data dots” from personal health to healthcare and into all manner of goods and services. Amazon is the best example, perhaps. Its acquisition of the grocer Whole Foods, pharmacies, and, more recently, digital-health-enabled primary care provider One Medical sit alongside its e-commerce history and hyperscale cloud-computing arm AWS. This combination of Amazon arms means that its data and customer contact points are proliferating. Colloquially, Amazon will try to keep you healthy and have a range of interaction options for you, no matter the state of your health: primary care, goods, services, or Prime Video to keep you entertained while you’re on sick leave…

A spectrum of approaches to industry blurring, spanning proactive, opportunistic, and reactive

As with most trends, there is no single definition or manifestation—and the blurring of industry lines is no different. We can ask three questions:

• Are new lines of competition due to industry realities? For example, the need to decarbonize and move toward renewable sources of energy drives the energy transition and mixing of the energy and utilities industries (for example, oil and gas giants rebranding as energy majors), as well as electricity’s penetration into automotive (Tesla, and everyone), industrial sectors (process electrification), and pretty much everything else.
• Or, like Amazon’s approach, is the activity part of a more significant strategic move that will change the industry dynamics?
• Or, like Shell with broadband, is it because of obvious transferable skills (mass customer management similar to that in the energy and utilities industries)?

In short, there are elements of these three approaches in most cases.

Both verticalizing and de-verticalizing are other trends to consider. For example, some fast-food firms farm potatoes and meat, and some car manufacturers produce metals, batteries, and small parts—all to bring more of the value chain under internal control. On the other side, we can find examples of the opposite—where firms choose to focus on what they’re best at. Automotive firms can often be an example of this, too, as can oil and gas firms focusing on downstream refining rather than upstream oil and gas exploration. Both GSK and Johnson & Johnson recently spun off their consumer healthcare and products businesses, respectively.

The Bottom Line: Industry lines are blurring, creating new opportunities, but industry-specific expertise will always be relevant.

For some, sticking with that expertise will be the best option. For others, instead, it’s a case of being clear about the approach or analysis and not taking a black-and-white blurring-or-thickening view of an ecosystem’s dynamics.