Digital Convergence: Fusion or Fantasy?

Digital Convergence: Fusion or Fantasy?

Digital convergence means that a single device can have many functions. It can access information from corporate data to the latest news. It's now possible to have your e-mails read to you in the car, and to book theatre tickets from your PDA.

Among consumers there is greater divergence, but in enterprises convergence is the name of the game.

If you believe the hype, digital convergence is leading us to a world where everything is interconnected. It will be possible to access information and services across a broad range of devices, from your mobile phone to your Internet-connected refrigerator. The boundaries between the Internet, media and enterprises will dissolve. Digital convergence means that a single device can have many functions. It can access information from corporate data to the latest news. It's now possible to have your e-mails read to you in the car, and to book theatre tickets from your PDA.

The boundaries between device roles (business and consumer) and types (phone, PDA and toys) continues to blur. This has led to a proliferation of devices and channels, giving greater freedom and choice of access mechanisms to consumers. Consumers can now mix work, their personal life and entertainment wherever they are, and whatever they happen to be doing. (Whether this is a good thing or not is another matter.)There's as much divergence as convergence. Consumers of information and services connect with an enterprise through a demand chain that starts with their device - for example PDA or mobile phone. The channel - for example, the Web or e-mail - connects to the enterprise's applications and infrastructure.

The extent of convergence varies with each layer in the demand chain - among consumers the message is divergence and at the enterprise layer we are seeing convergence.

Divergence in the norm in the consumer domain. In the "consumer domain"of devices and channels, divergence is the norm, creating lots of volatility. The consumer domain has two drivers: the opportunity caused by the blurring of device roles, and the opportunity to take advantage of new technology.

In the past, each device had a single role: a mobile phone to make your calls, a PC to organise, a Walkman to play your music, and so on. Digital convergence has changed that; all these devices can now be combined.

Divergence is also driven by the opportunity to take advantage of new technology. The most influential is the advent of a mobile, wireless and data communications infrastructure. New business processes and services are being created to take advantage of this. Giving sales staff wireless PDAs that connect directly to an enterprise's order processing system is an example. The aim is to provide sales staff with latitude over pricing and on-the-spot delivery information.

The number and the physical variations in device form will grow dramatically, driven by these new business processes.

Convergence is the norm in the enterprise domain. In the "enterprise domain" convergence is more apparent. This also has two drivers: the need to manage the volatility of the consumer domain, and the need for interoperability between applications and infrastructure.

Because of the volatility of the consumer domain, it's impractical for the enterprise to support individual devices and channels. The solution is to connect the various devices and channels through standard interfaces, often based on XML. For example, a wireless application gateway (WAG) is used to connect mobile devices and other applications, such as CRM and billing. The WAG also illustrates the second driver, the need for interoperability.

Modularity is also being used to increase interoperability. The trend is now away from large monolithic applications that do everything, toward off-the-shelf, best-of-breed applications for specific needs. The challenge for IS is integrating these applications. Once again, the solution is to use standard interfaces.

The experience of a cable TV operator illustrates the point. This operator had a legacy billing system designed originally to match its subscription-based business model. Over time, its business model changed toward interactive TV, which billed customers according to the services they used. The billing system had to be changed to cope with this new micro-billing model. Rather than modify the legacy billing system, the operator chose a best-of-breed billing system. It allowed the operator to take advantage of standard interfaces to its CRM system.

Of course, XML is a popular interface standard; but there are others. They include Microsoft's Simple Object Access Protocol (SOAP), part of its .Net strategy, and Sun Microsystems' Genie.

Consumer patterns are evolving. With the rise of individualism and greater choice, conventional ways of segmenting consumers aren't working. A new breed of consumer has emerged called "converged consumers"or I-Cons. Consumer market researchers Ross Honeywill and Verity Byth refer to these as I-Cons in their recent book I-Cons: The essential guide to winning and keeping high value customers, (Random House, 2001).

According to Honeywill and Byth, traditional consumers use a few, predictable channels for a single interaction. For example, to purchase a video recorder they would typically visit several shops to find out what's available and to talk with in-store sales representatives to establish trust. They might call a friend with a similar product to question its value and ask for advice. When they have decided, they return to the store to pay for and collect the selected product.

Converged consumers use many channels. By contrast, converged consumers vary their channel combinations. They act in unpredictable ways. While we refer to them as "converged consumers" in fact they use multiple channels and divergent technologies.

Converged consumers put stress on access mechanisms and points into the enterprise. They may use the Web to get detailed information on a whole range of products. They may e-mail online suppliers and call shops to check availability. They may use interactive TV to determine value and compare prices. They may then select the product by e-mail and pay over the Web. For other products, and even repeat purchases, converged consumers vary the pattern. And each converged consumer is different. The essence of a converged consumer is their individuality and, to some extent, their unpredictability. Their individuality drives the uptake of many different types of devices.

These converged consumers like to do things their way. Though they account for only a small proportion of all consumers, they represent a much higher proportion of overall spend. They're high value.

Converged consumers prize individuality and won't follow the crowd. They also expect to be treated as individuals. They are curious and have a thirst for information. They seek information from many sources and are quite adept at making sense of it. They are technology savvy and use devices and channels in flexible ways. Quite often they will use them in ways that weren't foreseen by the designers.

The unpredictability of converged consumers will erode the penetration of existing channels. For example, some young members of my family have chosen not to have their landline connected. SMS messaging comes bundled in with relatively cheap mobile phone rates. For them, relying on their mobiles and SMS messaging and readily accessible, publicly-available Internet access gives them the connectivity they need at a reasonable price.

So what is the IS group to do? IS can respond to the characteristics of unpredictable consumers in several ways.

Instead of creating solutions for each device and channel combination, the enterprise can insulate itself using standard interfaces. Devices can then plug and play. Content and services are held in a device neutral format, and recreated at run time. This is the so-called "liquid content"approach.

The individualistic consumer will constantly demand the enterprise makes business processes fit their needs. The enterprise needs agility to adapt to these changing demands. This requires more flexible working arrangements with business units and external service providers.

Individual consumers will also potentially use many devices and channels when interacting with an enterprise. A single view is needed to maintain consistency across all channels, online and off-line. This means creating a database containing customer details, personalisation information and transaction history. Often this forms part of a CRM strategy.

It won't be practical for the enterprise to respond to every demand. You need to select the information and services that will be supported. Although there is some evidence of convergence, there's still a long way to go. The real story is one of concurrent divergence and convergence.

Dr Marianne Broadbent is group vice president and global head of research for Gartner's Executive Programs.

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