(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
The Next Convergence: Energy, Telecommunications and Internal Infrastructure
A reliable way to obtain repeat revenues is to keep nudging consumers up the domain curve. However, the further up the domain curve a consumer moves, the more attractive he or she becomes to an increasing number of firms. The more the market converges, the bigger the stakes and the more ferocious the battle for consumer spending.
The struggle for consumer dollars occurs because cognate and complementary industries define the relevant portion of consumer spending. (Gas and electricity are cognate; electricity and telecom are complementary, since one needs the other to enhance its own performance.) With convergence, the historically segregated industries coalesce into one large river of opportunity. Since telecommunications (or more generally the spectrum-based industries), energy, water and internal infrastructure are either cognate or complementary, the target and contestable market is now huge. With the blurring of industry boundaries and the metamorphoses of segregated value chains the contestable market is easily in the hundreds of billions of dollars per year. Turning fragmented service delivery into a new, integrated value chain and integrated marketing pushes those dollars even higher.
The market, of course, is for satisfying the many consumer needs. The noncommodity or featured portion of the market (the bigger piece by far) is on a growth trajectory much steeper than many realize. Paradoxically, even as the market swells to a trillion dollars it will segment into even finer resolution until each consumer is reduced to one segment. Within these segments, individual micro-segments proliferate. The prize is both glittering and elusive.
Gaining access to, motivating and retaining intellectual capital will be the common and dominant characteristics of winning firms. Superior intellectual capital will create superior corporate metabolism of information and knowledge. This knowledge will impel superior financial and business performance. Anything else is a change of ownership and management waiting to happen. The world of intellectual capital is a place where a few do spectacularly well, and the many trot behind, envious, mystified and earning a solidly middle-class living.
Vinod K. Dar is managing director of the Corporate Strategy and Management Group at Hagler Bailly, Inc., based in Arlington, Va.
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