Technological convergence has been defined in a number of ways. Wikipedia explains convergence as a “tendency for technologies that were originally quite unrelated to become more closely integrated and even unified as they develop and advance.”
We only need to look at the communication networks of today to see this in action. Organizations related to TV, radio and cable originally designed to carry different types of information, independently, have blended companies to create new types of industries. Consider Disney/ABC/Pixar/Marvel or Viacom/Paramount Studios/CBS and AT&T/DirecTV and you see the point.
You can’t read a financial newspaper without seeing an example of a technological convergence via one merger or another. Why is this? What has changed so radically to warrant this ongoing trend?
The Age of Convergence
As we go through our daily lives, we see a direct correlation between what used to be disparate technologies. For example, what do Google, Uber and Netflix have in common?
These companies, along with many others in the technology industry today, are taking advantage of the power of convergence. In fact, because of the base technology of the internet, cloud storage, Wi‐Fi, app development and mobile devices, technology is merging together at a pace unlike anything we have witnessed before.
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Google has morphed from your garden variety search engine into something much more. Today, in addition to any number of services the software giant has developed or acquired, with the click of a mouse Google makes travel easier and seamless.
Uber’s ride-sharing business model disrupted the automobile and taxi industries through its revolutionary app by providing an easy way to move from place to place without owning a vehicle. It saw the future of mobility and turned yesterday’s auto industry on its head by creating a new model for travel.
Netflix is a compelling story, with more than 30 years of convergence in the making. What started out as a subscription company that developed a unique and powerful logistics model, quickly morphed into a continuous data analysis pipeline, then a content licensing powerhouse and today is a content development giant.
The three key technology drivers in convergence
As we look at these examples, we can see a direct correlation to convergence by the advances in technology, driven by changes in customer behavior and enabled by new ecosystems that bring this convergence to life. Let’s take a look at these key drivers.
1. Technology
When we talk about the advances in technology, one of the greatest drivers in recent years has been the advent, growth and shift to the cloud. As we look at the emergence of this technology, we can’t do so without looking at Amazon.
Amazon went from being an online bookseller to a leader in today’s cloud technology services, taking advantage of the ongoing trend of businesses moving to the cloud. In fact, 55% of its profit today comes from Amazon Web Services (AWS), which provides cloud services to technology companies, such as Netflix and Uber, to help them service their clients.
It is predicted Amazon will increase its spend into this technology over the next several years. Today approximately 80% of enterprises run applications on, or are experimenting with AWS as their preferred cloud platform. In IT, it is predicted $1.3 trillion will be spent directly or indirectly in a shift to cloud by 2022.
2. Data
The next big pillar in enabling technology convergence is data. As we look at the generation, collection and consumption of data in recent years, we know data is everywhere. As the whole world continues to be converted to data, the amount collected is increasing exponentially.
With that comes the challenge of organizing and structuring the data in a way that makes it actionable. This means not only collecting data but having access to the analytics to make sense of the information being generated.
3. Artificial intelligence
The third pillar is artificial intelligence (AI), the means by which the data is disseminated and organized. A great example of how these three pillars converge can be seen in autonomous driving. For the necessary decisions to be made automatically by the computer, vast amounts of data must be collected, converted and processed in the cloud, in real time, and without human intervention.
The Age of Convergence is now
This Age of Convergence isn’t a pie‐in‐the‐sky idea or something that may happen in the future. Convergence is already happening every day, and it’s a part of our daily lives, even if we can’t see it.
Let’s go back to Uber for example. The company has approximately 50 different applications in their technology stack to make the experience as efficient as possible for both the rider and the driver. Things such as messaging, geolocation, fare calculations, payments and promo codes are a perfect example of many instances of convergence happening in real time. All of this works together to create the unique, satisfying experience Uber has built.
If we apply that idea to the hotel industry, it’s obvious we need to move faster to catch up to consumer expectations. The industry is showing us what customers want, and it’s our job to provide it to them.
Bring it back to revenue management
The same can be said about the revenue management field. We are beginning to see a new level of convergence entering this industry. As we see technology moving into the cloud, data becoming more accessible and generated at a higher frequency, and converged ecosystems of technology companies coming together, we can also see a convergence in revenue management between pricing, distribution and marketing.
No longer is the revenue manager in a corner, crunching numbers. They are now tasked with leveraging the new capabilities of technology, AI and automation. In fact, the revenue manager’s function is increasingly moving toward a converged commercial function, making sure they suggest the right offer, at the right time and distribute it to the right channel.
Today, a typical hotel must make more than 52 million daily pricing decisions. What can we do to stay ahead of that growing number? Automate, automate, automate. It is literally impossible for a human to leverage the data streaming out of the hundreds of devices and data points each of us bring into the mix.
Hilton officially stated that they collect two billion data points on a daily basis from a variety of different sources. Expedia generates about two billion transactions every day that need to be analyzed.
Three key things to remember
- Automation. If you don’t have automation in place, there are huge amounts of data that cannot be measured or leveraged. It is critical today to ensure your systems are as automated as possible.
- Use your system like a GPS, making sure you remove any roadblocks that may slow it down and ensure it gets to the right destination. Asset and revenue managers, or the new breed of commercial managers, should be tasked with making sure the strategy is set to avoid these roadblocks in the foreseeable future.
- Embrace AI as soon as possible. In doing so we can elevate ourselves to a higher perspective to look further out on strategy and set objectives while knowing the mundane, repetitive data crunching can be left to the intelligent systems available to us today.
Convergence is the name of the game today. It’s happening in nearly every industry, and it’s happening as you read this. If you can embrace the changes heading your way, your property or brand will become infinitely more accessible, desirable and memorable.