Convergent Technologies, Divergent Devices

Convergence has been a popular topic for years. The term has scared executives into bad mergers (anyone remember the $2 BILLION that Disney lost after buying Infoseek?). We hear about the convergence of TVs and PCs, voice and data, media and distribution, marketing and customer service, content and advertising -- and more. Let me dispel a few myths and shed some light on what we at Forrester think are good and bad examples of convergence.

Technology convergence? Good. The core components and building blocks of the digital era are absolutely converging across a broad range of devices (TVs, PCs, phones, point-of-sale systems) and functions (video editing, messaging, search, auctions). The technologies we are talking about include core components like storage, processors, and bandwidth, as well as a range of supporting technologies like XML tags or compression standards. The most critical one to watch: storage. The exponential growth of storage (at constant cost) exceeds that of processing power or bandwidth, and so will transform many a business in the next decade (see figure below). (Example: What happens when you can put the entire New York City phone book on your phone?)

Device convergence? Bad. While core technologies converge, devices will head in the opposite direction. The most successful new products will be those that add clear, significant value to a discrete task, rather than try to be many things to many people. Good examples: DVRs like TiVo, messaging devices like BlackBerry, or MP3 players like Apple's iPod. Bad examples: music-photo combos like the iPod photo or Media Center PCs. In some cases, certain functions of separate devices will converge for a particular niche audience. But those markets will be small. Example: Smartphones, which blend PDA and phone functionality, are coming together, but will appeal to only a small set of consumers.

Hardware-software convergence? Good. If you think that you are in the media OR device OR services business, think again. The falling cost of technology, the proliferation of single-function devices, and the growing popularity of consumer bundles mean that products (and companies) of the future will have to blend hardware, software, and services. Good examples here: Apple iPods, LeapPads, or Starbucks HearMusic stores. Bad examples: Sony (still stuck on the hardware), or the range of clueless devices at the recent CES 2005. As more consumers network their homes, the new power positions will blend hardware, software, and services -- and spawn a series of surprising partnerships.

Marketing-service convergence? Good. In a world where consumers are blocking, skipping, or ignoring ads in record numbers, marketers have to make the most of each consumer touch. A big part of the solution is taking a more scientific approach to marketing -- an idea that we call Left Brain Marketing. Another critical step is blending the service and marketing functions to maximize sales and serve customers better. Grocery chain Stop & Shop provides this convergence in the store in its recent pilot of the "Shopping Buddy," a small cart-mounted personal shopping device that connects to the store's wireless network, accesses loyalty card data, and delivers targeted offers to shoppers as they wander the aisles. Bell Canada takes advantage of this convergence in its consumer call center, where agents offer contextual upsells of wireless and Internet services on about 60% of 14 million calls per year.

So, next time someone wants to talk convergence, ask her exactly what she means. Don't be heading in one direction when consumers are heading in the other.

By next month, we'll have completed research on Telco TV, B2B Marketing Effectiveness, Instant Messaging, Broadband, Digital Audio, as well as our Devices & Access Data Overview. Talk to you then.




Chris Charron
Vice President, Research Director
Devices, Media, & Marketing Research

P.S. If you'd like to suggest research for us to write or if there are data points you're looking to track down, feel free to drop me a line anytime at chrischarron@forrester.com.

Research Referenced In This Issue Ad-Skipping Still Haunts Advertisers (34285) CES 2005: Digital Devices Looking For Content (36303) Consumer Trust In Media Declines Further (36255) Getting Home Networking Into Second Gear (35004) HDTV And The Coming Bandwidth Crunch (35146) iPod photo: Stick To Music (35147) Left Brain Marketing (33961)    Microsoft's Media Center Extenders: Nice Start (35660) Sizing The US Mobile Messaging Market (34434)    Smart Screens Boost Stop & Shop's Store Experience (32528) The Battle For The Digital Home (35108)    The Mind Of The DVR User: Acquisition And Features (34436)    The Retail Point-Of-Service Transformation (33806)    What Next For TV Advertising? (35120) What Online Ad Formats Work? (35747) What's Next For Search: User Loyalty (35003) When Will The Phone And PDA Merge? (35638) Where Is Marketing Measurement Headed? (33836) Who Wants To Buy VoIP? (35357) Why Cable Operators Need CableCARD (35531) Why Marketing Should Own The Contact Center (34134)

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