Interest rates are low. The Fed is dovish. Strong balance sheets exist across the titans of tech. What does it all mean? Well, you are seeing the open salvos in an arms race in industry-focused tech as this combination of financial factors make the technology market prime for consolidation. A shining example is Microsoft’s announcement of its intention to acquire Nuance Communications for $19.7 billion in an all-cash transaction. Microsoft will complement its recently developed healthcare cloud products with Nuance Communications’ voice documentation and transcription technologies to drive greater value to its customers and its customers’ customers.
In the tech vendor space, Forrester has been highlighting the trend of the haves and the have-nots for a while now. While some of the powerhouses of the past 30 years have struggled, leaders such as Microsoft, Google, Facebook, and Apple have gone from strength to strength. This deal by Microsoft further shows it exerting its muscle by paying a premium for industry-specific dominance. Microsoft is using Nuance’s technological capabilities to accelerate its ability to deliver in healthcare. And Microsoft is seizing this window while it remains a darling — despite the inevitable privacy scrutiny about to unfold. Ultimately, the Nuance acquisition will make Microsoft more adaptive to serve its customers and more creative as it learns how to apply Nuance’s tech to create new opportunities across its customer base and business.
For tech execs, the Microsoft deal also has considerable implications. The opportunities in healthcare are obvious. For leaders in other industries, this acquisition offers lessons on how the principles of a future fit tech strategy can drive success — specifically, the core drivers of a future fit tech strategy, the three P’s: platforms, partnerships, and practices.
- Platforms: Microsoft has increasingly invested in its healthcare capabilities, resulting in the launch of its cloud-based healthcare platform to drive new customer segments and market growth. Platforms are a key opportunity for tech execs to capture and generate value from and to customers while increasing competitive advantage. How are you currently leveraging platforms to deliver for your customers?
- Partnerships: Nuance was a partner of Microsoft before being acquired. What is just as important are the partnerships that Microsoft inherited from the acquisition. The power of the network effect from Nuance’s partnerships will expand opportunities for Microsoft to co-innovate. How are you currently exploiting partnerships to build your market presence and drive creativity to create sustainable differentiation?
- Practices: Nuance allows for an artificial intelligence capability to be added as a layer to Microsoft’s cloud-based healthcare platform, driving new approaches to market interactions. This AI focuses on digitally transcribing medical and customer interactions to ease the overhead caused by error-prone manual processes. It allows Microsoft and its customers to benefit from practices that are more agile, with less governance, more trust, and greater innovation. How are you currently leveraging practices to build uniqueness and market differentiation?
Big picture: Keep an eye on the tech market — specifically in industries prime for innovation such as healthcare. Transactions like the Microsoft/Nuance combination are likely to become more prevalent. These potential deals will lead to new opportunities for your business. Of course, there may be some challenges, too, as market consolidation often relates to a reduction in buyer power.
Bigger picture: Learn from what a successful company like Microsoft is doing to maintain and increase its leadership position in today’s market. Apply the concepts of practices, partnerships, and platforms to improve your adaptive, creative, and resilient capabilities. Done right, you improve your future fitness, arming your employees and company with the tech needed to deliver great customer experiences.