Digital Revolution makes adjacent industries collide

Denis Barrier
Oct 9, 2017 · 4 min read

During our September 2017 Cathay Forum, various CEOs spoke about the future of their respective industry. It was striking to hear how a major innovation originated by the Digital Revolution in one industry can impact significantly all its surrounding industries.

For example, Jacques Aschenbroisch, the CEO and Chairman of Valeo, one of the leading automotive supplier in the world, was on stage to share an inspirational vision about the shifts happening in the automotive industry. One of his points was that the rise of the self driving cars will reduce accidents by more than 80%. This statement led to a big question mark for the future of the auto insurance industry : why would people need an auto insurance if there are no longer accidents ? Conveniently enough, our next guest on stage to give an overview of the future of his industry was Renaud Dumora, the CEO of BNP Paribas Cardif, a global insurance company operating in 36 countries and insuring 100 million people. He pointed out that, in an accident involving a self-driving car, the responsibility of the autonomous driving software provider may come under scrutiny, and that the latter may have to consider getting insured for potential liabilities from car accidents.

This simple anecdote illustrates very clearly that we have entered in a new phase where the disruption is coming from the side of the silos, from shifts involving several industries usually standing up back to back. The industrial pillars of the 20th Century now need to invest resolutely together to embrace the digital age.

In the 20th century, corporations have been innovating through internal Research and Development. This created opportunities for the venture capital industry to back companies spun out of research laboratories. Then, since the beginning of the 21st century, as pure internal R&D has proven to be less efficient, corporations started replacing R&D by acquisitions, and developing open innovation through partnerships with efficient startups able to bring faster the new innovations on the market. Corporate venture then became on the rise, along with other initiatives such as accelerators or incubators.

The example discussed earlier, involving the automotive and insurance industries, clearly showed how shifts occurring in one industry can massively impact adjacent ones. This is a real challenge because people are not used to talk and co-innovate with peers who are not from their industrial universe, and because the new efficient way in one industry must now natively be connected with the future paradigm shifts of the neighbors. The very company in the world able to internally innovate in adjacent industries has been Amazon, at the same time a lead innovator in e-commerce, IT infrastructure, home appliances, drones, media, etc… As a result, Amazon has a capacity to cross-fertilize internally between various business lines from different industries, and is taking over the world thanks to this internal network effect.

We observed that some collaborations not usually possible between different corporations, could happen when startups were involved. So we tried to build an efficient framework for the innovation of the 21st century : we gathered several large leading and global leaders from complementary industries on the same platform, including Valeo, Michelin, BNP Paribas Cardif, ADP (Aeroports de Paris), Total, SEB and Jouyong. Those corporates invested together in our global venture capital fund along with strong financial backers including Bpifrance and the China Development Bank. This enabled to create a cross-industries venture ecosystem covering automotive, insurance, mobility, home automation and energy. We were also very passionate about having a global presence with teams on the ground in the US, China, Europe (and now Israel) to cover the regions where innovation is cutting edge. By doing so, Cathay Innovation could be the glue of a new global and multi-industries ecosystem, enabling those corporations to have a better 360 degrees framework, now necessary to anticipate and take advantage of the brutal shifts happening in the modern world.

This unique ecosystem is however only a skeleton, and still needs flesh and muscle to propel forward. This is why we set up regular workshops with our corporate investors to discuss specific topics and trends, not only on 1-to-1 but also by gathering them regularly for events in Europe, US and China. We favored the creation of a club of committed leaders from various industries, with the mindset and internal power to think and act transversely. This already gave birth to new concepts and practical initiatives, which would have not existed without the right combination of common ownership in a venture initiative, and a high level of trust between all the committed members. Overall, the capacity of our ecosystem to go beyond networking & testing and mean real business, was only due to the quality of the leaders with whom we had the luck to get involved with this initiative.

In a vertical industry, Disruption is now coming from the outside of the silo, and we believe that our global and cross-industries set-up is an efficient way to anticipate and address the paradigm shifts happening in the world during the coming decade. For the prepared minds, disruption is not a barbarian knocking at the door, but an opportunity to thrive more than ever.

Cathay Innovation

Lessons, reflections and news from a global venture capital…