The other day I experienced a very distinct surprise. Picture a situation where you’ve had an internalized understanding for a long time and are convinced that everybody shares this way of thinking. Then, out of the blue, you find out that a person you respect has a completely different point of view.
This happened to me while discussing the creation of an extremely high-end and advanced product that the other person, whom I met at a conference, was involved in. They said that software development wasn’t interesting for their company, as it was mostly about “connecting raw materials”. This took me totally by surprise!
They also said that their IT department might find software development interesting. Well, that might be the case, but I strongly believe that software development doesn’t only affect the IT department. On the contrary, software is ubiquitous for your core domain and for your competitive edge!
After I got over my initial shock, I remembered that very few things, including this, are binary. That said, I do have some thoughts on this matter that I would like to share in the hope that they might prove helpful to others. Surprise-Driven Sharing, eh? :) I am of course also curious to learn more about other ways of thinking about this.
Firstly, I thought about the text “Why Software Is Eating the World”, published by Marc Andreessen in 2011, which carries the message that software-focused companies will have a great development (and why). I think the text was true then and it is even more so today. Let’s, for example, look at the Magnificent Seven Stocks. Their development since Marc wrote the text has been amazing, and one thing they all have in common is a belief in and a culture of software development. In my opinion it’s beyond correlation.
Secondly, I remembered a discussion I had at a big company 20 years ago. They told me that they weren’t about software development; they were about telecommunications. As I recall, they mentioned that even if Microsoft might enter telecommunications within a few years they weren’t too worried about it. That company's valuation development has been negative since Marc wrote his text, while Microsoft (who probably still don’t consider themselves to be about telecommunications) has had a nice development of over one thousand percent.
A third, totally different and more recent example, was when we were discussing the next leap for a certain company. A few years ago they started an initiative to sell software tools to support their hardware business. Now, that initiative has started to get traction. Now, calculations for the probable profit and loss of that new business area are, of course, just guesswork at this point. But almost all predictions show that the revenue will probably grow fast and that the profitability will be higher than that of the old – yet great – business. Instead of 20% profit, my moderate guess is 80% for the new area. Every new customer equals quite a lot of revenue and almost no cost.
So, do I think every company should skip everything else and become a software company? No, I don’t. But I do think that it’s often a very good idea to be evolutionary and add software offerings to what made the company successful in the first place. Your current cash cows are crucial; they just might not be where your strategy for the future says you should focus all your investments. Remember that the s-curve levels out over time. To stay ahead it might be wise to consider breaking the status quo, although one step at a time.
While I’m curiously studying different point of view on this and loving “Think Different”, I do confess that I still lean towards the viewpoint that “software is eating the world” – more and faster than ever.
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