The idea that all companies would eventually need to become software companies was first posited in Marc Andreessen’s famous “Why Software is Eating The World” and in the modern market it appears that the idea is more relevant now than it has ever been. However, it is not always practical for companies that operate in non-tech industries to adopt this line of thinking, which is perhaps why it is common for people to think of start-ups when considering the concept of software eating the world.

For traditional companies making the transition, focus and timing are often key.

Timing The Transition

The first step towards the transition into a software company is considering what is currently available and how this can be used to offer something innovative to users.

The evolution of Netflix is interesting in this case. The company started out as essentially an internet-based DVD renter, delivering films to people’s homes after they had rented then online. For some companies this may have seemed like enough as it offered something that traditional video rental companies could not in terms of convenience.

However, the ever-changing technological marketplace resulted in the evolution of the company in-line with faster internet connections, resulting in the movie streaming model that has not only resulted in even more success, but can be considered a primary factor in the dissolution of traditional video rental stores, like Blockbuster, which realised too late that the market had evolved beyond what they were offering.

Netflix essentially looked at what was available to them and considered how they could leverage this into providing an innovative service to users that filled a market need, much like in the case of Uber, which we will examine later on. Perhaps most importantly, the company has continued to innovate, particularly in regards to its fairly recent switch to content creator, as well as provider. None of this would have been possible were it not for the expert-timing that they demonstrated in bringing their software to market, coupled with the failure to recognise a changing market by more traditional suppliers.

Staying Focused on the Business Core

As mentioned, the transition is often most difficult for more traditional companies, as it often requires hiring many new people in all areas of the organisation, in addition to restructuring the economics of the business and establishing new infrastructure for customers and partners to interact with.

Even those that have healthy revenue streams need to understand the need for speed and comprehensive testing in this endeavour, which means they need to focus to make the transition as effectively as possible.

By focusing on the core of your business and its offering it becomes easier to work out how becoming a software company can benefit your end-users. This is seen in the evolution of Uber, which filled a gap in the market for the provision of accessible and affordable transport. The company identified that both riders and drivers essentially have access to a computer in their pockets thanks to the popularity of smartphones and they used this as a platform that would allow their service to bring drivers together with riders, essentially forming the core of their business upon which sub-cores could be utilised.

The fact that the company doesn’t own the cars that people book through the service allows Uber to place its focus squarely on its software and ensuring that it offers users what they need. In doing so, the company has fulfilled a market need through becoming a software company.

Such platforms also create boosts within their wider ecosystems because they allow for innovation, which companies like Uber can develop further from. For example, the use of the payments stack from Braintree within their core service allows Uber to benefit from the innovations of Braintree, in addition to any new innovations they themselves bring to markets. The ability to swap services within a software and whether a new service introduced will provide an experience improvement for customers must also be considered.

In essence, by focusing on your core in regards to software it becomes easier to focus on customers and their needs, allowing for greater utilisation of current and emerging technology.

The Final Word

The question now is how will traditional companies go about making the transition? The examples of Netflix and Uber show how important it is to stay aware of the developing technology around your business and how to leverage this to the company’s advantage. This is exceptionally difficult and many companies fail to accomplish this task, but it is one that is becoming increasingly important in a progressively more software-driven world.

References

http://www.wsj.com/articles/SB10001424053111903480904576512250915629460