Software Is Eating The World

“Why Software Is Eating The World” is an article written by Marc Andreessen for The Wall Street Journal. Marc Andreessen became the godfather of the Internet browser when he founded Netscape back in 1994. Netscape was the first company to capitalize on the World Wide Web by launching the web browser Netscape Navigator. Netscape’s open source offspring Firefox is still immensely popular.

Meanwhile, Marc became a serial entrepreneur and Super Angel investor with Twitter, Facebook, Foursquare, Pinterest, Skype, Groupon and Zynga among many other start-ups being at some point part of his investment portfolio.

Marc shares in the article his insights on how software is transforming every major industry, naming this process “software is eating the world”. In other words, every major industry is becoming software driven. Every business is to a certain extent a digital business. The old distinction between bricks and clicks is obsolete.

How companies use software will be key in the way they innovate, scale and expand their businesses. Technology in general and software specifically can transform major aspects of businesses — optimizing at least and innovating at best. Software is therefore the primary driver for differentiation → leading to growth → ultimately to profitability.

Because technology plays such a fundamental role, it’s no longer possible to separate it from “the business” as the two are closely intertwined. It is unlikely that a company becomes the best in its field unless it masters and leverages technology. Software has already a de facto monopoly in running the information and process backbone of companies. But by itself software has limited value. Embedded or connected it becomes a powerful engine for innovation: creating new products, services, customers; transforming markets and spark whole new industries. Software became an integral part of the products and services themselves, creating and capturing new value along the way. Software shifts from the side-line to the heart of companies. It moves from process-support to running the core-business: products and services → i.e. offering → i.e. the value proposition.

Take a simple light bulb. A technology that is manufactured and commercialized for over a 100 years. Light bulb manufacturers such as General Electric and Philips became conglomerates building on this transforming technology and created not just a new industry but a whole era: the Second Industrial Revolution, also known as the Technical Revolution.

Over the years the light bulb as a product commoditized and consequently the price went down to little more than a single Euro. For something we use so often, the light bulb hasn’t changed much over the years.

That is until September 2012. LIFX, a start-up company, launched a Kickstarter project to crowdfund the creation of a WiFi enabled, multi-color, energy efficient light bulb that can be controlled with any smartphone. Basically it transforms an ordinary fixture into a powerful lifestyle product that can match your mood; put you to sleep and wake you up; lighten up when you arrive home and vice versa; and visualizes your music! Since each bulb has its own Internet connectivity, it can even learn to adjust brightness levels to match the seasons. LIFX plans to collect real-time usage data of consumption behavior that might open a can of worms (aka how to monetize big data) but that’s a story for another time.

In a truly coincidence (?), Philips Lighting launched in the very same week a similar product: hue. Fascinating how such a multinational that probably spend tens of millions of Euros on the project is being taken on by a penniless start-up company in its own domain and the challenger seems winning in a true David and Goliath fashion too.

It is interesting to note that this new light bulb costs a hefty € 60. Quit expensive for a light bulb but pretty cheap for the “smartness” that you get with it. The created added value and differentiator of this new light bulb comes first and foremost from software confirming its position as the dominant driver for innovation → growth → profitability.

If we can infuse software in a basic commodity product such as a light bulb and transform it into an intelligent connected device, pretty much everything can be transformed by software to create new products and services. Another step towards the Internet of Things.

Software enables us to reimagine our whole business model; how we design and produce; how we create and manage new transactions and relations; and how we collaborate locally and globally. Ultimately creating a world that is becoming “software enabled” impacts the way we learn, consume, work and live. Embedding software into physical object and connecting these objects, such as for the light bulb, is the ultimate reflection of this.

The late Peter Drucker once described the difference between productivity and innovation as follows: “when we apply technology to existing processes, the result is productivity; but when we apply technology to brand-new processes, the result is innovation”.

Steve Jobs stated how indispensable valuable software is, and how companies that have focused almost exclusively on hardware and have not invested vigorously enough in software will find it increasingly difficult to innovate, to dazzle customers, and to compete. A lesson IBM took to heart.

Historically, software evolved from “The art of Programming” to “The art of Software Engineering” with the purpose of delivering software within budget, time and requirements. Today software provides a new framework for innovation to answer a single question: how to create value with software?

A software innovation framework is extensively described in the book “The Art of Software Innovation” by Sirris fellows Wim Codenie and Nick Boucart.

The question is not if software can innovate your business but when it will transform your industry. Software is not an industry anymore, as every company is a software company, it’s “the new normal”.

More information on, Accenture Technology Vision 2013, APIs are eating software,

Dit artikel is mede tot stand gekomen door Agentschap Ondernemen.

Over KATALICT: KATALICT is een project ter ondersteuning van bedrijven die software gebruiken in hun eindproduct en support nodig hebben in het domein van engineering, software innovatie of go-to-market. KATALICT is een samenwerking van Agoria en Sirris met steun van het Agentschap Ondernemen in kader van het Nieuw Industrieel Beleid.