As the world continues to become more and more digital, it’s becoming increasingly clear that every company is, in some way, a software company. This is a sentiment that was first expressed by Marc Andreessen over a decade ago, when he famously said that “software is eating the world.” Today, we can update that statement to say that software is the world.
According to a research report from McKinsey & Co, nearly 70% of the top economic performers in various industries are using their own software to differentiate themselves from their competitors. Furthermore, a full one-third of those top performers are directly monetizing software. These statistics make it clear that in order to succeed in today’s digital landscape, companies must think, act, and look like software companies.
There are a few key factors driving this shift. The first is the accelerated adoption of digital products, which is driving companies to embed software into the product and purchase experience. This includes everything from personalization to seamless omnichannel delivery. Additionally, more and more of the value in products and services from various industries is coming from software. For example, the average industrial company expects its share of revenue from software to double over the next three years. Finally, the growth of cloud computing, platform as a service, low- and no-code tools, and AI-based programming assistance is putting unprecedented power into the hands of employees across various industries.
While many companies may already recognize the importance of software, they tend to look at it as a capability that can be bolted onto their existing business. However, becoming a software company requires a fundamental change in skillsets, practices, leadership, and organizational structures. It’s not an easy transition, as less than 7% of all software revenue in the world accrues to non-tech companies.
But, successful transformations do exist. In the McKinsey report, “Every company is a software company: Six ‘must dos’ to succeed” they analyze more than 20 software transformations and spoke with a dozen senior executives who have led successful software transitions. The report provides six principles that are at the core of any successful effort to become a software company.
If you’re interested in learning more about the shifts happening in the business world and the steps your company can take to become a software company, I highly recommend checking out the original report from McKinsey & Co.
