Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. That's right: Software is delivering fresh, natural and high-quality food in situations where only junk food was available. But it requires changes in the fundamental assumptions around the problem. We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses. Meanwhile, the two biggest telecom companies, AT&T and Verizon, have survived by transforming themselves into software companies, partnering with Apple and other smartphone makers. They need to build strong cultures, delight their customers, establish their own competitive advantages and, yes, justify their rising valuations. One company I know has a backlog of almost a thousand suggested improvements. I’m privileged to work with some of the best of the new breed of software companies, and I can tell you they’re really good at what they do. And many of the leading innovators in financial services are software companies, such as Square, which allows anyone to accept credit card payments with a mobile phone, and PayPal, which generated more than $1 billion in revenue in the second quarter of this year, up 31% over the previous year. Kindle ebook $4.99 Introduc… Integrative solution:  Change the way you think about updates. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. Companies in every industry need to assume that a software revolution is coming. It’s brutally difficult. LinkedIn is today’s fastest growing recruiting company. When you have two seemingly opposing models, the choice isn't to either choose one or the other or to compromise. I write about Agile management, leadership, innovation & narrative. Software and context is transforming products. Netscape’s open source offspring Firefox is still immensely popular. Today’s leading real-world retailer, Wal-Mart, uses software to power its logistics and distribution capabilities, which it has used to crush its competition. Apple, for example, has a P/E ratio of around 15.2 — about the same as the broader stock market, despite Apple’s immense profitability and dominant market position (Apple in the last couple weeks became the biggest company in America, judged by market capitalization, surpassing Exxon Mobil). Excluding the revenue from its Qwest acquisition, CenturyLink’s revenue from these legacy services declined by more than 11%. In 2001, Borders agreed to hand over its online business to Amazon under the theory that online book sales were non-strategic and unimportant. What this means is that companies in nontechnology industries such as auto repair will use the third platform as a weapon against competitors. However, the 2 moves will also be predicated on a tendency I have found, one that makes me optimistic concerning the future evolution of earth and American markets, regardless of the chaos in the stock market. After discussing the importance of software he stated his thesis: 2. Software is eating the world. More than 10 years after the peak of the 1990s dot-com bubble, a dozen or so new Internet companies like Facebook and Twitter are sparking controversy in Silicon Valley, due to their rapidly growing private market valuations, and even the occasional successful IPO. Becoming Agile will steadily become a requirement just to stay in business. And, perhaps most telling, you can’t have a bubble when people are constantly screaming “Bubble!”. Once it is known that it is possible to operate in this better, faster way, it will inexorably become the new normal. Straub: What are the sources for the changes? Firms are learning the hard way that software requires a different way of running the organization to be successful. With the hierarchical bureaucracy in place, it will be many. Straub: What would be the learnings beyond this specific software development process? More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. I am also personally an investor in LinkedIn.) Straub: With a large releases you will know if it has gone right or wrong. It has lessons in terms of trust and delegation and removal of organizational barriers. It's an integrative solution. November 24th, 2015 - By: Tom De Schutter. In 2014, Microsoft open source’d .NET on GitHub and saw a spike in contributions shortly thereafter. My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy. And the success or failure of airlines today and in the future hinges on their ability to price tickets and optimize routes and yields correctly — with software. Running that same application today in Amazon’s cloud costs about $1,500 a month. It turns out that it’s not just software that’s’ eating the world. No one should expect building a new high-growth, software-powered company in an established industry to be easy. “Why Software Is Eating The World” is an article written by Marc Andreessen for The Wall Street Journal. Denning: At Etsy, they are constantly measuring the impact of everything they do and can see immediately whether something is improving things or not. In 2001, Borders agreed to hand over its online business to Amazon … Richard Straub, President of the Drucker Society Europe wrote that “improving the software in small increments seems to work much better than having a mega update in longer cycles. How do you know with all these continuous changes? “Irrelevant,” was one curious reaction. In the past we mostly interacted with a software-driven device when we sat in front of a desktop computer. The implications of this trend are very significant for companies. In today’s cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. The titel of this post comes from an essay in the Wall Street Journal written by Marc Andreessen. Originally published in The Wall Street Journal on August 20, 2011. Customers will expect nothing less. In some industries, particularly those with a heavy real-world component such as oil and gas, the software revolution is primarily an opportunity for incumbents. It's true that with a large releases you know if it has gone right or wrong, but often it's not clear what is the source of the problem. With scars from the heyday of Webvan and Pets.com still fresh in the investor psyche, people are asking, “Isn’t this just a dangerous new bubble?”. They operate in the background without the customer seeing. Companies in every industry need to assume that a software revolution is coming. And the fastest growing major videogame company is Zynga (maker of games including FarmVille), which delivers its games entirely online. Intelligence agencies do large-scale data mining with software to uncover and track potential terrorist plots. Networked organizations using agile management practices with a culture of trust, delegation and collaboration are able to move and innovate much more rapidly than traditional managements that are saddled with legacy cultures of hierarchical bureaucracy, slow-moving processes with approvals up and down the chain, and the structural barriers of organizational silos. Now it’s been joined by Groupon, Living Social, Foursquare and others, which are using software to eat the retail marketing industry. Software is breathing life into the world. How do they ensure that with these thousands of changes the whole platform does not lose a coherent architecture over an extended period of time? Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high. Secondly, many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. Rovio, maker of Angry Birds, is expected to clear $100 million in revenue this year (the company was nearly bankrupt when it debuted the popular game on the iPhone in late 2009). Denning: Etsy is constantly monitoring the impact at the local level and at the system level. The good news about building a company during times like this is that the companies that do succeed are going to be extremely strong and resilient. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. June Javelosa January 30th 2017. Are these just good ideas by employees? Steve Denning’s (@stevedenning) most recent book is: The Leader’s Guide to Radical Management . If you continue browsing the site, you agree to the use of cookies on this website. Denning: As in all good Agile implementations, the changes must be closely focused on improving the customer experience, although many of the changes are what’s known as “dark” changes. As Marc Andreessen quipped in 2011:  “Software is eating the world.”. To emulate this experience fully, other fields will need to upgrade the testing and measuring of what they do. Traditional record labels increasingly exist only to provide those software companies with content. And while people watching the values of their 401(k)s bounce up and down the last few weeks might doubt it, this is a profoundly positive story for the American economy, in particular. "the world's largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online," "Today's largest video service by number of subscribers is a software company:" "Today's dominant music companies are software companies, too: Apple's iTunes, Spotify and Pandora." There’s no way through this problem other than education, and we have a long way to go. So here, option one is update very infrequently, which avoids burnout but migrates the site very slowly, which is bad for customer value. This problem is even worse than it looks because many workers in existing industries will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again. Except where government regulation or private monopolies preserve the status quo, firms that don’t adjust over time won’t survive. Why Software Is Eating The World By Marc Andreessen. This is a tragedy since every company I work with is absolutely starved for talent. The world was impressed. Comcast, Time Warner and others are responding by transforming themselves into software companies with efforts such as TV Everywhere, which liberates content from the physical cable and connects it to smartphones and tablets. The days when a car aficionado could repair his or her own car are long past, due primarily to the high software content. The trend toward hybrid and electric vehicles will only accelerate the software shift — electric cars are completely computer controlled. The modern combat soldier is embedded in a web of software that provides intelligence, communications, logistics and weapons guidance. Industry revenue from digital channels totaled $4.6 billion in 2010, growing to 29% of total revenue from 2% in 2004. With continuous deployment, you can monitor the impact of each one as soon as it happens, so it's much easier to see what is causing what, and much quicker to fix it or at least reverse it. Perhaps the single most dramatic example of this phenomenon of software eating a traditional business is the suicide of Borders and corresponding rise of Amazon. Today’s dominant music companies are software companies, too: Apple’s iTunes, Spotify and Pandora. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. In this blog I have been discussing the increasing impact of software on many aspects of our lives. Groupon Investor Marc Andreessen: 'No Tech Bubble' In an … Marc Andreessen became the godfather of the Internet browser when he founded Netscape back in 1994. Opinions expressed by Forbes Contributors are their own. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. © 2021 Forbes Media LLC. With lower start-up costs and a vastly expanded market for online services, the result is a global economy that for the first time will be fully digitally wired — the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. On top of that, while Borders was thrashing in the throes of impending bankruptcy, Amazon rearranged its web site to promote its Kindle digital books over physical books for the first time. How Etsy issues 30 software upgrades per day, Another workplace of the future: Sun Hydraulics, The best-kept management secret on the planet: Agile. Simply speaking, computer software is ingesting the whole world. You might say that Etsy is rediscovering what Toyota discovered several decades back, namely, that short cycles of production can be more efficient and effective if they are used for learning. Software enables much faster cycle times for development and enhancements, of course, and provides the ability for rapid diffusion of new capabilities at a global scale. Marc Andreessen became the godfather of the Internet browser when he founded Netscape back in 1994. On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries — without the need to invest in new infrastructure and train new employees. We believe both of these industries, which historically have been highly resistant to entrepreneurial change, are primed for tipping by great new software-centric entrepreneurs. In today’s cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. They don't have to be perfect if they are very small. That updates the site even faster than Option 2 and makes staff feel better than option one. I am also the author of the Leader's Guide to Radical Management, The Leader's Guide to Storytelling and The Secret Language of Leadership. Or are they based on studying the usage patterns and customer feedback or analyzing major trends in the marketplace? It’s not an accident that many of the biggest recent technology companies — including Google, Amazon, eBay and more — are American companies. Their competence in … Our combination of great research universities, a pro-risk business culture, deep pools of innovation-seeking equity capital and reliable business and contract law is unprecedented and unparalleled in the world. 13 Ways To Better Keep Stakeholders In The Communications Loop, 13 Phrases That Will Make A Sales Script Sound ‘Canned’, Marketing Budget Surplus? Software is eating the world Tech is outgrowing the tech industry Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. In today's cars, software runs the engines, controls safety features, entertains passengers, guides drivers to destinations and connects each car to mobile, satellite and GPS networks. The dismissal of the Etsy experience also ignores the fact that the agile management practices developed in software under headings like Agile, Scrum and Continuous Delivery, are now appearing in other sectors, such as auto manufacturing, routers, hydraulics, groceries, retail, and many more. Now even the books themselves are software. That’s the big opportunity. Is the US in a phase change to the Creative Economy? “Why Software Is Eating The World” is an article written by Marc Andreessen for The Wall Street Journal. As a result, if the “Network is the Computer”, then “Software is Eating the Network”. It’s because of the obsolete management practices of hierarchical bureaucracy that are in place. nature of the firm & evolving institutions, The Pmarca Blog Archive Is Back… as an Ebook, a16z Podcast: Software Programs the World, a16z Podcast: Startups and Pendulum Swings Through Ideas, Time, Fame, and Money. Netscape was the first company to capitalize on the World Wide Web by launching the web browser Netscape Navigator. In 2011, the well-known venture capitalist Marc Andreessen wrote an influential article titled, “Why software is eating the world.” Andreessen was arguably one of the first to predict, correctly, that “[O]ver the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.” Software-powered drones launch airstrikes without putting human pilots at risk. The advantages are clear, but it’s also […] Disney — Disney! How Netflix eviscerated Blockbuster is an old story, but now other traditional entertainment providers are facing the same threat. Health care and education, in my view, are next up for fundamental software-based transformation. That sort of thing just isn’t possible in our field. And after it's happened, there's no going back. And a lot of damage can be done while the problem is being fixed, as can be seen with some of Microsoft's releases over the past few years. If Software is Eating the World, What Does the Food Chain Look Like? The world’s biggest bookseller is a software firm — its core capacity is for selling everything no shops necessary, its software motor. At faculty, we are pioneering both Software 2.0 and … I am currently a director of the SD Learning Consortium. Today, the world’s largest bookseller, Amazon, is a software company — its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. 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