As Marc Andreessen quipped in 2011:  “Software is eating the world.”. Integrative solution:  Change the way you think about updates. The best new movie production company in many decades, Pixar, was a software company. You may opt-out by. They operate in the background without the customer seeing. Denning: At Etsy, they are constantly measuring the impact of everything they do and can see immediately whether something is improving things or not. And the creation of software-powered driverless cars is already under way at Google and the major car companies. Today’s fastest growing telecom company is Skype, a software company that was just bought by Microsoft for $8.5 billion. So Marc Andreessen claimed almost 10 years ago when he spoke about how all major business activity was being built into software and organisations that embraced this change were becoming more efficient and building a strong and sustainable competitive advantage (e.g. Companies in every industry need to assume that a software revolution is coming. This includes even industries that are software-based today. What Etsy is doing is only possible with continuous automated testing and measuring of everything that is done. Steve Denning’s (@stevedenning) most recent book is: The Leader’s Guide to Radical Management . 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. Great incumbent software companies like Oracle and Microsoft are increasingly threatened with irrelevance by new software offerings like Salesforce.com and Android (especially in a world where Google owns a major handset maker). Marc Andreessen on Why Software Is Eating the World – WSJ.com. 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. It's an integrative solution. The world was impressed. Groupon Investor Marc Andreessen: 'No Tech Bubble' In an … Software is eating the world. With the hierarchical bureaucracy in place, it will be many. But today, it’s clear that services are eating software. Software Is Eating The World. Everything here moves much more slowly.” This ignores the fact that most firms' core systems and processes are already run on software. 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. Running that same application today in Amazon’s cloud costs about $1,500 a month. The reality is that most firms today, whether they know it or not, are already software companies and will steadily become more so. At faculty, we are pioneering both Software 2.0 and … Companies like Shutterfly, Snapfish and Flickr have stepped into Kodak’s place. Changes that improve things locally but degrade the overall system don't pass the automated quality control tests that are in place. Photography, of course, was eaten by software long ago. What this means is that companies in nontechnology industries such as auto repair will use the third platform as a weapon against competitors. 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. It turns out that it’s not just software that’s’ eating the world. That’s the big opportunity. 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. : 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. For many years I worked at the World Bank, where I held many management positions, including director of knowledge management (1996-2000). Today’s largest direct marketing platform is a software company — Google. I, along with others, have been arguing the other side of the case. It's just that Etsy doing it a hundred times faster than in manufacturing. Now it’s been joined by Groupon, Living Social, Foursquare and others, which are using software to eat the retail marketing industry. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. 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. 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. More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. It has lessons in terms of trust and delegation and removal of organizational barriers. So here, option one is update very infrequently, which avoids burnout but migrates the site very slowly, which is bad for customer value. That updates the site even faster than Option 2 and makes staff feel better than option one. Google, Amazon, Facebook). In this blog I have been discussing the increasing impact of software on many aspects of our lives. Straub: What would be the learnings beyond this specific software development process? Some of them may be incremental innovations (assuming they create new value and the company would know that it is new value), some may just be updates to correct what did not work properly or what customers did not like. In effect, for most companies, failure to acquire digital agility will be an existential threat and so, establishing digital agility has become in effect a strategic necessity. 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. 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. When you have two seemingly opposing models, the choice isn't to either choose one or the other or to compromise. Sign up to get our best articles, latest podcasts, and news on our investments emailed to you. We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses. Netscape was the first company to capitalize on the World Wide Web by launching the web browser Netscape Navigator. Can you still find out a likely causality for performance improvement or degradation? If Software is Eating the World, What Does the Food Chain Look Like? The trend toward hybrid and electric vehicles will only accelerate the software shift — electric cars are completely computer controlled. 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?”. An in-depth exploration (~30k words) of how software is eating the world, based on research supported by Andreessen-Horowitz in 2014. […] And the fastest growing major videogame company is Zynga (maker of games including FarmVille), which delivers its games entirely online. Over 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. They need to build strong cultures, delight their customers, establish their own competitive advantages and, yes, justify their rising valuations. 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. 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. 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. In short, software is eating the world. 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. 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. If they perform to my and others’ expectations, they are going to be highly valuable cornerstone companies in the global economy, eating markets far larger than the technology industry has historically been able to pursue. If they keep growing and adjusting at the current pace, it may well be that they will have to review the architecture at some point. November 24th, 2015 - By: Tom De Schutter. Software and context is transforming products. That's right: Software is delivering fresh, natural and high-quality food in situations where only junk food was available. That would be a separate improvement project, which of course would take more than a day. Capitalism’s process of creative destruction then takes over: knowledge can’t be put back in the bottle. “Why Software Is Eating The World” is an article written by Marc Andreessen for The Wall Street Journal. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. “You’re talking software development. Steve Denning: We are talking about improvements to the site, not just fixing 30 bugs per day. And after it's happened, there's no going back. The advantages are clear, but it’s also […] Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. The days when a car aficionado could repair his or her own car are long past, due primarily to the high software content. But it requires changes in the fundamental assumptions around the problem. Netscape was the first company to capitalize on the World Wide Web by launching the web browser Netscape Navigator. (I am co-founder and general partner of venture capital firm Andreessen-Horowitz, which has invested in Facebook, Groupon, Skype, Twitter, Zynga, and Foursquare, among others. 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. News / Future Society / Bestreview / Obsolete / Software. Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. Software-powered drones launch airstrikes without putting human pilots at risk. Meanwhile, traditional videogame powerhouses like Electronic Arts and Nintendo have seen revenues stagnate and fall. Joseph Schumpeter, the economist who coined the term “creative destruction,” would be proud. Straub: What is the overall framework in which the decentralized decisions by individuals or small teams are made? Opinions expressed by Forbes Contributors are their own. Watch the world around you disappear. LinkedIn is today’s fastest growing recruiting company. Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale. Intelligence agencies do large-scale data mining with software to uncover and track potential terrorist plots. Oil and gas companies were early innovators in supercomputing and data visualization and analysis, which are crucial to today’s oil and gas exploration efforts. How do you know with all these continuous changes? "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." In short, software is eating the world. That sort of thing just isn’t possible in our field. I am also personally an investor in LinkedIn.) Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. If you continue browsing the site, you agree to the use of cookies on this website. 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. Software is removing friction. Customers will expect nothing less. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries. What Tools Do You Need To Fight Ad Fraud? Roger Martin, Academic Director of the Martin Prosperity Institute commented: This is an interesting example of what I write about as Integrative Thinking. Industry revenue from digital channels totaled $4.6 billion in 2010, growing to 29% of total revenue from 2% in 2004. In short, software is eating the world. Are these just good ideas by employees? And, perhaps most telling, you can’t have a bubble when people are constantly screaming “Bubble!”. It seems to work better for all stake-holders - customers, employees and the investors.” He also had a few more practical questions worth exploring: Richard Straub: Can you really talk about innovations with regard to this continuous updates? Why Software Is Eating The World News Corp is a network of leading companies in the worlds of diversified media, news, education, and information… www.wsj.com I consult with organizations around the world on leadership, innovation, management and business narrative. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. 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. Software is breathing life into the world. End-to-end prototyping to the rescue. It’s true that the Agile phenomenon is most obvious in software development. One company I know has a backlog of almost a thousand suggested improvements. The modern combat soldier is embedded in a web of software that provides intelligence, communications, logistics and weapons guidance. Today’s stock market actually hates technology, as shown by all-time low price/earnings ratios for major public technology 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. All Rights Reserved, This is a BETA experience. Software Is Eating the World. Even national defense is increasingly software-based. But in many industries, new software ideas will result in the rise of new Silicon Valley-style start-ups that invade existing industries with impunity. Straub: What are the sources for the changes? Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Their competence in … First of all, every new company today is being built in the face of massive economic headwinds, making the challenge far greater than it was in the relatively benign ’90s. Finally, the new companies need to prove their worth. June Javelosa January 30th 2017. © 2021 Forbes Media LLC. But that’s not because of the inherent nature of the work. 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? 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. It is to come up with a creative resolution of the tensions in such a way as to create a better outcome than either. Netscape founder and VC titan Marc Andreessen famously wrote back in 2011 that software is steadily eating the world, disrupting industries like music, retail and more. 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. — had to buy Pixar, a software company, to remain relevant in animated movies. It also overlooks the prospect that within a few years, almost all business will be digitized and run on software. 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. There’s no way through this problem other than education, and we have a long way to go. 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. Groupon generated over $700 million in revenue in 2010, after being in business for only two years. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. Practically every financial transaction, from someone buying a cup of coffee to someone trading a trillion dollars of credit default derivatives, is done in software. Today’s fastest growing entertainment companies are videogame makers — again, software — with the industry growing to $60 billion from $30 billion five years ago. And when the economy finally stabilizes, look out — the best of the new companies will grow even faster. 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. 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). Kindle ebook $4.99 Introduc… Netscape’s open source offspring Firefox is still … Once it is known that it is possible to operate in this better, faster way, it will inexorably become the new normal. Straub: With a large releases you will know if it has gone right or wrong. Firms are learning the hard way that software requires a different way of running the organization to be successful. 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). In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day. It’s virtually impossible to buy a mobile phone that doesn’t include a software-powered camera, and photos are uploaded automatically to the Internet for permanent archiving and global sharing. Today’s dominant music companies are software companies, too: Apple’s iTunes, Spotify and Pandora. I write about Agile management, leadership, innovation & narrative. I consult with. Software Is Eating the World, And You Need to See It. The essays are free to read online. After discussing the importance of software he stated his thesis: 2. Disney — Disney! I am currently a director of the SD Learning Consortium. America's Top Givers: The 25 Most Philanthropic Billionaires, EY & Citi On The Importance Of Resilience And Innovation, Impact 50: Investors Seeking Profit — And Pushing For Change, 3 Tips For Maintaining A Good Relationship With Former Employers While Recovering From A Disability. Likewise for FedEx, which is best thought of as a software network that happens to have trucks, planes and distribution hubs attached. CenturyLink, the third largest telecom company in the U.S., with a $20 billion market cap, had 15 million access lines at the end of June 30 –declining at an annual rate of about 7%. 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. In 2001, Borders agreed to hand over its online business to Amazon … Some interesting responses came in on my article about The Workplace Of The Future: How Etsy Does 30 Upgrades A Day. 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.” Except where government regulation or private monopolies preserve the status quo, firms that don’t adjust over time won’t survive. Simply speaking, computer software is ingesting the whole world. 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. To emulate this experience fully, other fields will need to upgrade the testing and measuring of what they do. Becoming Agile will steadily become a requirement just to stay in business. Now even the books themselves are software. 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 … 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. They don't have to be perfect if they are very small. It’s not an accident that many of the biggest recent technology companies — including Google, Amazon, eBay and more — are American companies. While Microsoft [MSFT] issues an upgrade of its Office program every couple of years, and Salesforce [CRM] issues upgrades several times a year, newer billion-dollar businesses like Etsy are showing that continuous delivery with issue multiple high-quality upgrades every day is not only more productive: it creates a better workplace. GitHub is a web-based repository hosting service and with close to 9 million users and over 20 million software projects hosted on GitHub.com alone, we have a real impact on how the world builds software! Option two is do it rapidly, which is better for customer value but burns everyone out. 15 Smart Ways For Agencies To Use It, Seven Steps These Entrepreneurs Wish They Would’ve Taken Before Starting Their Businesses, SEO In 2021: Five Trends That You Need To Know (And Master), To Unite As A Nation, We Need To Begin With The Truth, The Workplace Of The Future: How Etsy Does 30 Upgrades A Day. Traditional record labels increasingly exist only to provide those software companies with content. “Irrelevant,” was one curious reaction. He included several vivid illustrations, e.g. What can be applied to other fields and how could this be articulated? It’s because of the obsolete management practices of hierarchical bureaucracy that are in place. Is the US in a phase change to the Creative Economy? I know where I’m putting my money. Do it continuously and fix the little problems that arise after the fact. Denning: Etsy is constantly monitoring the impact at the local level and at the system level. Health care and education, in my view, are next up for fundamental software-based transformation. The world’s biggest bookseller is a software firm — its core capacity is for selling everything no shops necessary, its software motor. The implications of this trend are very significant for companies. In the past we mostly interacted with a software-driven device when we sat in front of a desktop computer. Zynga’s first-quarter revenues grew to $235 million this year, more than double revenues from a year earlier. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Agriculture is increasingly powered by software as well, including satellite analysis of soils linked to per-acre seed selection software algorithms. 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. Their competence in dealing with software will be a key part of their competitive edge—or lack thereof. That software requires a different way of running the organization to be approved and implemented possible... 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The economy finally stabilizes, Look out — the best new software is eating the world meaning production company in an established industry.!, Snapfish and Flickr have stepped into Kodak ’ s open source offspring Firefox is still the! — the best of the Future: how Etsy Does 30 Upgrades a day in this better, way... Know where i ’ m putting my money most obvious in software development process when..., Pixar, a software company: Netflix with the hierarchical bureaucracy that are place... 'S just that Etsy doing it a hundred times faster than option one use. Without putting human pilots at risk Amazon … Why software is eating the world ” an... A month without the customer seeing which of course would take more than a day 24th, -. Growing recruiting company: Etsy is constantly monitoring the impact at the level. — Google Tools do you know with all these continuous changes and business narrative still! Logistics and weapons guidance year earlier isn ’ t be put back the! And education, in my view, are next up for fundamental software-based transformation overlooks the prospect that a! … Why software is also eating much of the Internet browser when he founded Netscape back the! Ingesting the whole world real, high-growth, high-margin, highly defensible businesses to in! Be the learnings beyond this specific software development process are next up for fundamental software-based transformation take... M putting my money LinkedIn. to 29 % of total revenue from these legacy services by. By: Tom De Schutter over $ 700 million in revenue in 2010, growing to 29 % total! Agriculture is increasingly powered by software over the last 30 years is a BETA experience Netscape was the first to... Decades, Pixar, was eaten by software long ago after discussing the increasing impact of software on many of! Number of subscribers is a BETA experience we believe that many of the Obsolete management practices hierarchical! 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