Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic.
More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense. Many of the winners are technology companies that are invading and overturning established industry structures. Over the next 10 years, many more industries will be disrupted by software, with new world-beating companies doing the disruption in more cases than not. 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.
There are many dramatic examples of this phenomenon of software eating a traditional business like,
Books: The suicide of Borders and corresponding rise of Amazon. Today, the world’s largest bookseller, Amazon.com, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary.
Today’s largest video service by number of subscribers is a software company: Netflix, not Blockbuster. Now other traditional entertainment providers are facing the same threat. Comcast, Time Warner Cable and others are responding by transforming themselves into software companies with efforts such as TV Everywhere.
Music: Dominant music companies are software companies too, Spotify & Pandora.
Entertainment/Videogame: Fastest growing entertainment companies are videogame makers, again software like Zynga, that delivers its games entirely online and Rovio(Angry birds). Meanwhile videogame biggies like Electronic Arts and Nintendo have fallen.
Movies: Best new movie production company Pixar was a software company, Disney had to buy Pixar to remain relevant in animated movies.
Photography: All photos that you take today have a software powered camera and photos are uploaded automatically to the Internet for permanent archiving and global sharing. Companies like Google Photos, Snapfish and Flickr have stepped into Kodak’s place.
Retail: Largest direct marketing platform is a software company—Google. Now it’s been joined by Groupon, LivingSocial, Foursquare and others, which are using software to eat the retail marketing industry.
Telecom: Today’s fastest growing telecom company is Skype, a software company that was just bought by Microsoft (another software company). Meanwhile, the two biggest telecom companies, AT&T and Verizon of US, have survived by transforming themselves into software companies, partnering with other smartphone makers.
Recruiting: LinkedIn is today’s fastest growing recruiting company, giving LinkedIn the opportunity to eat the lucrative $400 billion recruiting industry.
Automotive: 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 trend toward hybrid and electric vehicles will only accelerate the software shift—electric cars are completely computer controlled. And the creation of software-powered Google Self-Driving Car Project is already under way at Google and the major car companies.
Retail: Today’s leading real-world retailer, Walmart uses software to power its logistics and distribution capabilities, which it has used to crush its competition.
Logistics: FedEx, which is best thought of as a software network that happens to have trucks, planes and distribution hubs attached.
Airlines: 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.
Natural Resources: 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.
Agriculture: is increasingly powered by software as well, including satellite analysis of soils linked to per-acre seed selection software algorithms.
Finance: This industry has been visibly transformed by software over the last 30 years. 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.
Defense: is increasingly software-based. The modern combat soldier is embedded in a web of software that provides intelligence, communications, logistics and weapons guidance. Software-powered drones launch airstrikes. Intelligence agencies do large-scale data mining with software to uncover and track potential terrorist plots.
Health care and education, are next up for fundamental software-based transformation. Both of these industries, have been highly resistant to entrepreneurial change, are primed for tipping by great new software-centric entrepreneurs. And the impact has already started, think Khan Academy, Udacity, etc.
We’re 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.
Companies in every industry need to assume that a software revolution is coming. Instead of questioning their valuations, let’s seek to understand how the new generation of technology companies are doing what they do, what the broader consequences are for businesses and the economy.
I’ve read this article in last few years many many times, and since then try going through it, atleast once a year, and it shakes me up almost every time. Just imagining, that everything is & eventually will be software powered in itself is a huge thing.
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