In the past we mostly interacted with a software-driven device when we sat in front of a desktop computer. My book, "The Age of Agile" was published by HarperCollins in 2018 and was selected by the Financial Times as one of the best business books of 2018. Groupon generated over $700 million in revenue in 2010, after being in business for only two years. Roger Martin, Academic Director of the Martin Prosperity Institute commented: This is an interesting example of what I write about as Integrative Thinking. This includes even industries that are software-based today. The implications of this trend are very significant for companies. When you have two seemingly opposing models, the choice isn't to either choose one or the other or to compromise. 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 So here, option one is update very infrequently, which avoids burnout but migrates the site very slowly, which is bad for customer value. Netscape was the first company to capitalize on the World Wide Web by launching the web browser Netscape Navigator. Over the next 10 years, the battles between incumbents and software-powered insurgents will be epic. And the creation of software-powered driverless cars is already under way at Google and the major car companies. 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. That's right: Software is delivering fresh, natural and high-quality food in situations where only junk food was available. Straub: What would be the learnings beyond this specific software development process? 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. 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. What this means is that companies in nontechnology industries such as auto repair will use the third platform as a weapon against competitors. Their competence in dealing with software will be a key part of their competitive edge—or lack thereof. 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? One company I know has a backlog of almost a thousand suggested improvements. 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. No one should expect building a new high-growth, software-powered company in an established industry to be easy. And, perhaps most telling, you can’t have a bubble when people are constantly screaming “Bubble!”. It is to come up with a creative resolution of the tensions in such a way as to create a better outcome than either. All Rights Reserved, This is a BETA experience. 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. Watch the world around you disappear. You may opt-out by. Now it’s been joined by Groupon, Living Social, Foursquare and others, which are using software to eat the retail marketing industry. Capitalism’s process of creative destruction then takes over: knowledge can’t be put back in the bottle. Marc Andreessen became the godfather of the Internet browser when he founded Netscape back in 1994. 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. Google, Amazon, Facebook). June Javelosa January 30th 2017. It turns out that it’s not just software that’s’ eating the world. Meanwhile, traditional videogame powerhouses like Electronic Arts and Nintendo have seen revenues stagnate and fall. In short, software is eating the world. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. End-to-end prototyping to the rescue. If you continue browsing the site, you agree to the use of cookies on this website. Companies in every industry need to assume that a software revolution is coming. 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? Our business is very different. That sort of thing just isn’t possible in our field. "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." Running that same application today in Amazon’s cloud costs about $1,500 a month. Health care and education, in my view, are next up for fundamental software-based transformation. It’s true that many big old companies are still operating much more slowly. There’s no way through this problem other than education, and we have a long way to go. Netscape’s open source offspring Firefox is still immensely popular. Everything here moves much more slowly.” This ignores the fact that most firms' core systems and processes are already run on software. “Irrelevant,” was one curious reaction. Software is eating the world. That updates the site even faster than Option 2 and makes staff feel better than option one. He included several vivid illustrations, e.g. Originally published in The Wall Street Journal on August 20, 2011. 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. If Software is Eating the World, What Does the Food Chain Look Like? After discussing the importance of software he stated his thesis: 2. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. Can you still find out a likely causality for performance improvement or degradation? 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. With the hierarchical bureaucracy in place, it will be many. They don't have to be perfect if they are very small. Finally, the new companies need to prove their worth. 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. 13 Ways To Better Keep Stakeholders In The Communications Loop, 13 Phrases That Will Make A Sales Script Sound ‘Canned’, Marketing Budget Surplus? In short, software is eating the world. Why Software Is Eating The World By Marc Andreessen. 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. It’s true that the Agile phenomenon is most obvious in software development. 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. 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. 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. 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. Software-powered drones launch airstrikes without putting human pilots at risk. It’s not an accident that many of the biggest recent technology companies — including Google, Amazon, eBay and more — are American companies. Straub: With a large releases you will know if it has gone right or wrong. Is the US in a phase change to the Creative Economy? 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. BestReviews. To emulate this experience fully, other fields will need to upgrade the testing and measuring of what they do. 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. 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. 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. Today’s dominant music companies are software companies, too: Apple’s iTunes, Spotify and Pandora. Integrative solution:  Change the way you think about updates. This includes even industries that are software-based today. […] Netscape’s open source offspring Firefox is still … “You’re talking software development. 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! 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. Software and context is transforming products. 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” is an article written by Marc Andreessen for The Wall Street Journal. 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?”. 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 also overlooks the prospect that within a few years, almost all business will be digitized and run on software. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. 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. Some interesting responses came in on my article about The Workplace Of The Future: How Etsy Does 30 Upgrades A Day. Marc Andreessen became the godfather of the Internet browser when he founded Netscape back in 1994. The world was impressed. Now even the books themselves are software. 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. But that’s not because of the inherent nature of the work. Steve Denning: We are talking about improvements to the site, not just fixing 30 bugs per day. For many years I worked at the World Bank, where I held many management positions, including director of knowledge management (1996-2000). The titel of this post comes from an essay in the Wall Street Journal written by Marc Andreessen. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries. But too much of the debate is still around financial valuation, as opposed to the underlying intrinsic value of the best of Silicon Valley’s new companies. What Etsy is doing is only possible with continuous automated testing and measuring of everything that is done. 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. But it requires changes in the fundamental assumptions around the problem. 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. That would be a separate improvement project, which of course would take more than a day. It's just that Etsy doing it a hundred times faster than in manufacturing. Disney — Disney! How many years will it take for those improvements to be approved and implemented? It's an integrative solution. What Tools Do You Need To Fight Ad Fraud? Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. 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). The world’s biggest bookseller is a software firm — its core capacity is for selling everything no shops necessary, its software motor. 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. It’s brutally difficult. The essays are free to read online. As Marc Andreessen quipped in 2011:  “Software is eating the world.”. Software Is Eating the World, And You Need to See It. Option two is do it rapidly, which is better for customer value but burns everyone out. Companies like Shutterfly, Snapfish and Flickr have stepped into Kodak’s place. — had to buy Pixar, a software company, to remain relevant in animated movies. Sign up to get our best articles, latest podcasts, and news on our investments emailed to you. 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. 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. They operate in the background without the customer seeing. The advantages are clear, but it’s also […] Marc Andreessen on Why Software Is Eating the World – WSJ.com. In this blog I have been discussing the increasing impact of software on many aspects of our lives. At faculty, we are pioneering both Software 2.0 and … An in-depth exploration (~30k words) of how software is eating the world, based on research supported by Andreessen-Horowitz in 2014. 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. 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. Traditional record labels increasingly exist only to provide those software companies with content. 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. 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. Agriculture is increasingly powered by software as well, including satellite analysis of soils linked to per-acre seed selection software algorithms. 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). Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. 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. How do you know with all these continuous changes? The best new movie production company in many decades, Pixar, was a software company. 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. Excluding the revenue from its Qwest acquisition, CenturyLink’s revenue from these legacy services declined by more than 11%. In short, software is eating the world. 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 fastest growing telecom company is Skype, a software company that was just bought by Microsoft for $8.5 billion. Are these just good ideas by employees? Companies in every industry need to assume that a software revolution is coming. News / Future Society / Bestreview / Obsolete / Software. Their competence in … This is a tragedy since every company I work with is absolutely starved for talent. Changes that improve things locally but degrade the overall system don't pass the automated quality control tests that are in place. 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). : 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. 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. (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. Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world. 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. I am also personally an investor in LinkedIn.) The reality is that most firms today, whether they know it or not, are already software companies and will steadily become more so. That’s the big opportunity. Straub: What are the sources for the changes? We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses. For the first time ever, on LinkedIn, employees can maintain their own resumes for recruiters to search in real time — giving LinkedIn the opportunity to eat the lucrative $400 billion recruiting industry. And after it's happened, there's no going back. I know where I’m putting my money. Intelligence agencies do large-scale data mining with software to uncover and track potential terrorist plots. 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. 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. 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. 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