Every Company will be a Software Company – Really ?

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What was once an engineered hardware product is becoming an electrically driven software product; the ubiquitous CAR. Microsoft CEO Satya Nadella made this statement (‘Every Company will be a Software Company’) few years back.*

If this above statement is becoming a reality – will that affect our careers, businesses, societies, and life as a whole? Do we need to worry about it enough to start preparing for it as individuals & corporations?

Let’s stress test this statement with a an example from the marketplace & see if that has any indicators to prove this statement is true.

Let’s step back and explore what made a company win before the DIGITAL age?

Every company had a USP (unique selling proposition) & some trademarks with their products & processes. They addressed a particular problem or solved a particular issue. These are basics of a successful business & that is not changing with the times. But what made a GE or BMW win was either their product lifecycle to bring to market top pf the line Engines or Cars before the competition could through R&D, lots of market research, testing in various physical conditions and the list goes on.

So, then what’s changing after the Digital age?

Any company before the Digital age if they had a GTM (Go to Market) plan with a product development lifecycle of let’s say for e.g., 12-24 months now it’s cut down by half or even less, thanks to a myriad of cloud technologies available for a fraction of the cost & easily available to anybody without a huge budget. Digital tech has shrunken all timelines and costs through sheer compute power enabling automation & simulation to enable companies to bring products out quicker & better.

It’s no longer computational processing power or huge manpower (in some cases) needed for faster or better products, but cloud & digital tech gives you all that for very affordable prices with easy access.

Hypothetical Example:

If you are an industrial automation company with lots of integration products (hardware & software) using cloud & digital technology. If company A comes out with better & faster products than Company B, then A wins over B to grab mind share & market share.

How did Company A do it vs Company B?

Company A had a digital roadmap & moved systematically to the cloud & now leverages AI/ML/agile mind set, fails more often & comes up with products that customers get their hands on sooner. This is not possible for Company B who still does all their simulation, production, testing & roll out the old-fashioned way with little to no automation.

Company A does it through software both in house & leveraging cloud providers. That is where large conglomerates such as VW or GM or Honeywell is growing their software units faster than their engineering staff.

Does that mean companies don’t need their R&D, product management, testing teams and so on? They will need them all but probably not in large numbers as traditionally done in the past, but each division will have key leaders, architects, engineers who have ideas. options & work with software engineers in each group to simulate, test, manufacture pilot products & launch at scale once the software simulations help them test which ones will fail or succeed in the marketplace.

Also, even if their few products fail, the product life cycle will be considerably shortened since everything is automated & software driven so they can introduce new products some of which will succeed while others fail. The secret is they fail fast & win fast because they have moved software to the core of what they do R&D or manufacture or marketing or testing or CX (customer experience)

Real Life Industry Example:

VOLKSWAGEN aims to achieve the following through focus on SOFTWARE** :

  • Business from a car manufacturer to a mobility provider.
  • Cut development of vehicle projects from 54 to 40 months (25% savings)
  • From a mechanical engineering to electrically driven software product
  • Goal of being completely carbon-neutral by 2050
  • Create AI solutions for problems on the road.
  • VW Bug with ‘0’ lines of code many years back to 100 million lines of code (currently), expected to reach up to 300 million lines of code in the future.
  • Autonomous driving by 2030

Transformation of the Volkswagen development process.

Image Source**

What’s the Road ahead?

Imagine a Boeing or Airbus with millions of parts/suppliers/supply chain now becoming software driven at its core; cutting down on development, testing, new product launches faster than its competition? This transition from physical & manual processes to software driven automated digital processes will affect all industries not just heavy industry, it’s just a matter of time.

There will be the Blackberrys & Blockbusters in every industry who will be late to this software transition and eventually go out of business. On the contrary we will also have the Netflixs & Teslas who will embrace the inevitable SOFTWARE mantra and change around it to stay in business & excel.

One can extrapolate from the transformation VW is doing, similar changes will affect most industries & corporations in the coming decades. Those that embrace this change will stay relevant and in business. Software will be at the CORE and their unique business processes & trade secrets/patented IP (Intellectual Property) infused into that core. Not only will this paradigm shift make good business sense in terms of costs containment & productivity but also better revenues through better products for the environment and for customers.

Will this paradigm shift be as drastic as a horse buggy to a car or ships to planes. Right now, it seems to be getting bigger than all prior revolutions be it industrial, internet or others. Whatever be the case its best to embrace this change since that is the only constant.

*https://www.satellitetoday.com/innovation/2019/02/26/microsoft-ceo-every-company-is-now-a-software-company/
**https://www.volkswagen-newsroom.com/en/press-releases/volkswagen-realigns-technical-development-shorter-product-cycles-and-faster-digital-offerings-7768

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