xScion Blog

Will All Companies Eventually Become Software Companies?

Jan 21, 2019

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The other day I read an article in Information Week magazine titled, Capital One CIO: We’re a Software Company. I don’t think it’s any surprise that for a while now, Capital One has distinguished itself from competitors and other large organizations by referring to itself as anything other than a credit card company or financial company. As far back as I can remember, you would often hear leadership say things like, “Capital One is a technology company first and foremost”, and in many ways, they were ahead of the game in that regard. Capital One has always sought to push the boundaries of digital transformation, to serve as both a means of growing market share and as a way of defining their brand. They saw the writing on the wall and were able to implement digital transformation to adapt more quickly to a changing customer experience environment than most companies. This latest comment by CIO Rob Alexander takes the idea of digital transformation to a new level by going beyond the idea of simply being a technology company. It begs the question, as digital transformation continues to pervade just about every conversation concerning technology modernization, are all companies essentially software companies at their core, or at least on the path to becoming software companies?

 

The term digital transformation has been one of those monolithic terms that has been widely used over the last several years to mean either everything or nothing, depending on one’s perspective. With that being the case, 2019 is shaping up to be one of those years where that term might actually live up to its promise with the software and application economy wave really starting to crest. The most in-demand use cases for digital transformation are focused on optimizing the customer experience to increase market share. I think most of us have used our phones for banking, buying things through Amazon or even booking a hotel room, but what about the rest of the economy? How will advances in the use and prevalence of these applications affect customer demand for things like coffee and fast food, or everyday services like house cleaning, auto repair or babysitting? Clearly there are several companies attempting to fill these voids and creating disruption along the way, but how will this change as market demand continues to force every company to come to grips with exactly “what” they are?

 

Capital One seems to fit into this new application economy very nicely. It’s very easy to see why they view themselves as a software company and how they will benefit. But as an example what about a company like Starbucks? The Starbucks brand was never really about coffee right? Starbucks founder Howard Schultz in his own book referred to the Starbucks brand and experience as the “third place” or this other place that you could go to and exist for a while, outside of your work or home. While you were there, you would just “happen” to buy really expensive coffee, and you would love it. Even McDonalds founder Ray Croc realized early on that they weren’t in the business of selling hamburgers, but rather, in amassing one of the largest real estate empires in the world. The foundational aspects of these businesses won’t go away, but what role will software and applications play in their future? Will companies like Starbucks and McDonalds ever get to a point where like Capital One, they too consider themselves a software company first? Time will tell, but I can promise you that they’ve already started heavily investing in that future.

 

As we look to the future and prepare for it, it’s extremely important to not put the application cart before the business-need horse. It’s very easy to spend a ton of money and time on digital transformation without first clearly defining the business need and using that data as a means to inform those transformation decisions. Additionally, it’s important to fully map out your ongoing process for continued transformation into the future. As market forces continue to not only push companies to transform at all, the speed at which a company must transform and evolve is also growing at an exponential rate. It will no longer suffice to simply have some feature available to your customers before your competitors do. The real race will be measured by how long you can sustain that narrow lead over your competitors, over time and hopefully indefinitely. This new race is being won on the backend as companies re-engineer “how” they produce and release their software and applications to the end-user.

 

Whether or not a company has decided if they are, or will ever be a software company, the winners and losers of the next decade will in part be decided by the success and efficiency of the “new assembly line” that once only produced things like cars and goods but is now producing the digital experiences of the future.

 

By Mike Hoke, Client Partner

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