Roughly a decade ago, Marc Andreessen published what I consider one of the most important essays of our time, “Why Software Is Eating the World.” He described why he believed that technology was about to cause major disruption across virtually every industry. He gave voice to what I had been seeing in my own work—primarily with the disruptors, but occasionally with those under threat of disruption.
Ten years later, it's clear he was remarkably prescient.
That said, most companies seem to have not really understood his warnings.
Yes, they're all spending more on software now.
Yes, they've (mostly) moved to Agile methods.
But most have not transformed in any meaningful sense, and in particular most have not embraced technology as the business enabler it is.
The examples of this are unfortunately everywhere.
One of the clearest and most egregious recent examples has to be the absolute ineptitude of the leadership at Boeing with the software at the heart of the aircraft manufacturer's shocking 737 MAX crisis.2
Boeing's fundamental mistake was to consider this technology as just a necessary cost, rather than the core competency that enables them to provide the safest, most fuel‐efficient, and most cost‐effective airplanes available.
Rather than staffing an empowered product team—continuously working to provide the safest, most fuel‐efficient, mission‐critical control software—they decided to outsource this technology, thinking they could maybe save a few dollars.
It's not just the aerospace industry. The automotive industry has suffered from this mindset for decades,3 until Tesla came along and proved what is truly possible when technology is at the core of the car, rather than treated as just a necessary cost. Going far beyond navigation and entertainment systems, using technology at its core and over‐the‐air updates, a Tesla actually improves over time rather than simply depreciating. Consider that for a moment.
Pixar has shown the film industry what is truly possible when technology is at the core of an animated feature film, rather than just a necessary cost. Pixar uses technology in ways far beyond traditional film‐making, and the technology teams are as valued as the creative teams.
As you may know, Pixar is now part of Disney, and look at how Disney has embraced technology to completely reimagine so many of their existing businesses. This includes everything from their legacy theme parks to what they've recently done with the Disney+ video streaming service.
The same story is playing out in the insurance, banking, health care, telecommunications, education, agriculture, transportation, and defense industries. I could keep going.
Often, when I am having dinner with one of the CEOs from a company that doesn't get this, they'll tell me how they're not a technology company—they're an insurance company, or a health care company, or an agricultural company. I'll say, “Let me tell you what I would do if I was a product leader at Amazon or Apple, and we've decided to go after your market because we believe it is large and underserved, and that technology is available that enables dramatically better solutions for your customers.”
After describing how we would set up our teams around the enabling technology to optimize for true innovation, I also point out that, competitively, we would be betting on them not being able to respond because they would be too busy trying to protect their old business.
It's not that these CEOs don't admire what companies like Amazon and Netflix and others have done—they generally do. It's that they don't see how these lessons apply to them. They don't understand what Marc was trying to warn them about.
Of course, there are many possible reasons why the CEOs of these companies have been so slow to grok this. Sometimes, they have worked in the old world of business so long that they need more time to wrap their head around the changes. Sometimes, I can't help but feel like they are fearful of technology. Sometimes, they just seem to be resisting change. But, ultimately, these are all just excuses. The board is supposed to be there to ensure the CEO is able to effectively lead the company.
What is especially ironic is that these companies are almost always spending far more on technology than they need to. In fact, I've never seen more wasted technology investment than I find in these companies that don't understand the true role of technology.
Rather than outsourcing hundreds or even thousands of mercenary engineers—and providing them roadmaps of features from their stakeholders which rarely generate the necessary business results—I explain to them that they will receive a much greater return from a significantly smaller number of the right employees. Employees who are given business and customer problems to solve and are held accountable to the results.
One way or another, becoming one of the best companies today requires senior leaders who understand the true and essential role of technology.