Software-as-a-Advantage (S3A)
The world’s leading innovators have shifted the focus of their competition investments from products development to software engineering. This leading-edge non-tech companies are following this pattern and joining the software revolution.
Through out the history traditional industries and business have been following management strategies based on functional specialization and division of labour to professions. This classical administration, mechanic and business function has led to highly complex and inefficient organizations. Manufacturing organizations have been solving complexity with process integrating specialized functions to a matrix following linear engineering, manufacturing and production approach. This approach no longer efficient in supercharged software-based innovation economy.
Software-as-a-Advantage based strategy has changed the way companies are organized, lead and governed around their super-fast innovation goals to monetize the market potential. The focus of these companies around operating systems, platform and cluster innovations with target to create new markets, services and products. Software, as a general multipurpose technology, allows companies changes rules of the game rapidly. The software-based service innovations allow organizations to integrate new connect components such as IoT, smart devices and network elements – not forgetting customer experience as critical success factor.
Software-as-a-Advantage is also major shift in NPD (“new product development”) spending where the software investments increased 65% during 2010 to 2015 and over 100% during 2015 – 2020. Software investment have taken the biggest leap of all competitive advantage spending in the largest industrial and business organizations during last decade. 2010 the share of companies investing in software was just over 50%. Just five years later 2015 the number of companies investing in software NPD rose to 70%. Today 90% of largest companies invest in software.
The 2020 can be characterize as era of Software-as-a-Advantage. Many companies are struggling and facing severe governance, leadership, managerial, organizational, and cultural challenges as they have shifted the investments to software. This remains major obstacle for traditional and functional organizations relaying on basic managerial education etc. Porters value chain, Mintzberg’s configuration of organization, Kotler’s marketing concepts and Taylor’s scientific management. All these theories where written during physical products and traditional production technology era – lacking completely the creative production and innovation side of software.
Software-as-a-Advantage (S3A) is much broader competitive advantage theory than traditional multipurpose technology foundation. In S3A the software is considered as new symbolic artefact, medium or language which itself can be used as product, service, tool and production utility for creating, driving and delivering value. Software can be used to create customer, markets and industries by humans. This means that human capital has once again become the most strategic asset of global competition. Nations and organizations with cognitive capabilities in software-as-a-advantage competition outperform competitors spurs wealth much faster than any other strategy. In the epicentre of this are business savvy engineers acting as intermediating catalyst value capturing and delivery between market and organizations.
Software industry has outperformed traditional industry NPD’s five times, auto industry NPD’s four times, and healthcare NPD’s two times. Europe has the lowest share of software related global NPD investments as European companies are cutting software investments at the same rate where USA companies increase their investment on software. This leads to -30% lower EDITDA, -15% smaller market cap and -10% revenue growths in Europe.
Why Europe has not strategy nor policy for Software-as-a-Advantage remains political question and important topic in near future.
Your innovation evangelist,
Mika
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- Skills for 2020
- New DESI views
- Firmware trojans