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CEOs: Like It or Not, You’re Running a Software Company

on September 4, 2014

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This post originally appeared on the Powered by Battery blog.

What business is your company in? Chances are you’ll answer this question in a pretty focused way – your company is in financial services or telecommunications or transportation. I would argue that as CEO, you should see your company in a different light: Your company is, at its core, a software company. Or it should be.

Think of it this way: There is no shortage of competition today. The barriers to entry are so low that new competitors are coming out of nowhere and disrupting entire industries in the blink of an eye. To be successful, you must constantly find new ways to innovate and differentiate your company, no matter what your specific industry. You have to do things better, faster and cheaper, and engage your customers and partners in new and meaningful ways. It doesn’t matter whether you’re a bank, a pharmaceutical company or a logistics provider; it all comes down to thinking like a startup and using software applications to stay one step ahead.

App companies are disrupting traditional industries

App-Driven-DisruptorsThere are plenty of good examples of ventures that are app companies that happen to be disrupting a particular industry.

Take Uber, for instance. Everybody knows the taxi experience is lackluster. Cab availability can be spotty. Pricing is inconsistent. Security can be an issue. Uber didn’t just introduce a shinier fleet of cars. The company found a way to turn the industry on its head, starting with technology, and it has me hooked as a consumer. I can instantly request, track and pay for my ride, all from the Uber app. Uber has developed a strong relationship with me as a customer, using software in a unique way to collect information and re-think processes that have revolutionized the way an entire industry works.

For another example, look at Nest in the home-hardware industry. Nest took hum-drum products like thermostats and smoke alarms and made them exciting—thanks to software. Nest’s thermostats program themselves by learning the optimal temperatures you prefer. This takes innovation. Google, no stranger to innovation, saw the possibilities and bought Nest for $3 billion.

Then there’s Airbnb, in the travel industry. The team there created a community marketplace for people to list, find and book accommodations online or from a mobile device. In one swoop, Airbnb empowered both buyers and sellers. And the model is working. The company recently inked a $450 million funding deal that boosted its valuation from $2.5 billion to $10 billion.

What these innovative companies have in common is the following: an urge to disrupt the status quo and turn an industry on its head; an app-driven approach; and a practice of continuously releasing new versions of their software. In other words, they are all inherently software companies.

Your IT department isn’t fast enough

Make no mistake: It’s hard to act like a software company and innovate as fast as a company like Uber does. The business of an organization is usually pretty good at coming up with ideas, but often isn’t in synch with IT. Either IT says “no” to the project altogether or it can’t keep pace because there aren’t enough resources to deliver what the business needs, as quickly as it needs it.

This is happening across industries. McKinsey published a study earlier this year that asked close to 1,000 IT leaders if their IT organizations are faster or more competitive than others in bringing ideas to market. Eighty-seven percent thought their companies were slower than the competition. Only 13 percent thought their organizations were doing well.

Turn your whole company into an IT department—or get rid of it altogether

The key to more quickly bringing innovative ideas to market isn’t simply a bigger IT department. In fact, I would argue that you should consider eliminating your IT department altogether. It sounds counterintuitive but the point is to make software-thinking a defining characteristic of your entire business, not just a separate department. Every employee in your company should be empowered to think—and act—like they work in an innovative startup. My 150-employee company doesn’t have a traditional IT department. Why?  Because I strongly believe that in order for the company to be fast and agile, we must all be part of the innovation process.

Once you embrace this notion, you will be in a much better position to harness everything that’s unique about your company – your people, processes and information – to deliver apps that help continually reinvent your business. Great ideas live in every corner of your organization. If someone in marketing or finance or HR has an idea for a new application, they should be able to take matters in their own hands. That’s not to say I’m expecting everybody in a company to build their own apps. I’m simply suggesting a new way of thinking about business-app development that unleashes the creativity of your entire workforce.

When I founded Mendix, and started speaking with prospective customers about their application-delivery challenges, I found most companies weren’t thinking like this. They were focused on efficiency and cost reduction. Since then, the role of IT has changed—fundamentally—and businesses now recognize the need to act fast, and use apps to drive growth, innovation and differentiation in a hyper-competitive world.

Uber, Nest and others have proven that organizations can be innovative and disrupt markets by putting software at the heart of their business and making it the differentiating factor. In today’s world, the ones that throw the traditional playbook out the window and turn their companies inside out will be the leaders of tomorrow. It’s time to start running your company like a software company!

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Derek Roos

About Derek Roos

As chief executive officer, Derek leads a pioneering team of software industry experts with the mission to bridge the gap between business and IT, making business application development dramatically easier, faster and collaborative. As a result, the company is achieving tremendous global growth and disrupting the way many of the world’s leading companies are innovating and differentiating. Derek earned a Master of Science degree in Business Administration from Erasmus University, Rotterdam. He is a highly sought speaker at IT conferences and is guest lecturer at several universities. Derek has received the Ernst & Young Emerging Entrepreneur of the Year 2012 Award. Keep in touch at @MendixCEO.

  • Johan Theunissen

    Hi Derek, great article. If every company is a software company, than it is really about Information, to be more precise, boundaryless information flow, to create value for customers anytime, any place, on any device …

  • Mendix CEO – Derek

    Indeed, Johan, thanks for your comment. Getting the right information to the right people at the right time is key.