Everyone is now a software company (again)
Several years ago I wrote, “everyone is in the software business. All of the interesting business operations are happening inside your company’s software.” Since then, this trend has intensified. Today I want to share with you three companies that should come under the software label. And while you may not think of these three as software vendors, all three run themselves like a typical software company.
The three are Tesla, Express Scripts, and the Washington Post. It is just mere happenstance that they also make cars, manage prescription benefits and publish a newspaper. Software lies at the heart of each company, as much as a Google or a Microsoft.
In my blog post from 2014, I talked about how the cloud, big data, creating online storefronts and improving the online customer experience is driving more companies to act like software vendors. That is still true today. But now there are several other things to look for that make Tesla et al. into software vendors:
- Continuous updates. One of the distinguishing features of the Tesla car line is that they update themselves while they are parked in your garage. Most car companies can’t update their fleet as easily, or even ever. You have to bring them in for servicing, to make any changes to how they operate. Tesla’s dashboard is mostly contained inside a beautiful and huge touch LED screen: the days of dedicated dials are so over. These continuous updates are also the case for The Washington Post website, so they can stay competitive and current. The Post posts more total articles than the NYTimes with double the reporting staff of the DC-based paper. That shows how seriously they take their digital mission too.
- These companies are driven by web analytics and traffic and engagement metrics. Just like Google or some other SaaS-based vendor, The Washington Post post-Bezos is obsessed with stats. Which articles are being read more? Can they get quicker load times, especially on mobile devices? Will readers pay more for this better performance? The Post will try out different news pegs for each piece to see how it performs, just like a SaaS vendor does A/B testing of its pages.
- Digital products are the drivers of innovation. “There are no sacred cows [here, we] push experimentation,” said one of the Post digital editors. “It is basically, how fast do you move? Innovation thrives in companies where design is respected.” The same is true for Express Scripts. “We have over 10 petabytes of useful data from which we can gain insights and for which we can develop solutions,” said their former CIO in an article from several years ago.
- Scaling up the operations is key. Tesla is making a very small number of cars at present. They are designing their factories to scale up, to where they can move into a bigger market. Like a typical SaaS vendor, they want to build in scale from the beginning. They built their own ERP system that shortens the feedback loop from customers to engineers and manages their entire operations, so they can make quick changes when something isn’t working. You don’t think of car companies being so nimble. The same is true for Express Scripts. They are in the business of managing your prescriptions, and understanding how people get their meds has become more of a big data problem. They can quickly figure out if a patient is following their prescription and predict the potential pill waste if they aren’t. The company has developed a collection of products that tie in an online customer portal to their call center and mobile apps.
I am sure you can come up with other companies that make normal stuff like cars and newspapers that you can apply some of these metrics to. The lessons learned from the software industry are slowly seeping into other businesses, particularly those businesses that want to fail fast and more quickly as their markets and customers change.