Think every business should become a software business? Think again

Rather than view themselves as software companies, organizations need to think of themselves as data companies

data analytics - statistical analysis - charts, graphs, strategy planning

There’s a popular mantra in the tech world these days that every business should strive to become a software business. With technology now central to competitiveness, the thinking goes, organizations must innovate through software to stay ahead. While there’s a germ of truth in this, the thinking is flawed and can lead CIOs to focus on the wrong objectives and waste time and money. Rather than view themselves as software companies, organizations need to think of themselves as data companies—data is the critical asset every company has and should leverage to improve operations, better serve customers and increase profitability.

The distinction between software and data may seem semantic—you obviously need software to access data—but it’s more significant than that. By casting software innovation as the imperative, CIOs focus on the wrong objective and miss out on more impactful, more immediate opportunities to expand their business. They’re focusing on the means rather than the end.

General Electric presents an interesting example here. The industrial giant invested billions to develop its Predix IoT platform, which aims to monitor the performance of turbines and other equipment in the field. Jeff Immelt, GE’s former CEO, was among the first to promote the idea that every company should be a software company. But Predix has run into trouble; the software has been buggy, and last year GE was forced to call a two-month “timeout.” Its instincts with Predix were correct; there is much to be gained from managing equipment in the field, but its mistake was to focus on the software rather than the data. By making a complex platform like Predix the cornerstone of its strategy, GE took its eye off the ball.

And keep in mind, GE is a company with deep pockets and a background in sophisticated engineering. The vast majority of companies are simply not in this position. They don’t have the expertise or resources to build innovative software that will advance their businesses and trying to do so is the wrong strategy.

Data, on the other hand, is a resource every company has, and it’s becoming far easier to create value from. Organizations now collect more data than ever, from mobile devices, websites, supply chains, ad campaigns and other sources. And the cloud provides affordable ways to store, process and analyze this data to extract value from it.

Yet statistics show much of this value is still being left on the table. In manufacturing and healthcare, for instance, organizations are capturing at most 20 to 30 percent of the potential value their data can provide, according to a report from McKinsey Global Institute. Retail, supposedly an industry on the cutting edge of data usage, fares only a little better, at 30 to 40 percent.

That’s not to say businesses should ignore opportunities in software, only that it shouldn’t be their primary goal. To be sure, some startups have used software to turn entire industries upside down, and organizations must look out for these opportunities to avoid being blindsided by rivals. Uber and Airbnb, for instance, built mobile apps and real-time reservation systems that allowed them to reinvent their sectors. These low-hanging opportunities in mobile may be largely exhausted, but machine learning and AI will provide new ways to upset traditional industries in the future.

But such opportunities are not common, and to view software creation as the primary path to competitiveness may be the wrong strategy. The technology industry is going through one of the greatest periods of innovation in its history, with much of that work centered on tools for generating business value from data. Leveraging these tools is where the greatest opportunity for most companies lies.

With that said, these are some of the questions organizations should be asking themselves to maximize their use of data:

  • What are the most valuable data types in my organization?
  • How can I leverage that data to make my business more competitive?
  • How do I make useful data accessible to employees?
  • How do I train my workforce to recognize the value of data and act on it?
  • What do my customers need that I can use data to provide?

The business world today is divided into data haves and have-nots. At modern companies such as Google, Facebook, and Tesla, employees have vast troves of data at their fingertips, which they use to make informed decisions about product development, marketing and other aspects of the business. Across the other side of this digital divide, too many organizations still view data as a privilege, parsed out to a select few.

This is the great challenge for enterprises today: to close this digital divide and spread data literacy throughout their business. Data is the primary asset for organizations in the 21st Century, and the companies that recognize this will be the ones that thrive.

Copyright © 2018 IDG Communications, Inc.