McKinsey: 6 ‘Must Dos’ for Business Success in a World Dominated by Software

The use of software is so embedded into the modern business world that even traditional companies are recognizing that to survive and thrive in a digital world they must begin to think and act like software companies themselves.

This evolutionary pressure is being driven by the accelerated adoption of digital products, an expanded share of value in products and services across industries coming from software, and the growth of cloud computing and programming becoming more accessible, which is putting greater power into the hands of countless workers.

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While most companies already accept the importance of software and are investing accordingly, to transform from a company that uses software to a software company takes careful planning and execution. McKinsey & Company recently released a report offering six key principles to drive that transformation.

The CEOs interviewed as part of the report laid out the first three key principles: leadership, communication, and investment. Beyond simply implementing DevOps, companies must commit to a culture that focuses on the value of software, starting at the top. One third to one half of a leadership team should be made up of deep software experts with the talent and experience necessary to drive transformation from the top. The strategy, value proposition, and progress of a software business must also be communicated consistently, from the C-suite down to frontline workers, as well as to external stakeholders. Sustained investment is also core to building a successful software business, with most new businesses needing to invest an average of 25-35% of revenues over three to five years before they start to generate profits.

Empowerment, strategy, and talent make up the remaining principles needed for a successful transformation. By empowering software product managers to act as leaders and enabling product teams to experiment, try new tech, and develop their own solutions, businesses can build in the kind of flexibility needed to succeed in the software business world.

Building a specific go-to-market strategy is also crucial to success, sometimes requiring recruiting outside software sales experts to drive a profitable business. Focusing on mission and work environment can help with recruiting top talent by providing opportunities to grow and build skills and granting the kind of autonomy that keeps developers happy and in place.

While the idea of changing a traditional business based on products and services into one based on software seems daunting, nearly 70% of top economic performers, compared with just half of their peers, are using their own software to differentiate themselves from their competitors. Software is no longer a tool of the future, it is a key to success today.