Executives don’t understand software and that’s a problem

For the last years, I’ve been testing out the postulate that the higher you look inside an organization, the less understanding there is of software. In that time, I’ve encountered a fair amount of confirmation, but mostly based on anecdotes or opinion. Recently, I was involved in a project at a non-Dutch multinational that has provided me with first-hand evidence, not only of the reality of the postulate, but also of its rather shocking scope.

Before we get into the details, it’s probably worth discussing why a lack of understanding of software at executive level is an issue. Simply put, as hardware has become increasingly powerful, cheap and commoditized, it’s software that’s becoming the more significant creator of value. And the thing with software is that it changes the business game. Perhaps the simplest-to-explain example of how software is changing business is the shift from the right-to-own a product to the right-to-use it. Owning a product is a capital expense that implies investment and risk. Using it is an operating cost that comes out of the bottom line. Guess which one most businesses would prefer and, if you guessed rightly, you’ll understand why servitization business models are the next hot potato.