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How Your Company Became a Software Firm and May Not Even Know It

Geneca CEO Joel Basgall likes to tell his software firm’s customers that they’re in the software business these days. Whether they’re florist giant FTD, Inc., movie rental upstart Redbox, or Blue Cross/Blue Shield, when it comes to attracting customers, partnering with suppliers, and employees interacting both internally and externally, it’s all about the software, says Blasgall. Middle-Market Executive recently caught up with Basgall to see if he’d like to expand on his “it’s all software now” mantra.  Joel-Basgall-Updated

MME: How do you help companies come to the realization that they’re in the software business?

Basgall: Well, what we commonly find is two situations: The first is where they are already a software company, but they just don’t realize it. The other is when they have really no way to differentiate in the future, so they are going to have to make software. One example, for instance, is Redbox. Until recently, they did not realize that they were a software company, and even though they operated digitally with software and kiosks, they would say simply, “We are a movie rental company.” That’s fine, but the reason the model actually works is the technology. In most organizations, IT is viewed as a cost. In the case of Redbox, it’s actually revenue-generating directly, and while it’s not literally the technology that consumers are buying, the fact is that if the technology falls apart, their model falls apart. Most organizations, because of history and past approaches, treat IT as a cost as opposed to treating it as part of its service.

MME: It would seem that customer service is one area where so many companies have added a sizable software component …

Basgall: I think that this is an interesting example. It’s a fact that many companies have distinguished themselves through customer service and not their product. One interesting example is Dell, where 5 or 6 years ago it offshored its tech support. Michael Dell was not running the company at that time and everybody really just hated it. One of the first things that Michael Dell did when he began overseeing the company again was to bring customer service back on shore. It made such a difference. In the software world, not only does software enable customer service, but also sometimes the software itself can be the customer service. What I think that we’ll see is a whole bunch of organizations understanding this situation, including manufacturing organizations, where the software is what differentiates one manufacturing firm from the next because without that, everything is equal.

MME: If I’m a middle-market manufacturer and I make widgets, why do I need to become a software company?

Basgall: What it really comes down to is that a widget is a widget, and your widget and my widget are going to be pretty much the same over time. The longer we compete, the more they converge to being the same and the more our prices become the same. The question is, What can we do that would be of value to the customer and differentiate our offerings? It’s not like you can do something to the widget because the widget has to do the same thing it always has. Depending upon what it is (there could be all types of things that you create), the only thing that does not have limitations is software — and what I mean by “limitations” is essentially physics. You don’t have any physics associated with software — software is all about ideas and imagination.

MME: How would creating software benefit my widgets?

Basgall: If you come up with some widgets — or let’s say that you make pipe couplings, and I make the same ones — what if you have software online that allows customers to test the pipe couplings in certain sequences and play out different approaches online that allow users to see if the soldering points are likely to hold under different circumstances, and finally customers can say, “Okay, I want all that stuff that’s required to make this particular pipe coupling work.” This would be hugely valuable to the customer, and if I were the customer, I would be willing to pay more because you made it so easy for me. Software can be a differentiator in a homogenized world. People have to stop thinking of it as a cost, when every dollar you spend generates value.

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