2020 has become synonymous to COVID19, and in the wake of the global pandemic, companies have taken cost-cutting measures across the board. Given the situation, it’s no surprise to expect a decline in IT Spending, and forecasts by Gartner reaffirms the same, with an 8% decline in Global IT Spending as against 2019.
So, what it means for the ISVs and leading IT solutions developers? Despite the reduced investment, the sheer market size ($425 billion investment enterprise software and IT systems), has room for opportunities. Opportunites for disruptors capable of addressing the emerging needs of the New Normal – new entrants, new solutions from dominant players, etc. Changing market dynamics is accelerating new product introductions, and companies projecting themselves as the next major innovator.
The critical difference between a company that achieves a high rate of systemic innovation and a company that wants to be known as a disruptor but is not one is apparent in these attributes:
- Innovating Vs Marketing
If marketing statements were the True-North for every company, several B2B technology companies would be ‘Pioneers’ in helping their customers. Companies like to brand themselves as the innovators in the marketplace. However, systematic innovation is challenging, time and resource-intensive. R&D is an expense until its contributions result in full-fledged and viable products.
Hence, a software disruptor would spend a large proportion of its revenue on research and development. Apple, one of the eight companies consistently ranked as one of the most innovative companies by BCG, had spent nearly $4.2 billion on R&D in just a quarter in 2019.
- Hiring ‘Product People’
Legacy enterprise software businesses have been mostly dependent on human capital investments in the sales and business development areas. In such companies, the product team is often looking backward and deciding how to build updates & provide support to earlier versions.
For truly innovative companies, hiring more engineers, data scientists, product & program managers would increase focus on new products, not newer versions. More investments in growing the number of sales teams would mean milking the existing product base. From a corporate strategy standpoint, there is not a lot wrong with this as far as it can yield competitive profits. But such a company cannot brand itself as an innovator.
- Novelty vs. Economic Innovation
McKinsey stated in a report that leaders in innovative companies were able to quantify the incremental revenues and profits that came with the spending in innovation. This mindset differentiates a company that focuses on innovation to solve enterprise problems and a company that innovates for the sake of doing it.
Establishing a projection that shows how much profits or revenues would come from innovation would mean a goal for the company to achieve. And a goal-setting exercise would necessitate a clear understanding of the marketplace and customer-needs because no software disruptor should run with an implausible goal.
ultimately, becoming a software disruptor in 2020 means companies will need to pivot existing products or develop new ones, to meet the challenges in the current and post-pandemic world.