In recent decades, we’ve witnessed an enormous shift in how businesses operate, thanks to advancements in technology. Today, regardless of the sector or size, every company is becoming a software company in some capacity. Whether it’s delivering products, managing operations, or innovating new services, software is at the core of it all.

Digitalisation is no longer an option but a necessity for survival and growth in an increasingly competitive marketplace. Many companies that failed to recognize this shift, like Borders or Blockbuster, were replaced by companies like Amazon and Netflix, which are fundamentally software-driven. This article explores why companies are transforming into software companies and how this transformation drives competitive advantage.

In the audio industry, take Universal Audio as an example. Once focused solely on analog equipment, they transitioned to a hybrid model offering digital plugins and some hardware equipment. This shift underscores how even traditional companies must evolve into software-driven businesses to thrive.

Data is crucial for creating successful products, and software is essential for collecting, processing, and analyzing that data. Over the past few decades, industries across the spectrum have been disrupted by companies that understand the value of data-driven products. For example, companies like Amazon and Netflix have mastered using software to gather customer data and optimize user experiences in real time.

With over 2 billion internet users and an expected 5 billion smartphone owners in the next decade, the capacity to collect, analyze, and act on data will only increase. This digital infrastructure empowers companies to innovate faster and deliver more tailored, personalized products. Amazon’s data engine revolutionized the retail sector by tailoring product recommendations based on customer preferences. This data-driven approach allows businesses to be more proactive, not reactive, to customer demands.

Netflix has taken a similar approach. As explained by former VP/CPO Gibson Biddle, Netflix used data to hypothesize and A/B test assumptions to discover what worked best. This method led to key changes, such as replacing the 5-star rating system with simple like and dislike buttons, introducing the “percentage match” for movie suggestions, and significantly simplifying the UI.

In the audio industry, most companies still offer desktop products. Some companies like Native Instruments added user data tracking to their desktop product downloader called Native Access – this allows the company to extract the data needed for analysis, but users can turn it off. During our webinar “Can we create user-friendly products”, Matt Collings, the Head of Product from Krotos Audio said they also analyse the usage of their plugin Krotos Studio to understand what features generate growth. There is also the rise of new online DAWs such as BandLab and Soundtrap – these companies have a natural advantage in being able to make informed, data-driven decisions.

Figure 1 – Online Digital Audio Workstation (DAW) BandLab.

Companies rely on software to streamline operations, improve decision-making, and increase efficiency. Software has transformed how companies manage internal processes, from resource planning (ERP systems) to customer management (CRM systems) or even product management. Whether it’s logistics, human resources, or supply chain management, software automates and optimizes these workflows.

The rise of cloud computing has reduced the cost of launching and scaling businesses globally. For instance, in 2000, it cost around $150,000 a month to run an internet application. Today, the same application costs roughly $1,500 on Amazon’s cloud infrastructure. Companies like FedEx and Walmart use sophisticated software systems to optimize their logistics and distribution networks, ensuring that they stay ahead of their competition by minimizing costs and increasing delivery speed.

The integration of software transforms a company’s culture, pushing it toward data-driven decision-making and innovation. As more businesses adopt software-driven approaches, they undergo cultural changes that prioritize agility, collaboration, and technological innovation.

In software-driven companies, data-backed decision-making replaces intuition, and collaboration tools allow for more dynamic workflows. Digital-first companies, like Netflix, have fostered cultures of innovation, making it easier for teams to adapt to market changes and consumer preferences.

Software is increasingly embedded in physical products, creating “smart” products that offer enhanced value. From cars to home appliances, many physical products now incorporate software to offer additional functionality. This trend is particularly evident in sectors like automotive and consumer electronics.

Modern cars are now software-driven machines, with computer systems controlling everything from engine performance to navigation. Companies like Tesla have built entire business models around software, offering over-the-air updates to improve vehicle functionality long after purchase. As electric and autonomous vehicles gain popularity, software will play an even bigger role in managing driving systems and enhancing safety features.

Similarly, in the audio industry, Native Instruments has embedded software into their physical products to offer enhanced functionality. Their Komplete Kontrol MIDI keyboards come with integrated software (Kontakt platform) and access and control a wide range of virtual instruments (Komplete) seamlessly.

These examples show how embedding software into physical products can create greater value and extend the product’s capabilities, allowing for continuous updates and new features, much like Tesla’s over-the-air updates for vehicles.

Figure 2 – NI Komplete Kontrol MIDI keyboards with integrated software Kontakt

Companies need software to manage data, improve operations, embed intelligence into products, and drive innovation. The rise of software is not just a trend; it’s a fundamental shift in how businesses operate. The companies that embrace software as the backbone of their operations will be the ones that thrive in the future.

The next wave of global disruption will be driven by companies that not only use software but also build their entire business models around it. This shift is even more important now when we experience the raise of AI. 

At Rokanan Group, we help audio product teams to implement best practises and tools and transform their culture through tailored workshops. 

You can find the upcoming workshops dates in our calendar.