Posted by: crudbasher | August 22, 2011

When the Physical Becomes Virtual

(cc) Radio Rover

Our world is undergoing an amazing transformation. Humans rely on information. In all of human history this has been recorded and transmitted on physical media. This drastically reduced the scope of spread and it’s speed of transmission. If you look at the history of technology, the vast majority of it has been invented since the invention of the telegraph. In fact you can draw a direct connection between information transmission speed and technological innovation. This is because most innovations are actually people taking several different ideas and mashing them together in a creative way. Because the information gets around faster, the ideas move faster and innovation is sped up.

This article by Mac Andreessen (founder of Netscape) gives a great list of industries that have been disrupted by technology. He discusses how industries that previously were established on physical goods now are virtual. Those companies that saw it coming survived. Most didn’t though.

Here’s the money quote. After he gets through talking about all the industries such as the recording industry, film, and book sellers, he mentions what he sees as the next industries to be disrupted.

Health care and education, in my view, are next up for fundamental software-based transformation. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries. We believe both of these industries, which historically have been highly resistant to entrepreneurial change, are primed for tipping by great new software-centric entrepreneurs.

This is just beginning. Sites like Khan Academy, and are trying out very disruptive business models of Education. Keep in mind, it only takes one to get it right. Within a year, there will be dozens of others.

Here comes the Education Stormfront.

  • Great article about how the virtual is replacing the physical

    tags: technology profound disruptive education software nell

    • This week, Hewlett-Packard (where I am on the board) announced that it is exploring jettisoning its struggling PC business in favor of investing more heavily in software, where it sees better potential for growth. Meanwhile, Google plans to buy up the cellphone handset maker Motorola Mobility. Both moves surprised the tech world. But both moves are also in line with a trend I’ve observed, one that makes me optimistic about the future growth of the American and world economies, despite the recent turmoil in the stock market.
    • In short, software is eating the world.
    • With scars from the heyday of Webvan and still fresh in the investor psyche, people are asking, “Isn’t this just a dangerous new bubble?”
    • We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses.
    • But too much of the debate is still around financial valuation, as opposed to the underlying intrinsic value of the best of Silicon Valley’s new companies. My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy.
    • Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.
    • Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day.
    • On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries—without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.
    • Today, the world’s largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary.
    • Today’s largest video service by number of subscribers is a software company: Netflix
    • Today’s dominant music companies are software companies, too: Apple’s iTunes, Spotify and Pandora.
    • Today’s fastest growing entertainment companies are videogame makers—again, software—with the industry growing to $60 billion from $30 billion five years ago.
    • The best new movie production company in many decades, Pixar, was a software company.
    • Photography, of course, was eaten by software long ago. It’s virtually impossible to buy a mobile phone that doesn’t include a software-powered camera
    • Today’s largest direct marketing platform is a software company—Google.
    • Today’s fastest growing telecom company is Skype, a software company that was just bought by Microsoft for $8.5 billion.
    • LinkedIn is today’s fastest growing recruiting company. For the first time ever, on LinkedIn, employees can maintain their own resumes for recruiters to search in real time—giving LinkedIn the opportunity to eat the lucrative $400 billion recruiting industry.
    • Software is also eating much of the value chain of industries that are widely viewed as primarily existing in the physical world.
    • Today’s leading real-world retailer, Wal-Mart, uses software to power its logistics and distribution capabilities, which it has used to crush its competition. Likewise for FedEx, which is best thought of as a software network that happens to have trucks, planes and distribution hubs attached.
    • Health care and education, in my view, are next up for fundamental software-based transformation. My venture capital firm is backing aggressive start-ups in both of these gigantic and critical industries. We believe both of these industries, which historically have been highly resistant to entrepreneurial change, are primed for tipping by great new software-centric entrepreneurs.
    • Companies in every industry need to assume that a software revolution is coming. This includes even industries that are software-based today.
    • And while people watching the values of their 401(k)s bounce up and down the last few weeks might doubt it, this is a profoundly positive story for the American economy, in particular.
    • Still, we face several challenges.
    • First of all, every new company today is being built in the face of massive economic headwinds, making the challenge far greater than it was in the relatively benign ’90s. The good news about building a company during times like this is that the companies that do succeed are going to be extremely strong and resilient.
    • Secondly, many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution. This is a tragedy since every company I work with is absolutely starved for talent.
    • Finally, the new companies need to prove their worth. They need to build strong cultures, delight their customers, establish their own competitive advantages and, yes, justify their rising valuations.
    • Instead of constantly questioning their valuations, let’s seek to understand how the new generation of technology companies are doing what they do
    • That’s the big opportunity. I know where I’m putting my money.

Posted from Diigo. The rest of my favorite links are here.

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