A new digital transformation ? From click & mortar to brick & software
Are you wondering what your company’s next digital transformation will be ? Get ready to become a “Bricks & Software” company !
During the first internet revolution, around the early 2000s, traditional “Brick & Mortar” companies gradually had to undergo their transformation, becoming what was commonly referred to as “Click & Mortar” businesses.
It often started with a simple corporate website, followed by an e-commerce platform, and eventually various interfaces connecting customers and suppliers (extranets, EDI, APIs, etc.). This transformation was frequently driven by dedicated teams, initially coming from communications departments, then from Digital teams, and finally involving the operational departments concerned (sales, logistics, etc.).
All of this was achieved by adding new skills and adapting processes, sometimes under pressure from pure players, but without fundamentally challenging the company’s core expertise.
At the same time, business processes were becoming increasingly digitalized, continuing the evolution initiated in the previous century with office automation, ERP systems, computer-aided design and management tools, robotics and automation, and later enhanced by sensors and data management platforms (Industry 4.0).
In many cases, these tools were purchased off the shelf, then customized and integrated, generally by consultants, to fit the company’s processes, while the organization itself remained in control of its know-how.
Software, digital technologies, and even data largely remained at the edges of the company. Only a handful of organizations had long embraced software as a core capability, particularly in finance, naturally among pure software companies, and within a few fabless businesses that built their competitive advantage around software mastery (Apple being a prime example).
Today, we are witnessing a far deeper revolution, one that raises fundamental questions about the evolution of a company’s core business and may even threaten its control over its own expertise.
Software is increasingly capturing the intelligence embedded within business processes.
Software is increasingly capturing the intelligence embedded within business processes.
Indeed, software is increasingly capturing the intelligence embedded within business processes. Software is no longer merely a support layer, such as transactional ERP systems that have become largely commoditized, it is now the process itself. Artificial intelligence, in particular, is becoming capable of absorbing so much expertise that outsourcing it is becoming increasingly risky.
Specialized startups and major software companies are attempting to capture the data of traditional players in order to train algorithms. While this symbiosis may appear attractive, the risks of value capture are significant. In the industrial world, the threat resembles a form of uberization, where value creation, including design, planning, maintenance, and more, becomes concentrated within the software layer, reducing manufacturers to mere executors. In the service sector, the risk is even more direct : being entirely replaced by fully digital services, or at the very least relegating humans to standardized and interchangeable roles.
Furthermore, for hardware manufacturers, from automotive companies to electronics and smart home providers, as well as for service companies such as banks and digital platforms, software has become the primary interface between the customer and the product. Although most companies understand this shift, many still struggle to bring their interfaces and software production processes up to modern standards. Your frontline is no longer your salespeople or advisors, it is your interfaces. The good news is that building excellent software may ultimately prove easier than recruiting and training large teams.
The risks of losing value are significant
In the era of software companies, or rather “Brick & Software” companies, make-or-buy decisions, as well as priority management, must be completely rethought. Greater emphasis must be placed on internalizing software development and software ownership, particularly around artificial intelligence and user experience design, while raising quality standards to the level set by pure players.
So, how can companies succeed ?
Three major pillars for a successful transformation
This shift is more complex than the first wave of digital transformation, which could largely remain at the edges of the organization or even be outsourced. Attention must therefore focus on three major areas : human resources and skills management, organization and culture, and technology and infrastructure.
How should companies recruit ? Do they need a new employer brand ? Can these new talents be integrated into existing career paths ? Should organizations centralize teams to achieve critical mass, or instead distribute them closer to operational realities ? How should external support be leveraged ? How can software production be industrialized ? Which infrastructure should be prioritized ? And how can new software capabilities be integrated with existing IT systems ?
There is no universal recipe that fits every company and organizational model. Nevertheless, certain constants and major strategic directions are beginning to emerge.
Regarding human resources and skills management, we have observed that it is often possible to upskill existing employees and recruit new talent without completely reinventing the organization. However, a strong and forward-looking vision from the CTO or CDO is essential to initiate the transformation required by this new digital era, attract talent, and provide direction. Significant investment in training will also be necessary to support the development of new skills.
Organization and culture will be key to enabling these talents to fully deliver their value. Even in the age of StackOverflow, GitHub, and collaborative platforms, a critical mass is still required to build a community capable of supporting one another, complementing skill sets, and offering real career development opportunities. This community does not necessarily need to take the form of a centralized team. It can remain distributed close to operational teams, provided it is strong enough to meet these requirements.
Corporate culture must also evolve accordingly : greater flexibility in processes, whether HR or IT-related, increased agility, adoption of pure player best practices and state-of-the-art standards, and alignment across all management levels.
From innovation to deployment
One effective approach for succeeding in this new digital transformation is to establish a central expert team at the cutting edge of innovation, capable of incubating complex projects and then disseminating expertise and solutions into more operational teams. Provided that high-value projects are clearly identified and that close ties with business teams are maintained, this model enables organizations to innovate while successfully scaling proven solutions across the company.
Technology and infrastructure must evolve as well : open platforms enabling continuous integration and continuous delivery (CI/CD), access to open resources such as the web, open source technologies, open data and APIs, modular architectures including serverless approaches, scalability, and more. These flexible platforms can interface with existing IT systems through APIs.
It is worth noting that the emergence of these platforms, architectures, practices, and resources has significantly simplified the reinternalization of software capabilities, allowing developers and designers to focus on business value rather than low-level technical layers.
As organizations scale these initiatives, it is important to progressively and simultaneously develop the different dimensions of transformation, including use cases, infrastructure, and governance, in order to avoid project failures, organizational misalignment, or investments with insufficient returns.
The most effective organizational model is often one where teams integrate exploration, development, and operations capabilities together (ML Ops / DevOps). Nevertheless, a handover to traditional IT teams remains possible, provided there is strong cultural alignment, solutions are designed to be industrialized from the start with no need for code rewrites, and feedback loops remain short and efficient.
Naturally, these guiding principles must be adapted according to the company’s size, organization, and culture. The journey toward becoming a state-of-the-art “Brick & Software” organization should simultaneously strengthen internal capabilities while preserving and enhancing the company’s existing expertise and culture.
Morand Studer
