Software startups often target applications that many companies share – accounting, human resources, communications, etc. Companies want to digitize by purchasing off-the-shelf software. No one creates software for processes that underly their unique competitive advantages. They buy excess capacity in departments that aren’t their core business instead.
But it relates to the piece I wrote a few years back with James Bessen for HBR. In it, we linked firms’ software capabilities and startups’ ability to create new organizational architectures to the rise of large firms.
Software is at the center of competition between firms but many firms lack the ability and/or the incentive to adopt software in ways that actually give them competitive advantage.