2024: A year of reinvention for Software & Platform companies

The conditions that shaped Software & Platform (S&P) companies’ growth in recent years have now evolved. High growth rates, strong customer demand, and access to a pool of eager top-tier talent are no longer given. Competition has reached a fever pitch. Employees are looking for better experiences. Customers now want personalized products and services and end-to-end solutions that deliver real value. And growth is tempering. Accenture’s analysis shows that the sector’s compound annual growth rate from 2023 to 2026 will drop to 11%, down from 15% and 21% in the two previous three-year periods.¹

In this environment, S&P companies need to evolve; what has made them special and successful in the past will not work going forward. It is time for reinvention. According to our research, nearly half of S&P businesses (43%) are already embracing reinvention. That’s more than any other segment. However, many S&P companies are not executing their strategies holistically or fast enough. To move forward and ensure future success, S&P players should consider the following three guiding principles.

1. Think strategically and focus on value.

S&P companies are striving to achieve greater success than ever while doing more with less. It’s quite a challenge. That’s why we think 2024 should be the year S&P companies take a step back and think strategically about what they do and how they generate value. Everything needs to be on the table. The goal? To be able to reprioritize investments on an ongoing basis, stop non-value-adding programs at the right time, identify new opportunities for growth, and regularly restock their product/service/experience pipeline. Three actions can put them on the right course:

• Set the ambition. Leaders need to determine the primary outcomes they are trying to achieve. We’ve seen companies focus on various goals, from fueling growth and profitability to building resilience to strengthening the digital core. The importance of a holistic cost transformation as a reinvention imperative should not be downplayed. Companies can unlock tremendous value by rewiring efficiency across the enterprise. That means optimizing processes and operating models, cultivating a culture of efficiency, and strengthening the data and technology foundation to drive sustainable value.
  
  
• Envision the future. Next, leaders need to pinpoint areas of focus. What needs to happen to make an impact? For example, many S&P companies have made money from just one or two primary products/services. Will future growth come from these areas? Or should they pivot investments to find and scale new opportunities? How can new technologies like generative AI (Gen AI) help them capture new value pools and become purpose-built for future growth?
  
  
• Align to execute. Successful change requires a set of non-negotiable principles to guide execution. It also calls for prioritizing employee experiences and building a culture that fosters career development and attracts top talent. Such a focus pays off. We’ve found that companies that focus on unlocking the potential of their people (in addition to their data and technology) excel. Finally, leaders need to build collaborative ecosystems that can deliver end-to-end solutions. We’ve found that business customers are looking for integrated, holistic solutions.

2. Listen to the customer.

S&P businesses, like many others, have scrambled to cut costs and protect profits against a strained economic backdrop. They’ve made tough decisions, which came with two major consequences: the erosion of customer experiences and customer trust. For example, only 14% of people feel that their favorite tech brand has their best interest at heart. And 37% of people believe companies no longer prioritize customer care. 2024 is the year S&P companies can reclaim the narrative by delivering winning user experiences. To do so, they need to:

• Develop keen market-sensing capabilities that allow them to constantly listen to customers, take in their feedback, and then optimize products and service experiences around what matters most to them.
  
  
• No longer create products and services because they can. Instead, they need to develop new offerings that solve customers’ problems.
  
  
• Abandon the notion of “being everything to everyone.” They should identify what they want to be known for and aim to delight customers in different ways—often with “frenemies” or even newly acquired companies at their side.

3. Get real and tactical about Gen AI.

S&P companies have bold expectations for Gen AI to reimagine processes, cut operational costs, and provide better support to end users. In fact, their expectations for productivity gains are higher (19-27%) than their peers (14-20%). As they move quickly to experiment with Gen AI, we urge them to be cognizant of three factors that can impact the potential value:

• Use case prioritization. Many companies are looking to Gen AI to help them improve customer engagement. In fact, many are creating their own Gen AI tools that integrate with their devices, software and platforms. But these initiatives ignore Gen AI’s other potential uses—primarily to improve back-end processes and drive efficiencies and productivity across the value chain.
  
  
• Attention to people. Our analysis suggests that companies that integrate Gen AI across functions and processes at scale will overtake the revenue growth of even today’s leading companies in the next five years. But technology alone won’t drive such growth; prioritizing people during a Gen AI transformation can lead to productivity gains of up to 11%, while sidelining the human factor slashes that gain to 4%.
  
  
• Leadership training. 65% of executives admit they lack the expertise required for a Gen AI-led transformation. Therefore, it’s critical that leaders in S&P companies immerse themselves in the technology and embed learning into the flow of their work.

We believe Software & Platform companies that take these three actions will be better positioned for success in 2024 and beyond.

¹ Accenture Software & Platforms Market Model, Q1 FY24.