One post tagged with "strategy"

In 1937, the economist Ronald Coase published "The Nature of the Firm," asking a deceptively simple question: if free markets are so perfectly efficient, why do companies exist at all? Why don't independent contractors just negotiate with each other on the open market for every step of production?

Coase’s answer was transaction costs. Discovering prices, negotiating contracts, and coordinating labor is exhausting. Firms exist because it is cheaper to internalize that friction through hierarchy than to rely on the open market.

For the last three decades, the enterprise software company has been a monument to this friction. Translating a customer’s raw business pain into deployed infrastructure is an agonizingly slow endeavor. Because the medium of code was historically so rigid, an entire professional class spawned purely to manage this translation layer.

I call them the Delegators.

These are the strategists, the coordinators, the project facilitators, and the alignment-drivers. They do not write the code, and they rarely carry a bag. Their entire economic value—their "moat"—is acting as a human API between the people who have the problems and the people who build the solutions.

But what happens to the human API when the transaction cost of building software drops to zero?