What will replace Excel?

VC is a funny space compared with other areas of finance* – a core difference being unlike other asset classes you bet on things changing whereas many other investors bet on things staying the same.

Every time we make an investment we make a bet that this company will create, augment or replace an entire way of doing something, which means replacing a product(s). This is also a great lens to use when asking founders how they’re changing the behaviour of their customers and if they appreciate what that means for them^.

A fun thought experiment I used to ask my engineering class is ‘what will replace Apple?’ We would discuss it in class, sometimes for an hour or more, as we ran through the pre-conditions and behaviours that would have to change to allow us to use that new thing. In the process learning about why the tech company became so dominant.

One of those questions that keep getting asked popped up again on Twitter recently via Alan Tsen – what will eventually replace excel? Which leads you to ask why it’s still something so pervasive?

Excel is the pinnacle of software engineering, it’s the tools to review a spreadsheet that are broken. https://t.co/Rwn0bQNkOp

— Alan Tsen (@alantsen) July 25, 2021

We joke with founders a lot that their biggest competitor isn’t some other SaaS tool, its excel. Many multi-billion organisations and governments still use it as a core tool to track, forecast and compute many different things.

In fact I would go as far to say Excel was really the first ‘no-code’ tool out that in that you could create fairly complicated models and programs with its scripting language. Many founders still use spreadsheets as an alternative to high-priced CRMs and often, they’re more powerful and configurable (we use Airtable at Galileo, which is essentially excel with a GUI!).

Im going to propose there are perhaps 3 ways to look at this replacement question which can make for a nice thought experiment – using a function lens, a company/organisation lens, or a behaviour lens.

Function lens: What will replace excel/spreadsheets?

One way to look at this question is to look at the function you’re trying to replace.

One of the reasons excel is so pervasive is that its really, at its core, a spreadsheet that you can use to compute and arrange information. Which was originally based off paper worksheets. For accountants these were ruled sheets for recording numbers. The first iteration was arguably mechanical office machines which included accounting machines up until the 1970s.

So, in a sense, excel became the default tool to use worksheets or spreadsheets on a computer and the effect of that is very similar to marketplaces in which its a ‘winner takes all scenario’. That is, the more people that know how to use it, the more powerful it becomes as the standard tool for doing set things.

With that lens what will replace excel is similar to question to other marketplace questions which is, what will create so much value that eventually, over time, it replaces the old way of doing something.

Accountants still used paper based forms and accounting machines for recoding essential numbers, for years after excel was around, but over time excel started to replace bits of the ‘accounting stack’ before eventually it was the clear winner for recording financial numbers.

So one core question is what is creating independent value right now that over time will become an obvious replacement for the spreadsheet? You’re really asking what new function will exist in the future that will replace spreadsheets as the optimal way to record, manipulate and compute information in tabular form. This is an interesting question because the answer is most certainly, not yet another way to use a spreadsheet – although there are certainly useful tools right now that are basically just fancy spreadsheets. i.e. “the next Bill Gates will not look like Bill Gates”, the next spreadsheet will not look like a spreadsheet.

“The next Bill Gates will not look like Bill Gates”, the next spreadsheet will not look like a spreadsheet.

One way to think about this is what functions are we seeing right now that enable new types of behaviour that accomplish the same result but in a far superior way with added benefits? The key here is that this new function to replace spreadsheets, in my mind, has to have extremely good which unlock new ways of doing things. This ‘added benefits’ part should not be underestimated. Its not good enough just to do iterative innovation on spreadsheets e.g. just put them online – it will probably have to be a new approach to the problem.

As a thought experiment:

1. We have iterative tools, like online spreadsheets e.g. Airtable, and CRMs like Salesforce which are specific types of spreadsheets (really) that allow you do the work faster for a very valuable task (selling and tracking stuff).
2. We need to end up with a new format that is really a new paradigm, I think, to fully replace excel
3. We’re seeing glimpses of this in Machine Learning tools – give me your data, let the AI program give you relevance and suggestions for you to work on automatically. (we invested in exactly this tool – check out relevance.ai)

What is this new paradigm that is coming? I think it will be exactly this – mathematical models that allow software to do the computation for you and enable new ways of planning that you simply can not do with a spreadsheet.

But still, who knows if that will replace spreadsheets?

Company/Organisational lens: What will replace Apple?

Another way to approach this thought experiment is from a organisational lens and ask, what will replace a company?

No company lives forever. And while its hard for us current day to think about how anyone could beat Apple (already at US$81b in revenues for 2021!) or Google today, I can guarantee they will die and be replaced over a long enough time horizon.

Keep in mind, our extraordinarily huge global companies as still similar to some of the worlds very first conglomerates in terms of their sheer value, revenues and people size – although very different functions the British East India Company was a crazily large and ‘valuable’ organisation that created huge wealth and huge despair. At the time it was impossible for people to think of it to not exist – it was ‘too big to fail’. It essentially ran and controlled India at different points in time too.

So, what will replace Apple?

This question now means we have to think about what drives Apple’s dominance and one can use the 80% rule – what makes up 80% of your activity vs the rest? And for Apple that is selling fancy iPhones or better yet, its iOS ecosystem, which drives its iPhone, Watch and app marketplace and services. Combined the iOS ecosystem – iPhone, Watch and app marketplace and subscription services made up 82% of its revenues.

When thinking about what will replace Apple, the core question is what paradigm shift in computing platform (smart phones) will have to happen which will replace it?

That is not an easy question to answer, but very easy to throw out new tech inventions as possible candidates. VR was touted as one answer but that has been very disappointing, even dipping in sales during the pandemic. One could argue cheaper smart phones too as the cost keeps coming down it means more derivatives and knock offs but that is essentially just the same thing.

Applying my theory from before, the next Apple will not look like Apple at all. You could, perhaps, think about these steps (but even these are probably a little limiting):

1. What is a core function we do everyday that could be the ‘entry point’ for a new paradigm? For smartphones it was..the phone! Now its that annoying ‘app’ we don’t like to use unless you’re in sales or investment banking. This could be something as mundane as sitting down to your desk every day for work or commuting to work it could be how we send information to each other…
2. What can we do with technology that would significantly extend that everyday function to enable us to do much more – e.g. self driving cars will in theory fee up lots time in your daily personal commute to do more and not have to live in crowded, expensive cities
3. What can you build into this new technology platform to create an ecosystem of services? How can you create a marketplace off the back of this new platform that drives more value for everyone in it?

With these steps you can start to squint and ask yourself maybe something to do with Augmented Reality (AR). The paradigm shift for AR is that you no longer need to ‘be at a computer or looking at a screen to compute’ which is huge. Cue Apple’s rumoured new AR glasses coming out next year too…

Other potential platform style technologies are self driving things or ‘self learning things’ really – as thats what we need software to become so it’s less prescriptive and more powerful.

Like with Apple I fully suspect the Next Apple will have marketplace like effects or network effects that just drive a huge amount of value for its customers and users to enable them to keep doing new things with the new paradigm. It’s a powerful flywheel.

‘Generational companies’ are often created as new technology waves get diffused across society – so if you’re betting on change you need to bet at the intersection of new tech waves. But, as we know now, these waves sometimes need to happen a few times before they hit the mainstream ‘beach’.

Behaviour Lens: What will replace going to the doctor?

Another way to look at this question is to look at specific behaviours that we all take for granted but in reality didn’t exist until recent history.

Going to the the doctor is one such behaviour that didn’t exist until the advent of modern medicine and, as I predict, will cease to exist at some point in the future. This is a bold claim, I know, and its not say we won’t have medical professionals in the future in some form, but it is to the say the notion of a GP or general doctor may very well disappear as technology gets much better at giving personalised assessments of the ‘80% of medical issues’ – again, applying my 80/20 approach which is what do GPs actually diagnose 80% of the time? It’s pretty common illnesses.

In reality this question is kinda mixture of the 2 lenses I proposed before, behaviour is heavily intertwined with function and organisation. But nonetheless it’s a fun way to conceptually think about everyday tasks and how they might change over time.

For doctors the function of diagnosis will still exist, it’s the behaviour of literally going to a doctor that I’m suggesting will change. So, what will stop the need of rocking up to a GP to ask what’s going wrong with your body? I’ll propose a few steps again but usual disclaimer that this is a limited way to think about it:

1. We go to a doctor to get a diagnosis when something is wrong. This is reactive, as it should be, and only when things are bad enough to warrant (although a lot of people go to GPs anyway to be sure). Thus, if diagnosis was proactive, i.e. continual monitoring, then would that take out 80% of reactive illness situations!?
2. Personalised medicine in theory could lead to far more proactive diagnosis and it has been a hot topic of late among many medical and tech circles but its a bit of a mirage in the sense that it’s still not quite possible with the set of tools consumers have at their disposal. The smart watch (cue Apple Watch, which is the leader in smart watches) is a promising consumer platform for companies to use to start down the personalised track – probably with nutrition and exercise as the first port of call but later using long term vital sign trends to compute likely hood of various illnesses ect may start to have a big impact too.
3. Whatever the platform used, we will need to see, again, new unlocked applications for medicine that enable us to see and proactively get informed well before its too late is my prediction. You could squint and see that having huge datasets of your vital signs over time, which mixed with other datasets of people your age, could start to give us new insight into what is happening with peoples health and how the environment is effecting that too. The next ‘going to the doctor’ will not look like ‘going to the doctor’!

So what will this behaviour change be? I suspect it will be definitely software-based, definitely based on personalised data and probably part of some sort of extremely advance consumer product that can give the information we need to see.

The next going to the data could very well be having ‘the doctor’ come to you as your lifestyle changes over time.

The best way to predict the next Excel is to…

In the end no one actually knows what will replace excel. But in thinking about it we can start to ask lots of new questions which leads to many more questions.

For founders, thinking about the ‘bigger picture’ of these questions can be useful when thinking about what you’re actually building towards and what the significance of it might be.

A core truth is that the next excel will not look like excel and will most likely lead to network-like effects where the solution benefits from a winners-take-all dynamic.

In the end the best prediction is to create it. And make sure to pitch me when you do.

Footnotes

• *I don’t really consider early-stage VC to be in the true finance sector, as its driven by different factors when it comes to investing, excluding the funds management side of things (which is very important). At least in the early stages!
• ^Often you’re reducing steps for customers when solving a problem, but every so often you create whole new steps and types of behaviour (hello, social media).