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Steve and Steve perform unnatural acts.

Steve Jobs and Steve Ballmer have a problem.  It’s called the netbook.  These under-powered computers are threatening the most lucrative segment of the PC market today, the laptop.  And, in classic “Innovator’s Dilemma” fashion, the Steves are failing to take the steps required to address the problem.

Apple’s reaction has simply been to deny the viability of the netbook market.  In yesterday’s earnings call Apple honcho Tim Cook said “When I’m looking at what’s sold in the netbook market, I see cramped keyboards, junky hardware, very small screens, bad software. Not a consumer experience that we would put the Mac brand on.”  Ironic, isn’t it?  Cook’s remarks echo IBM’s dismissal of the early personal computer market; the very dismissal which led to the formation of Apple itself.

Microsoft, on the other hand, has responded with Windows 7 Starter Edition – the version of Windows 7 that can only run three applications.  Ed Bott’s assessment aside, it’s hard to see how any ordinary computer user will be happy with a three application limitation.  More to the point, Windows 7 Starter Edition flies in the face of the entire basis upon which Microsoft has been built – that Moore’s Law will continue to bring better and higher powered computing platforms to the masses at lower and lower prices.  Over time, those netbook devices will become powerful general purpose computing platforms.  Indeed, Atom chips are already being deployed in desktops and servers where their power characteristics are generating real savings. 

The netbook phenomenon is driving both of these giants of the personal computing industry to unnatural acts.  Clearly they are worried, and neither have a clue what to do yet

{ 5 comments… add one }

  • Craik April 23, 2009, 7:39 am

    But Alec – you're neglecting the comment Cook made immediately after the quoted one:

    If we can find a way to deliver an innovative product … then we'll do that." (ref: http://www.tuaw.com/2009/04/22/apple-q209-results… )

    I see Cook's comments on current netbooks and his comment on 'if they can find a way' as acknowledging the market is real, and they need to get into it on terms they understand – much has Apple has done in the past. Trashing the existing Netbooks is consistent with Apple's tactics of cranking up fanbois to preach on Apple's behalf.

    There's enough anecdotal evidence (Apple ordering 10 inch LCDs, massive flash memory orders, etc) that Apple is going to give a try in at the space in some manner.

    The point that really remains to be seen in my opinion is whether the cost (which will certainly be higher than the typical netbook) will discourage purchasers.

  • Thomas Purves April 23, 2009, 8:53 am

    Either that or it's worse. Microsoft is accidentally/deliberately preparing the world for day you only need to run one application: Firefox and OS and everything else is irrelevant.

  • Ted W April 23, 2009, 12:24 pm

    A closer inspection of both company’s history reveals that they have a habit of denying involvement in R&D as late entrants into areas where the competition is ahead. Case in point when Steve lamented the PDA market. He wasn’t thinking about PDAs. He was imagining the iPhone. And Windows 7 Starter? Well you’ve got me on that one. I don’t have a darn clue what kind of sense that product makes. SSD drives are too slow to churn page files, maybe?

  • Chris April 28, 2009, 1:21 pm

    Great post! As a self-confessed Christensen kool-aid drinker, I’ve been debating with myself if the Netbook is a disruptive product. The PC market is ripe for disruption as the cost, complexity, and features far exceed the needs of average people. Christensen wrote this years ago and it’s still true. People in industry often call things disruptive when it disrupts themselves, but does not meet the classic definition. Just because the PC is ripe to be disrupted doesn’t convince me yet that the Netbook is disruptive. The netbook is simpler, cheaper, and enters a low end of the market. It targets new uses by virtue of the product’s design and cost… in that it can be used in more places and in more contexts. But the applications are the same. Email is still email, and a web browser is still a web browser, and they are still used in the same way. Seems that a case could be made that the netbook is a sustaining technology, not a disruptive one, but I go back and forth. I wonder what Christensen would say about this….

    • Alec April 29, 2009, 2:08 am

      Good points Chris. I think the disruptions in Christensen's book were often new technologies applied to applications but in different contexts as well. Remember the steam shovel example? When small backhoe's arrived, the application was still digging holes, but now more people could dig them using mechanized technologies, and for different purposes. Or how about the huge improvements in hard disk technology? When new disk heads arrived, hard disk prices dropped dramatically and hard disks could be used in more applications.

      My opinion is that the netbook is a similar disruptive innovation. Perhaps it's not the entire computer that's disruptive, but the enabler – the existence of powerful low power consumption i86 instruction set chips. I don't know. I just see an incredible shift happening in the market.

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