A Disruptive Technology--Google Docs

I just finished a great book titled "The Innovator's Dilemma" by Clayton Christensen.  The book addresses the challenge facing established companies to stay on top of their industries when faced with certain technologies which disruptive their business, or worse, destroy their business.  Christensen outlines a number of examples of dominating companies ruined due to "disruptive technology".  Christensen outlines the common elements of disruptive technology, how to spot disruptive technology, and advice on how to navigate through a disruptive technology shift.

My goal is to summarize the common elements which make up disruptive technology, and to propose that "Google Docs" is a disruptive technology which represents an amazing risk to Microsoft.  

Christensen explains in his book that disruptive technologies initially establish products which underperform when compared to the established product offered by the dominating company. Christensen also writes that disruptive technologies attract a small customer base which see value in the product.  Another very important idea concerning disruptive technologies is the rate of innovation relative to market need.  Another way to think of this, disruptive technologies get better-and-better but the performance needs of the mainstream customer stays relatively static.  So, as disruptive technologies improve, disruptive technologies' features match customer expectation.

Here is an interesting example.  "Google Docs" is an application which includes word processing features, in addition to features to develop spreadsheets and presentations.  Google Docs is an alternative to Microsoft's Word, Excel and PowerPoint.  Google Docs' feature set is small when compared to Microsoft's offering, BUT, Google Docs is FREE and Google is improving and innovating quickly.  I'm most familiar with the word processing application.  There are a number of shortcomings (one is not being able to view your document easily before you print.  Also, the number of fonts are limited compared to Microsoft Word). Despite the short comings of Google Docs, it is an application I can see folks using who don't want to purchase Microsoft Word at $200.  If you are going to use a word processor for general report writing, then buying Microsoft Word may not make sense.   For example, most students word processing needs can be satisfied by Google Docs. I would not be surprised that in the near future, the "basic" functionality we see in Microsoft Word will be developed in Google Docs  (the ability to easily review a document before printing, more fonts, interoperability with other applications).  And as Christensen has pointed out, technology innovates at a rate faster than market needs, so Google Docs has the great potential of "innovating up" to what the mainstream market expects.  

An idea to keep in mind.  Microsoft's "Business Division" revenue for FY2008 was $20 billion ,about a third of the companies total revenue.  Business Division includes revenue from Microsoft Word, Excel and PowerPoint.  I'm not suggesting that Google Docs in the near term is going to affect this revenue stream, but Google Docs is "knocking" on the door, and when Google is knocking on the door's of their competitors, it is generally not a friendly visit.  Also, Google Docs is operating system (OS) independent so in addition to not needing to purchase Microsoft Word, Excel and Powerpoint, there will be no need to purchase Microsoft's OS (oh boy...).

Check out Christensen's book, a very interesting read.  

Roger Mehta