Classic Disruption: Microsoft Dismisses New Google Apps as Inferior

Microsoft says it has no fear about losing sales of its office applications to Google because they aren't up to corporate standards.

"The simple argument that 'this is good enough for 90 percent of what we do' has fallen on its face over and over and over again," Microsoft's Antoine Leblond told Reuters in an interview on Tuesday. "When it comes to mission critical things and key pieces of how people run their businesses, the threshold is higher."

Microsoft is right.

But being right could take Microsoft Office to a point of future irrelevance. Disruptive innovations typically are inferior to incumbent products on mainstream attributes. And disruptive innovations typically appeal to marginal customers initially.

Think about how the entire minicomputer industry dismissed early PCs as inferior. Or how the cellular phone industry dismissed the BlackBerry and the wireless email market as insignificant in 1999. Or how once-dominant department stores like Sears crumbled by dismissing low-end discount stores for 40 years.

What was BlockBuster's reaction in 1998 when Netflix launched a snail-mail based video rental service?

I recently studied a handful of young employees at a high-end global consulting firm and -- surprise -- they were using Google applications like docs and spreadsheets to get their jobs done instead of MS Office. Why is that?

• Inferior by old measures: These employees suffered through the occasional bug in Google apps. They missed a few unimportant features. They couldn't always bold the text the way they wanted etc.
• Superior by important new attributes: Using Google apps, the employees said they were better able to collaborate with remote colleagues around the world and they were able to maintain better version control of documents.

We can readily dismiss these observations of the young employees as a one-shot anecdote. But we should ask three important questions:

• Are collaboration and version control becoming more important to a rising group of workers? 
• Are twenty-something young professionals getting more experience and familiarity with Google apps early in their careers?
• Are most customers overshot with complexity and functionality in current office applications that they never use?

My view is, yes, yes, and yes, which suggests that nobody should dismiss the new Google apps, despite their apparent inferiority. 

MS Office accounted for about $3.0B in revenue in the latest quarter, or about 28.5% of Microsoft's total revenue, according to Microsoft Monitor.

**Other Views **

CEO Guide to the Benefits of Disruption (pdf) and other tools for managing disruption at The Disruption Group's site.

BusinessWeek reports on the Soul of the New Microsoft, saying J. Allard's success with Xbox and his new effort on Zune show the company is open to new ways of thinking, beyond just the next version of Windows, Vista. "The point is that Microsoft needs to find its un-Vista. Several of them, in fact... For investors to care about the company, it needs to find new growth markets."

Google CEO Eric Schmidt lays out his vision in a column in The Economist: "Disruption is only going to intensify...Today's desktop software will be overtaken by internet-based services."

Nicholas Carr says say Google's Schmidt had been playing coy with his real ambitions.  But now the lines are drawn between Old School and New School on software.

Adobe is next in Google's target, says Amit Agarwal at Digital Inspiration.

Dare Obasanjo says Microsoft's new Office Live strategy is interesting but its unclear if it solves a real problem: "It is clear there is a pent up demand to bring office applications in the Web era, however it is unclear whether the simplistic division of desktop versus web applications is the right way to view this evolution."

Comments

[Daniel Scocco]

Recognizing the enemy as an inferior product or technology is a classic sign of disruption, I agree. Just remember Xeror saying that Canon's small printers could not match its superior technology...