Long back, when I articulated the concept of rogue innovations, it was Google that finally led me to complete my arguments in my own mind. I can still remember that aha moment when my puzzled mind finally saw how rogue innovations deceive incumbents and make them behave as deer in headlights.
When you consider how free online apps such as Google Docs would affect Microsoft and the reaction of Microsoft so far, you will see a rogue innovation at play and Microsoft behaving like so many other firms did prior to it.
In spite of being one of the most innovative firms, Microsoft is still stumped by a rogue innovation such as online apps. If you have been following my blog, you already know that brilliance of a company and its management has nothing to do with the reaction of incumbents to rogue innovations.
Consider the choices facing Microsoft. It could embrace online office software or it could avoid it. If it embraces online applications, it would voluntarily destroy its own profits because giving away stripped down versions of “Office” would clearly lower the revenues currently generates from its feature rich desktop based office software. If it avoids the innovation, it may completely miss the boat and may become a minor player if the online apps become mainstream software consumption vehicle. This is classic choice set associated with a rogue innovation.
In fact, there is some evidence that Microsoft may have been underestimating the probability of success of online office software- again very much in line with what my work on rogue innovations would predict.
I think Microsoft’s slow reaction to online applications has not affected it much so far because of the switching barriers of consumers. Such barriers may drop significantly if Google succeeds in winning over corporate customers and finding ways to deal with security concerns. Similar switching barriers helped firms such as Fidelity in the face of Index funds as a rogue innovation. However, I am inclined to believe that the switching barriers in software may not be as strong as they were in mutual funds in 1970s and 1980s.
This is still an early stage for this rogue innovation (online apps). So stay tuned for more on this innovation.
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