It\’s the outsiders that change markets

Dell and HP weren\’t going to pioneer a $400 laptop, because they were already selling laptops for $1,000. Why mess with a good thing? MSI had no laptop business at all, and Asustek had only a small business selling full-price machines under its own brand, mostly in Asia and Europe. Since the Taiwanese weren\’t addicted to selling SUV-class computers, they could swoop in like Honda with smaller, more efficient models. They also knew how to design on the cheap after years of producing motherboards with excruciatingly tiny margins.

In The Innovator\’s Dilemma, Clayton Christensen famously argued that true breakthroughs almost always come from upstarts, since profitable firms rarely want to upend their business models. "Netbooks are a classic Christensenian disruptive innovation for the PC industry," says Willy Shih, a Harvard Business School professor who has studied both Quanta\’s work on the One Laptop per Child project and Asustek\’s development of the netbook.

Those gales of creative destruction tend not to come from hte large market incumbents. Which, of course, is why continually protecting such large market incumbents is a very bad idea indeed.

6 comments on “It\’s the outsiders that change markets

  1. The usual excuse used to protect these large companies is to save jobs but this is at the cost of jobs that would have been created elsewhere. Be thankful that technology is not regulated like banking otherwise still buying time on a mainframe.

  2. Be thankful that technology is not regulated like banking otherwise still buying time on a mainframe.

    Kit, haven’t you heard that SaaS and Clouds are the future? The user interface is different, and not so much COBOL now, but still the same basic idea as the old computer bureaux.

  3. “Which, of course, is why continually protecting such large market incumbents is a very bad idea indeed.”

    In what way are the incumbents protected in law.? Answer: None

    Do the newcomers produce something new? Answer: No, all that they have achieved is to make cheap, limited functionality laptops. All they did was spot a gap in the market. The incumbents produced the iPhone and the Google Android.

  4. “In what way are the incumbents protected in law.? Answer: None”

    But the claim was not that companies should not be protected in law, but that they should not be protected in anyway at all. This includes by subsidy or trade tarrifs, and indeed by excessive regulation which also protects incumbants. That being the case, in what way is your comment pertinent? Answer, none.

  5. I agree with Tim about the economics.

    But, it must be pointed out though that Asus and Quanta did not invent this class of computer. They simply made it successful

    Read this:-
    http://www.notebookreview.com/default.asp?newsID=2366

    That machine, the Dell X1 shipped in 2005. A little earlier Samsung shipped the Q30. (Both were internally very similar).

    The netbook market didn’t take off then because people still needed powerful machines. Now software has stayed quite still but hardware has advanced, so machines like this are useful.

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