Disruptive Technologies (Or How the iPad Will Rule The World)

Before I started business school, my program assigned a pre-reading list. On this list was one of the best books I have ever read - "The Innovator's Dilemma" by Clayton Christensen. If you haven't read this book, you should order it right now (here), but I'll summarize it in a few sentences. Every technology will eventually be disrupted by newer technologies.

At first, these new technologies may be radically worse, and will look like toys, but they will eventually get to the point where they are good enough. Even though these new technologies may never approach the originals for sheer power, they will provide other attributes that give them a significant advantage (for example, low cost or light weight). One of the products that Christensen uses to illustrate the point is hard drives. Every few years, a new drive came along with a smaller form factor than the previous drives. At first, capacities were smaller, and performance was laughable. However, both capacities and performance eventually improved to the point where no one really wanted the old technology because the new technology was good enough.

This pattern continues to today. In fact, I believe that we have just hit that point for 2.5" drives. With the advent of (this) drive, 2,5" drives are now faster than pretty much all 3.5" drives. Sure, it is a bit more expensive (you can buy a 2TB drive for the price of this), but 500GB is plenty of capacity for almost anyone, and it is smaller, lighter, and more power efficient, which makes it good for laptops and small form factor desktops (which are sufficient for 90% of the people out there). Of course SSDs will probably be the end point of this revolution, but we are still a few years off from that.

So, the funny thing is that disruptive technologies appear to be a step backwards from the things that proceeded them. A bit over a year ago, I decided that netbooks were going to be disruptive to modern PCs. I told this to some of my b-school classmates, and they pretty much laughed at me. "But the Atom Processor is equivalent to the PCs of four years ago," said one of my classmates. And, at that point, he was correct. Netbooks were a cheap toy. The displays and keyboards were too small, and the interfaces were clumsy. The only thing that they had going for them was their size and cost. A year later, netbooks aren't too much better - they are still powered by the same underpowered CPUs, and the keyboards are still too small to be useful. Some of them have dedicated video decoders, which allow them to do the only thing they are decent at, media consumption. There is actually one interesting and potentially compelling use case, which was announced just today, and involves some of the coolest out-of-the box thinking I've seen in a long time (here).

But the real competition actually came from below, and not from above. I'll give you a hint: fruit. That's right, Apple Computer. Apple had refused to introduce a netbook, but they essentially pioneered the second generation of netbooks. The keyboard wasn't useful, so they just got rid of it. And even a stripped down PC processor consumed too much power, so they substituted one from a cell phone. And why use a hard disk when you can substitute a few GB of flash? It didn't even have a built-in camera (although I bet the second generation will). Instead, they focused on the one thing that mattered - the screen and the accompanying touch interface. After all, the only thing it's good for (well pretty much) is consuming media.

No one really knew what to make of the iPad. It was too expensive to be a smartphone (and didn't make calls), but it lacked features available in even the lowest-end netbook. Apple got around that by calling it "magical" - I suspect that Steve Jobs completely understands the strategy, but figured that most people wouldn't really understand if he explained it (plus, Steve never really explains himself). Apple still sold around 2 million to early adopters, many of whom just wanted the newest and coolest thing from Apple.

So, here's my prediction. I suspect that, in the long term, a lot of these early adopters will find that the iPad does like 75% of what they use their PC for, and some of them may even forego their next notebook purchase. In about two generations, the iPad (and whatever Google comes out with) will be capable of replacing about 90% of the function of the PC. When coupled with cloud computing/storage, a lot of us won't even own PCs any more. Just an xPad and maybe a bluetooth keyboard (for writing blog posts). And possibly some sort of media box that attaches to your PC (although maybe the xPad will handle that with a wireless video link). When it comes down to it, we're a nation of consumers more than anything else...

So I have another story of disruptive technology, but that is best left for another post.