Several news outlets have been reporting on the new
Microsoft Office, which is due to be released in two versions. One is the
traditional form of software that is on the disk of a PC and run from there
(Office 2003). The other is a cloud version of Microsoft Office (Office 365),
which means that it will be downloaded from the web and run through a web
browser. There is no need to keep a local copy on the PC, and no need to wait
for those annoying upgrades (the downloaded version is always the latest). In
fact, there is no need for a PC because cloud software can be run on any device
with a compatible web browser, though the performance may differ depending on
how well it is programmed to take into account that it might be run from a
tablet or a phone, for example.
Why is this change notable? Microsoft has long been
successful using the traditional format of software, and Office still accounts
for a sizable portion of their profits. They have also long voiced doubts about
the various new computing devices based on the web, such as netbooks (light and
inexpensive laptops that primarily get their software from the web). The argument has always been that there is so little to save from having
lower-grade specifications that users are unlikely to settle for anything except
full-featured computers that can be run both with and without web access.
The change to delivering Office over the cloud is
significant because buyers will now be able to choose between the highly
profitable normal Office and a subscription-based cloud Office. Although there
are clear opportunities in having subscriptions instead of users who buy once
and maybe never pay again, it is not clear that the pricing can be done so that this consumer
choice can be turned into a benefit for Microsoft. This is especially true
because Microsoft is behind competitors such as Google and Zoho in providing cloud-based
computing.
Microsoft is a good example of a major firm facing uncertainty
because of technological changes. This situation often results in a failure to launch
innovations in response, even though the major firms often have greater
capabilities to make innovations than their smaller competitors do. What holds
them up is the will to do so. In my research, what keeps coming up is that the
current success is a deterrent against making necessary changes, but past
success can help because it sets the aspirations for future performance high.
That looks like a good description of Microsoft now, because its performance is
not quite what is used to be, which is exactly the situation that can drive
innovations forward. So, I think we can expect Microsoft to launch more innovations
that are adapted to the cloud, and perhaps also to the new generation of
computing devices. Whether it is soon enough to maintain their competitive strength remains to be seen.
Greve,
H. R. 1998. Performance, aspirations, and risky organizational change. Administrative
Science Quarterly, 44(March): 58-86.
Greve,
H. R. 2003. A behavioral theory of R&D expenditures and innovation:
Evidence from shipbuilding. Academy of Management Journal, 46(6):
685-702.
