Google Android – Invasion of a Disruptive Cell Phone Technology?

Thanks to a powerful value proposition, Google’s Android operating system (OS) may be on its way to disrupting the cell phone industry.  The notion of disruptive innovation – first introduced in 1995 by Harvard Business School professor Clayton Christensen – centers around the emergence of a new product that serves the market in a unique and compelling way, typically by being lower priced or designed for a different set of consumers or needs.  Often, disruptive products will quickly capture  market leadership.   Not surprisingly, Android fits this description in many ways.    

Though not quite a full scale invasion, Android has secured an important beachhead among cell phone manufacturers.  Currently, Android has an install base on 1.8% of smart phones worldwide (Gartner Research).  Although modest, this share is about to rapidly increase.   

According to the New York Times, all four of the largest carriers in the United States have now agreed to offer Android phones. Previously, Android was available on only one handset through T-Mobile (via HTC). Going forward, Samsung, LG, Kyocera and Sony Ericsson will be making Android devices; twelve Android handsets have been announced this year, with dozens more expected next year.  HTC, a major cell phone maker, expects half its phones sold this year to run Android. Interestingly, another disruptor, Dell, is using Android for its entry into the cell phone market.  In many cases, Android phones will be replacing the incumbent OS, most often Windows Mobile. 

What is driving swift manufacturer and carrier penetration?  For one thing, Android is free.  In the price sensitive handset market, free is very compelling when a product like Windows Mobile adds $15-25 to each handset.  Secondly, although a first generation product, Android has garnered solid consumer acceptance.  A J.D. Power survey of cell phone OS satisfaction rated Android ahead of BlackBerry and Microsoft but still a distant second behind Apple’s iPhone.  Thirdly, unlike current operating systems, Android is available as open source code, so anyone can use or modify it.  Despite modest market share, Android has attracted one of the largest followings of application developers. Finally, Google is not resting on its laurels.  They are rapidly introducing regular updates to Android which will improve performance, functionality and stability.

Android’s disruptive power is indicative of Google’s commitment to winning in this space. Google is aggressively approaching the cell phone market with deep cash reserves, free of legacy technology & channel issues, possessing a powerful ad model and with a wealth of software expertise. Not surprisingly, Google has a history of disrupting other markets and business models including online search and internet advertising. 

Android’s push has major industry implications beyond market share:

  • Android’s zero cost (today) could significantly reduce industry margins and profitability by forcing manufacturers to reduce pricing; 
  • Similar to what occurred in the PC hardware industry, open source Android will hasten the commoditization of smart phones and lead to an explosion in available apps and tools;
  • An emphasis on the consumer market will place significant product and price pressure on market leader Apple and may hinder RIM’s attempts to expand beyond their core business franchise;
  • Google will add another important weapon in its fight with Microsoft for desktop application supremacy and mobile integration.

Although the current OS incumbents may be comfortable at the present time, lets check back in 18 months and see how Android is fairing.

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2 comments so far

  1. […] of the World’s most successful companies – IBM, Amazon, Apple and Google etc – have gained a sustainable competitive advantage and industry-leading shareholder returns […]

  2. […] At any one time, there could be dozens of innovation projects under way, many of which could be disruptive in nature such as its self-driving […]

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