The Netbook Effect

Wired.com article

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.

In the US, we regard branding and marketing—convincing people what to buy—as core business functions. What Asustek proved is that the companies with real leverage are the ones that actually make desirable products. The Taiwanese laptop builders possess the atom-hacking smarts that once defined America but which have atrophied here along with our industrial base. As far as laptop manufacturing goes, Taiwan essentially now owns the market; the devices aren't produced in significant volumes anywhere else.

Netbooks are evidence that we now know what personal computers are for.Which is to say, a pretty small list of things that are conducted almost entirely online. This was Asustek's epiphany. It got laptop prices under $300 by crafting a device that makes absolutely no sense when it's not online. Consider: The Eee's original flash drive was only 4 gigs. That's so small you need to host all your pictures, videos, and files online—and install minimal native software—because there's simply no room inside your machine.

Netbooks prove that the "cloud" is no longer just hype. It is now reasonable to design computers that outsource the difficult work somewhere else. The cloud tail is wagging the hardware dog.