Why the Chromebook is not a Low-End Disruption

Do Chromebooks fill the criteria for a low-end disruption? Can we expect the Chromebooks to eventually move upmarket and disrupt the PC industry? Since we have seen Chromebooks make some success in some markets, these are valid questions to ask.

First of all, there is no denying that Chromebooks are low-end. They are typically priced lower than Windows laptops (although the price difference is not very large), and the cheaper Chromebooks have lower specs. However, low-price alone does not qualify a product as a low-end disruption.

Let’s look at a few more attributes that we should find in a product that causes low-end disruption.

Is the current market overshooting?

In terms of performance, Chromebooks and low-end Wintel laptops both use Intel Celeron processors. There are some exceptions that use an ARM, but these are mostly coming from Samsung which makes their own ARM-based CPUs. They also have 2GB of RAM which is the same as a low-end Windows laptop. The main difference seems to be whether they use a HD with hundreds of Gigabytes of storage, or whether they use a fast SSD with only tens of Gigabytes of storage. Storage seems to be the only area where Chromebooks can skimp on hardware relative to Wintel machines.

Given that the hardware specifications of a Chromebook and a low-end Wintel laptop are almost identical, it is hard to argue that the Chromebooks are targeting a market that is over-served by Wintel. You could argue that Chromebooks are faster than Wintel due to the use of SSD, and that probably is very true. This would however suggest that Chromebooks are “sustaining innovations” relative to Wintel that are playing in the low-end market segment.

Is the price differential large enough to attract new customers?

Although the cost for an OEM to install Windows on a computer is confidential, it is probably not large enough to make a free operating system like Chrome OS a game changer. For example, the cheapest Chromebook on Amazon.com is the Acer C720 for $199 with a Intel Celeron 2955U 1.4 GHz CPU and 2GB of RAM. On the Windows side, you can get an ASUS 1015E laptop with an Intel Celeron 847 1.1 GHz CPU and 2GB of RAM for $299 or a ASUS VivoBook X200CA with an Intel Celeron 1007U 1.5GHz CPU and 2GB of RAM for $300.

The price difference of $100 is substantial at this low price, but it is not large enough to expand the market. I doubt that people willing to pay $200 will find $300 abominable. Hence people looking at Chromebooks will also be interested in Windows. Chromebooks are not creating a new market for consumers who couldn’t previously afford a laptop. They are simply marketed to the same customers as a cheaper alternative.

Therefore Chromebooks are not competing with non-consumption. Instead they are competing head-on with the incumbent, and that is always difficult.

Is the simplicity enough to attract new customers?

Some people argue that Chromebooks are much simpler than Wintel computers or Macs. That may or may not be the case, depending on the tasks that you need to get done. This is not however the question that should be asked.

What needs to be addressed is whether or not the increased simplicity is enough to target non-consumption. In other words, will those people who previously did not buy laptops due to the complexity, buy Chromebooks by virtue of the improved simplicity. Will the increased simplicity create a new market which Chromebooks can uniquely target?

That was certainly the case for the iPad. Small children and seniors are very comfortable with the iPad. Significant numbers of people who didn’t use personal computers before can now use iPads because of the much improved simplicity.

Now, is this the case with Chromebooks? I strongly doubt it.

What are the jobs-to-be-done?

When you compare the jobs-to-be-done of Chromebooks and Wintel laptops, Chromebooks are simply a subset.

Both require you to be sitting at your desk or at least have your computer on your lap. This is very different from iPads and smartphones which can be used comfortably even when you are standing up, lying down or reclining on the sofa. Hence Chromebooks will be used when you are at work or studying. Not when you are relaxing or only have a couple of minutes of free time. They won’t be used much for reading e-books, watching videos, etc. You can easily see that the usage scenarios for Chromebooks completely overlap with Wintel laptops.

Hence Chromebooks are competing directly with Wintel for the same jobs-to-be-done. Here again, they are fighting the incumbent head on.

Summary

In summary, Chromebooks are unlikely to succeed as a low-end disruption because they are competing head on against the incumbent in almost every way. Although the incumbent (Wintel) is weakened compared to its heyday, they successfully deflected the Netbook-Linux threat and are still formidable competitors. Wintel has also always addressed the low-end, and has never fled up-market. Chromebooks are not significantly more low-end than the market Wintel is already competing in so we can expect Wintel to quickly address any threats. I find it unlikely that Chromebooks are enough to disrupt.