As Google steals its education thunder, what can Microsoft do?

In schools across America, the operating system inside its computers is once again changing. Whereas Microsoft played the role of disruptor the first time around, in this chapter, Google is disrupting Microsoft and threatening to drive it out of most U.S. K–12 schools.

What’s so striking about this shift is that we have seen a version of this movie before.

In the early 1980s, Apple Computer sold the best personal computers in the business. It did this by integrating to develop and build much of the machines from top to bottom—including product design, assembly, the operating system, and the application software. From this vertically integrated position, Apple developed a proprietary, highly interdependent architecture that crushed its more modular competitors in terms of performance.

Apple machines shot quickly to the top as the easiest-to-use, least-likely-to-crash desktops around—and became a fixture in schools in the 1980s.

But in the mid-1980s the market shifted. Desktop computers became good enough in terms of basic functionality and reliability, and customers started to demand something else: the flexibility to install non-Apple software, such as WordPerfect and Lotus. These products were plug-compatible with Microsoft’s DOS operating system, thanks to a well-defined interface, and customers took notice. As customers became less willing to pay for further improvements in performance and reliability, the companies that offered more affordable and customizable modular solutions gained the advantage. Apple could have decided to modularize its design and sell its operating system for other computer assemblers to use to thwart the rise of Microsoft’s Windows. But Apple did not, and, over time, Microsoft took the lead both inside and outside of schools.

Industries tend to swing like a pendulum between interdependent and modular architectures. In the 1990s, the pendulum swung back toward favoring some interdependence. Customers began demanding the ability to transfer graphics and spreadsheet tables between different types of files. This created a performance gap, which swung the industry back to an appetite for interdependent architecture. Microsoft responded by integrating its software suite (and later its web browser) into the Windows operating system. This quickly put nonintegrated companies, such as WordPerfect and Lotus, out of business—and Microsoft retained its advantage.

Over the last few years, the landscape in schools has been shifting yet again.

Most commonly, device selection at schools begins with a debate about the right form factor—with desktops, laptops, netbooks, and tablets as the top four contenders. Schools usually opt for laptops and netbooks, although beginning in late 2012, sales of Apple’s proprietary and interdependent iPad tablets dominated the K–12 market. School leaders who select laptops and netbooks say that although tablets are great for consuming content, they are lousy for creating it. Tablet purchasers, on the other hand, claim that despite the limited functionality of a tablet, its portability and touchscreen interface make it a compelling tool, especially for very young children—and it’s not hard to add a physical keyboard.

The question of form factor is important, but in the end the modularity issue may trump the debate. Until recently, schools have mostly purchased either Apple devices, which use Apple’s OS X operating system, or so-called PCs that run the Windows operating system. Both of these operating systems are proprietary and integrated, although Apple’s is more so. For many, this proprietary architecture is the essence of Apple’s allure.

Many schools, however, have historically not been able to pay the premium that Apple commands for its high-end products and have opted for Windows-based devices. For decades, scarcely anyone noticed or cared that Windows has an interdependent architecture at the software level. But this is changing. Computing is becoming more Internet-centric with the work being done increasingly “in the cloud” rather than on a personal computer’s hard drive. So if most of the software people want is cloud-based and online, why pay Microsoft or Apple for proprietary, integrated software that’s tied in with their operating systems? The shift toward Internet-centric computing is creating demand for dis-integration between operating systems and software.

This is where Google has entered the fray and is taking schools by storm.

Google first announced the sale of Chromebooks—personal computers running the Chrome operating system—in June 2011. By 2013, Chromebooks had come out of nowhere to grab a fifth of U.S. K–12 purchases of mobile computers. In the first quarter of 2016, according to Education Week, Google’s Chromebooks “topped 50 percent for the first time in the first quarter of 2016, and Microsoft’s Windows represented about 25 percent of the market.”

The Chrome operating system is a Linux-based system—itself open source and modular—designed by Google to work primarily with web applications. It’s built on the open-source project called Chromium OS, which enlists volunteer developers around the world to test, debug, and improve on the operating system’s source code. This helps Chromebooks get better over time, without the massive fixed costs that Microsoft and Apple incur when they try to improve Windows and OS X, respectively. In addition, Chromebooks do not have installed software on their local hard drives, except for the browser, a media player, and a file manager. Microsoft Outlook, Word, Excel, or PowerPoint isn’t stored on the device either. Instead, Chromebooks rely exclusively on the Internet to connect users to Google’s Apps for Education—like Gmail, Google Docs, Google Spreadsheets, and Google Presentations—which more than 50 million students now use.

The upsides of these architecture choices are manifold: for one, Chromebooks are inexpensive. They sell for under $300 per unit. Their limited functionality means that they boot up lightning-fast—10 seconds max. Relative to Windows-based devices, they are much less likely to get a virus because Linux is set up to ensure a virus-free environment. They are also easy to keep up to date; Google pushes auto updates to the Chrome OS without requiring any work on the user end.

And yes, Google’s suite of office tools lacks the raw functionality of Microsoft Office’s suite, but Google has taken advantage of two key dynamics. First, most users are overserved by Microsoft Office. Most don’t take advantage of at least 98 percent of the functionality in Word, Excel, or PowerPoint, for example. Google’s office tools get the basic functionality right, enable new features like collaboration—which is custom made for the Web, and keep getting better with more and more functionality. Second, Google’s apps are free for educators, whereas Microsoft makes you pay. Faced with the decision, it’s become increasingly a no brainer for educators to opt for Google. If trends continue, a whole generation of children may never know what PowerPoint is.

The question of interdependence versus modularity suggests that devices like Chromebooks will give closed-architecture devices tough competition in the years ahead and continue to steal market share.

The big challenge for Microsoft has been the same as it is for all incumbents. Its natural instinct has been to cram features like collaboration, cloud-based applications, and mobile features as an add-on to its existing offerings, not as a pure-play disruptive product. For example, the Microsoft Surface delivers the functionality of a laptop and the convenience of a best-in-class tablet—a classic hybrid, sustaining innovation that is not disruptive, as my colleague Tom Arnett has written. And Microsoft has also lost the smart phone race, which will become increasingly important in education in the years ahead as mobile learning emerges as a disruptive force.

So what should Microsoft do?

Investing in new business models with new value propositions that are free to leverage the company’s existing resources but also totally free from its traditional strategy and business models will be critical. If Microsoft doesn’t do this, we can write the rest of the story now before the data is available to confirm it.

What would be great to see is Microsoft move away from just focusing on the content creation marketplace of its traditional Office suite and instead leverage its acquisition of LinkedIn and Lynda.com to do three things: support competency-based learning—through badges, portfolios, and rich profiles for all students; invest in building students’ social capital—a key determinant of life success that education typically ignores—in a deliberate way; and, through both of these efforts, help students discover and cultivate their true passions.

Innovating in these arenas would put Microsoft back on the education map—and represent a major commitment to not just digitizing today’s education system, but transforming it into a student-centered one where all students can find and fulfill their potential.