The Pull of the Market
"The greatest danger for a new venture is to 'know better' than the customer what the product or service should be."
—Peter Drucker, Innovation and Entrepreneurship
Apple founder Steve Jobs predicted its impact on society would rival that of the personal computer. Its inventor, Dean Kamen, believed cities and towns would be redesigned around it. “It will be to the car,” he said, “what the car was to the horse-and-buggy.” And legendary venture capitalist John Doerr promised that its maker would be the fastest company in history to reach a billion dollars in sales.1
In December 2001, in one of the most anticipated launches in commercial history, Kamen and his backers unveiled the Segway Personal Transporter, a revolutionary alternative to walking or driving. The two-wheeled, magically balancing Segway was a technological marvel, ten years and $100 million in the making, and it had wowed riders in super-secret tests. A gleaming production facility sat ready
To crank out as many as 40,000 units every month in hopes that city dwellers across the world would embrace the product as a solution for congested traffic, overcrowded parking lots, and long, exhausting walks.
But urban commuters never got the memo. After seven years and more than $250 million in invested capital, the Segway had yet to catch on with its intended market. Only about 25,000 Segways had been sold in total by 2008, mostly for police, security, and industrial use. As BusinessWeek noted in 2006, “the problem that he (Kamen) wanted to solve, the need for a clean, energy efficient vehicle that could coexist with pedestrians and replace the car in the world’s cities, was one that others didn’t see.”2 For most urbanites, the Segway seemed no more practical than the bicycle, a tried-and-true device invented two centuries ago and available at a fraction of the cost, prompting the Washington Post to dub it “The Invention That Runs on Hype.”3
But don’t count out Segway just yet. During his tenure as CEO from 2005 to 2010, James D. Norrod pushed the company to expand its foothold in the police, security, and industrial markets, maintaining that “market development is about finding one market that works really well and building your business from there.” The company has also explored new applications for its Smart Motion technology, including robotics, toys, unmanned military vehicles, and the development of four-wheeled, multiperson prototypes. For Norrod, these approaches have been the result of listening to what the market has to say. “If people want four wheels,” he said, “I should give ’em four wheels.”4
The Segway story is one dramatic example of a nearly universal experience among new business founders and investors. What at first seems like a slam-dunk business idea is usually an approximation, a first stab at something you hope will resonate with paying customers. You won’t know for sure until real customers buy and use your product. Or not.
Most often, identifying the right market means refining, adapting, even reinventing your original concept. Apple, Yahoo, and Google were not their founders’ first ideas. Chris Holden, referring to the sucCessful startups his venture capital firm has funded, says that “none of them looks identical to what we thought we were investing in.” Two of history’s most celebrated entrepreneurs, Bill Gates and Paul Allen, first started a company called Traf-O-Data but later saw the tremendous market potential for a different business, something they named Microsoft.
Like Dean Kamen and many others with inspired ideas, these entrepreneurs learned a powerful lesson: An idea isn’t great until the market says it is.