Forbes - Excellent Article

[JW Hunter]

This is an excellent article as it relates to the marketing failures of Segway. Perhaps they would have been better served consulting with DRAFT/Segs4Vets organizers along the way.

http://www.forbes.com/sites/adamhart...-all-failed/2/

[JohnG]

Sorry, but I don't think the author of that article really studied the history of Segway hard enough by talking to actual folks who worked there (instead of just relying on newspaper articles written about the company).

Had he interviewed actual folks from Segway, he would've discovered, that indeed, half our marketing and sales efforts in those early years was in identifying the niche area the product could fulfill a need. We had a whole team working on the problem.

The problem isn't simply one of "identification" -- the need also needs to fit the budget. And frankly, the biggest ding against the product then as it is today is the cost. We found plenty of interested parties who had nothing but good things to say about the product in a number of industrial applications. But when it came time to put in a PO, they couldn't stomach the costs for something that would marginally make their employees more productive. Paramedics and cops loved the thing for patrolling in large crowds, because they could move slow when they needed to, but move fast when a situation arose needing their attention. But there was no budget for it...

Segway is not a strict "failure" in the traditional business sense (also making it a bad example for this particular article). It's still a thriving, ongoing concern. It still sells units every single week. It still services existing units. So while, no, Jobs' and Bezos' vision for the success of Segway (interestingly left out of the article) wasn't grounded in reality, it actually pivoted enough to still be in business selling the same product (basically) it launched with.

So this article was largely a failure, because the author didn't understand that in the early days of Segway, we were very focused on finding niche markets and serving them. They just never materialized in the numbers we all had hoped.

John

[SegwayDan]

Originally Posted by JohnG

Sorry, but I don't think the author of that article really studied the history of Segway hard enough by talking to actual folks who worked there (instead of just relying on newspaper articles written about the company).

Had he interviewed actual folks from Segway, he would've discovered, that indeed, half our marketing and sales efforts in those early years was in identifying the niche area the product could fulfill a need. We had a whole team working on the problem.

The problem isn't simply one of "identification" -- the need also needs to fit the budget. And frankly, the biggest ding against the product then as it is today is the cost. We found plenty of interested parties who had nothing but good things to say about the product in a number of industrial applications. But when it came time to put in a PO, they couldn't stomach the costs for something that would marginally make their employees more productive. Paramedics and cops loved the thing for patrolling in large crowds, because they could move slow when they needed to, but move fast when a situation arose needing their attention. But there was no budget for it...

Segway is not a strict "failure" in the traditional business sense (also making it a bad example for this particular article). It's still a thriving, ongoing concern. It still sells units every single week. It still services existing units. So while, no, Jobs' and Bezos' vision for the success of Segway (interestingly left out of the article) wasn't grounded in reality, it actually pivoted enough to still be in business selling the same product (basically) it launched with.

So this article was largely a failure, because the author didn't understand that in the early days of Segway, we were very focused on finding niche markets and serving them. They just never materialized in the numbers we all had hoped.

John

Thanks, John, for your candid and valid assessment. I don't know why people keep believing what they read in newspapers.

From my own perspective as a Segway PT owner and frequent glider for over a decade, there are a few other less defined and perhaps even less discussed "barriers" to mass market adoption beyond cost: a requirement for a high level of agility, alertness, and a keen awareness of the glider's surroundings—at all times—while gliding; the necessity of a good grasp of the operating characteristics and limitations of the machine; a substantial level of responsibility as a Segway glider for being a "good ambassador" which involves obeying local regulations, showing respect for and courtesy to other pedestrians, demonstrating good relations with business owners and establishments in respecting any and all restrictions and regulations for operating Segways on respective business property.

Take your own casual survey of people around you at any time of the day or night. They don't look around. They barely even look up. They look down at the ground immediately in front of them—and not even that if they're glued to their "smart device."

So, for such a person to expect consistently safe, incident-free glides, they would have to rise to the occasion fully and realize that they're going to have to be uncommonly observant of their surroundings while gliding.

From my own experience of having been a Segway tour guide a good number of times, most average people can get through a Segway tour unscathed. Everyone's gliding slowly and the guides are watching everyone, ready to step in for any needed assistance.

But for someone to expect to glide solo "out in the wild" on a daily basis and stay healthy, they really have to step up and out of "zombie mode" as a pedestrian.

If someone tends to shrug off "technical" things, they're asking for trouble when operating a Segway. It's not as robust as a bike or other manually operated conveyance. It has its operational characteristics and limitations. Gliding without a good grasp of and respect for those factors is literally asking for trouble.

So considering all of the above, it's not surprising how few Segways get bought by individuals. The consumer market for Segway PTs on not only a niche, it's a MICRO-niche.

[Civicsman]

It's still a thriving, ongoing concern.

Well, it's ongoing, anyway. But it's not "thriving" unless that means the same thing as "surviving".

So this article was largely a failure, because the author didn't understand that in the early days of Segway, we were very focused on finding niche markets and serving them. They just never materialized in the numbers we all had hoped.

One can have an academic discussion about the marketing approach, but this a clear example of a marketing failure, and the magnitude of this failure is stunning. Market analysis for a new product is typically done LONG before anyone started soliciting investments, let alone building production machines, and that obviously includes research to understand what customers are willing to pay! Either the potential markets were misidentified or misunderstood. Somebody really blew it.

There must have been some really interesting investor meetings after the realization that the product was going to top out at numbers that were not going to pay back their investments.

[JohnG]

I can show you stacks upon stacks of market analysis done for the Segway before, during and after launch. To claim that no market analysis was done is simply to not know the facts. The analysis showed the niche markets that Segway should pursue, which is exactly what it did (and still does to this day).

More than half of marketing and sales was devoted to commercial uses and applications. A much smaller portion was devoted to consumer sales. The problem, again, was not knowing what markets to pursue, but finding out there was no way to deliver the product to those markets at a price point that made sense.

This was not a failure of marketing or sales so much as a failure to understand the product made sense only at certain price points. And we could never reach those price points (especially early on).

Think of it this way... what if the original Kindle cost $1000? Would anyone have bought it? Would it be the success it is today? What about the original iPod, what if that had been priced at $1000? (Within 8 months of introducing the original iPod at $399, Apple discovered cheaper is better when it comes to consumer goods and released one for $299.)

You cannot divorce pricing from everything else.

As for "thriving," given that the company is privately owned, we don't know its financials. But here it is nearly 15 years later and the company is still in business. Which is a lot more than you can say about 90 percent of startups.

John

[Civicsman]

First of all, I did not claim that "no marketing analysis was done". What I wrote was "Either the potential markets were misidentified or misunderstood". Quite clearly, the results of whatever marketing was done (pre-investment) was terribly flawed.

Again, we can argue about what was and was not done in Segway's crack marketing department, but the results are clear. If the pre-investment market analysis was even reasonably accurate, investors would have been told that production would top out at a tiny fraction of the numbers being thrown around by those who were promoting the product, and that investors would therefore likely never see a return on their investment. That would have been the end of it.

This was not a failure of marketing or sales so much as a failure to understand the product made sense only at certain price points. And we could never reach those price points (especially early on).

There must be a significant difference in the marketing schools that we attended. My school taught that a clear understanding of the product, including the selling price at which it can be successful, is a fundamental requirement of a marketing analysis.

You cannot divorce pricing from everything else.

Precisely correct. That was one of my points. Yet, that is apparently exactly the path that Segway put itself on, according to your statements. To be sure, marketing analyses are often screwed up. The "New Coke" debacle is commonly taught in schools as an example of how a big company with lots of money can still screw up a marketing analysis, but it is clear that Segway's marketing takes a place in the annals of classic marketing failures.

As for "thriving," given that the company is privately owned, we don't know its financials.

John, it was my understanding that you've been out of the company for years. Public financial reports are not the only source of information about a company. Is it possible that some people might have more recent knowledge about the company than you? In addition, did you forget that Segway brought in a senior manager (years ago) specifically to orchestrate an Initial Public Offering (IPO), which never happened. Why was that? I do not know why the IPO never launched, but as an investor myself (not in Segway), I am pretty sure Segway had a HUGE mountain to climb to convince IPO organizers that new investors would be willing to put more money into the company, given the sales volumes they were experiencing.

The fact that the company has not failed outright is hardly proof of "thriving". What else you got?

[KSagal]

Originally Posted by Civicsman

First of all, I did not claim that "no marketing analysis was done". What I wrote was "Either the potential markets were misidentified or misunderstood". Quite clearly, the results of whatever marketing was done (pre-investment) was terribly flawed.

Again, we can argue about what was and was not done in Segway's crack marketing department, but the results are clear. If the pre-investment market analysis was even reasonably accurate, investors would have been told that production would top out at a tiny fraction of the numbers being thrown around by those who were promoting the product, and that investors would therefore likely never see a return on their investment. That would have been the end of it.



There must be a significant difference in the marketing schools that we attended. My school taught that a clear understanding of the product, including the selling price at which it can be successful, is a fundamental requirement of a marketing analysis.



Precisely correct. That was one of my points. Yet, that is apparently exactly the path that Segway put itself on, according to your statements. To be sure, marketing analyses are often screwed up. The "New Coke" debacle is commonly taught in schools as an example of how a big company with lots of money can still screw up a marketing analysis, but it is clear that Segway's marketing takes a place in the annals of classic marketing failures.



John, it was my understanding that you've been out of the company for years. Public financial reports are not the only source of information about a company. Is it possible that some people might have more recent knowledge about the company than you? In addition, did you forget that Segway brought in a senior manager (years ago) specifically to orchestrate an Initial Public Offering (IPO), which never happened. Why was that? I do not know why the IPO never launched, but as an investor myself (not in Segway), I am pretty sure Segway had a HUGE mountain to climb to convince IPO organizers that new investors would be willing to put more money into the company, given the sales volumes they were experiencing.

The fact that the company has not failed outright is hardly proof of "thriving". What else you got?

It is easy to Monday morning Quarterback, but you speak as if you know what the investors discussed, and what they knew and did not know. How is this so?

It is easy to claim that the sales were far less than some famous people predicted, but to say that the investors did not know what the the true sales numbers would be is to also say that you know what they knew and when.

How do you claim to have this inside knowledge?

I suspect you are just concluding what they 'must have known' based on your own opinions of what happened. That is quite a bit different.

Also, you claim that the company brought in a financial manager specifically to bring the company to IPO. Again, were you in on the top level meetings, or are you just again employing your observations from the outside as fact?

I suspect that an IPO was considered, and perhaps a financial specialist was hired to investigate if it made sense for the company or not. Then they got a better offer, or found a better route, or came up with a better plan. I don't know, but I also do not pretend to know the intentions of those who run the Segway company, as they did not confide in me. (As you would have us believe they confided in you, by the way you write your posts)

This much is pretty clear, the Segway company is not being run the way you would run it. But of course, you are not running it, so that point is moot.

I suspect it is not being run the way I would run it either. And no one has asked me to run it, or asked me to give them advice on how to run it either.

We are all speculating. That is fun. But what may be obvious in one person's opinion my not be so obvious in another's, and also may have little resemblance to what actually happened.

[JohnM]

RE: IPO

Perhaps?

In May 2006, AP reported:

And Segway Inc. President and Chief Executive James Norrod, hoping to parlay the growth into a payday for the original investors in the scooter, has made grooming the company for an initial public offering in the next few years a top priority. Norrod said he was brought in as CEO last year for just that purpose by Segway's principal investors, Credit Suisse Group and the venture capital firm Kleiner Perkins Caufield & Byers, best known for its early investment in Google Inc.

http://www.washingtonpost.com/wp-dyn...900509_pf.html


However, it should be noted that I can find no quotable reference to Norrod using the term "IPO", but always spoke of a "liquidity event". I suppose that the sale of Segway Inc to Jimi Heselden in 2010 constitutes such an event.

[KSagal]

Originally Posted by JohnM

RE: IPO

Perhaps?

In May 2006, AP reported:

And Segway Inc. President and Chief Executive James Norrod, hoping to parlay the growth into a payday for the original investors in the scooter, has made grooming the company for an initial public offering in the next few years a top priority. Norrod said he was brought in as CEO last year for just that purpose by Segway's principal investors, Credit Suisse Group and the venture capital firm Kleiner Perkins Caufield & Byers, best known for its early investment in Google Inc.

http://www.washingtonpost.com/wp-dyn...900509_pf.html


However, it should be noted that I can find no quotable reference to Norrod using the term "IPO", but always spoke of a "liquidity event". I suppose that the sale of Segway Inc to Jimi Heselden in 2010 constitutes such an event.

Exactly. He may have been brought in to do something, and he may have done that thing. Speculation that he was supposed to make the company ready for IPO is not fact, but someone's opinion, and that someone is not someone who had inside knowledge.

[Civicsman]

It is easy to Monday morning Quarterback, but you speak as if you know what the investors discussed, and what they knew and did not know. How is this so?

It is easy to claim that the sales were far less than some famous people predicted, but to say that the investors did not know what the the true sales numbers would be is to also say that you know what they knew and when.

How do you claim to have this inside knowledge?

I suspect you are just concluding what they 'must have known' based on your own opinions of what happened. That is quite a bit different.

Also, you claim that the company brought in a financial manager specifically to bring the company to IPO. Again, were you in on the top level meetings, or are you just again employing your observations from the outside as fact?

I suspect that an IPO was considered, and perhaps a financial specialist was hired to investigate if it made sense for the company or not. Then they got a better offer, or found a better route, or came up with a better plan. I don't know, but I also do not pretend to know the intentions of those who run the Segway company, as they did not confide in me. (As you would have us believe they confided in you, by the way you write your posts)

This much is pretty clear, the Segway company is not being run the way you would run it. But of course, you are not running it, so that point is moot.

I suspect it is not being run the way I would run it either. And no one has asked me to run it, or asked me to give them advice on how to run it either.

We are all speculating. That is fun. But what may be obvious in one person's opinion my not be so obvious in another's, and also may have little resemblance to what actually happened.

This entire string is based on Forbes post-mortems of unsuccessful products. It's "Monday morning quarterbacking" by definition!

With regards to the Forbes article, I made no claim of inside knowledge. I don't know what the original investors were told. However, I think I stated it succinctly when I wrote, "If the pre-investment market analysis was even reasonably accurate, investors would have been told that production would top out at a tiny fraction of the numbers being thrown around by those who were promoting the product, and that investors would therefore likely never see a return on their investment." One can reasonably conclude that whatever the investors DID hear, it convinced them that they were investing wisely and they would get a reasonable return on investment. The sales did not meet expectations, and the investors lost their collective shirts. A marketing analysis is the tool for projecting sales volume.

As to why James Norrod was brought in, I relied on media reports that on multiple media reports from the 2006 timeframe. Such as this quote from another AP story,

"The company's CEO, James Norrod, has started a media blitz, trying to convince potential investors that Segway sales are growing at a steady rate and that the company could make an attractive long-term bet. The IPO chatter that's sure to extend over the next couple of years will haunt many of you out there so very tired of the Segway "buzz".

Norrod, who stepped in as Segway's CEO last year, has already mastered the vague diction required of a public company's chief.

"(The investors) thought it was the right time to bring me in to really lead this company through this crucial period and to a liquidity event," Norrod told the AP.

We take liquidity event to mean an IPO and not the pool of tears investors have shed over Segway's most unspectacular sales.

and

The AP notes that venture capital firm and Segway investor Kleiner Perkins Caufield & Byers (KPCB) once expected scooter sales to reach the $1bn per year mark. At $5,000 a pop, it would take 200,000 units to reach that revenue goal.

Ouch.

Such financial reporting can be dismissed out-of-hand, of course, if one chooses. However, national-level reporting of a potential upcoming IPO would generally be quickly corrected by the company, if it were incorrect. Not to do so would raise questions in the investment community. Whatever actually WAS said to the investors, we can all reasonably conclude that "We'll level out at somewhere around 10K units per year and you'll lose your shirt" was NOT what the original investors were told.

Please note that this string is about the Forbes article, which is about why some products are unsuccessful. I have not posted my opinion in this string about current Segway operations.