[Tarkus]

Monday, Aug. 14, 2006
The Segway Riddle

Dean Kamen's inventive vehicle failed to change the world. Now he's back for a second act
By UNMESH KHER/BEDFORD, N.H.

Changing the world isn't easy. It's a lesson Dean Kamen, the guy who invented the Segway "personal transporter," has learned the hard way. When he unveiled his self-balancing, battery-powered technological marvel (it seems a sin to call it a scooter) in 2001, Kamen predicted that cities would in the future banish cars from their congested hearts, and wildly popular Segways would fill downtown pavements.

Or maybe not. That scenario isn't even remotely likely today. And Kamen, who chairs Segway's board, has been forced to adjust his vision. "We didn't realize that although technology moves very quickly, people's mindset changes very slowly," he says. "People are very cautious, especially when it comes to the big issues."

Transportation, it appears, is one of those biggies. Though ceo James Norrod will say only that Segway has sold tens of thousands of personal transporters (PTs), and that sales are growing 50% annually, it's obvious — just look around — that Kamen's machine hasn't found much traction in the consumer market. Segway has, however, cultivated a few commercial niches to keep Kamen's company and his dreams whole. It has introduced off-road, police and golf models of its transporter, and thanks largely to its lobbying, 44 states now allow the PTs on pavements. Segway just entered the Chinese market, and its global sales are growing rapidly, especially in Europe. Foreign sales could account for half of all revenues next year, up from roughly 15% a couple of years ago.

Segway this week will roll out a slickly upgraded $4,995 PT, which it hopes will revitalize consumer interest. The new model is, predictably, a feat of engineering. It comes with a souped-up wireless key, which doubles as an alarm and display module. But the real breakthrough is the ride. If the first Segway felt intuitive-lean forward to go forward, lean back to stop and reverse, twist your wrist to turn-the latest models (the i2 and off-road x2) respond like they're controlled by mere thought. The secret is in its new control shaft, which has done away with the steering grip and now sways in sync with the rider to turn the device. The effect is akin to skiing, on cement.

Still, it isn't clear that such wizardry will-or can-do anything to change the firm's fortunes. The early adopters have already snapped up their Segways. Now the company has to convince everybody else that they need this thing. To help give people a feel for the machine, Segway has established a network of 102 independent dealerships operating in 116 locations across the country, many of which try to gin up business by running Segway-powered sightseeing tours. David Floyd, a dealer in Estes Park, Col., says about one tourist in 30 returns to buy a PT from his store. But his main business, he says, comes from the commercial market.

Segway's executives are aware that novel technologies rarely establish themselves first in consumer markets. "It's a chicken or egg problem," says Klee Kleber, vice president of marketing. "People won't buy it until their peers do, and their peers won't buy one until they buy it." Marketers call this treacherous patch of a new product's path to the mass market "the chasm." Companies typically cross it by getting a foothold in a commercial market until consumers grow accustomed to the technology. The pager, for instance, was used mainly by doctors before everybody else caught on. PCs, VCRs, GPS: each crossed the chasm as the price dropped and their utility became obvious.

Segway has identified the commercial security and police markets as its chasm-crossers. Today more than 150 law enforcement agencies globally are using Segways to boost the range, visibility and visual field of their beat cops. The Chicago Police Department, for instance, has 38 Segways, which cops use to patrol the airports and large public events. It will soon buy 20 more. "It's a low-key force multiplier," says Jonathan Lusher, senior V.P. at the mall security firm IPC International, which owns scores of Segways. "It allows us to have our officers in more places in less time."

By all accounts, Segway's commercial sales are picking up fast. But is this business sustainable? Curtis Carlson, ceo of SRI International, an innovation consultancy and research institute, has his doubts. Segways, he notes, are competing with established products, like electric golf carts, and stealing only a share of their market. Price is a problem, too. "Value is benefits per dollar," says Carlson. "For a lot of the world, a small lightweight bike is a good alternative to a $5,000 Segway."

Geoffrey Moore, a managing director at TCG Advisors in San Mateo, Calif., whose book, Crossing the Chasm, has shaped Segway's strategy, raises other concerns. There's simply too much "pain" associated with its use, he says, to make the gains derived from owning it seem worthwhile. Average consumers, he explains, will worry about such things as the etiquette of Segway use. (Where can it be driven? Or safely parked? Can it be brought into the office? Left in the lobby?) Though any one such concern is minor, he says, together they have a multiplicative effect. "It's like Gulliver and the Lilliputians," says Moore. "No one string was a big problem, but together they kept Gulliver down."

Even the security market, says Moore, won't save Segway. Novel technologies must offer a solution to a "broken mission-critical process" to get adopted wholesale. The PT, he observes, offers nothing of the sort. His conclusion? "Segway," he believes, "is a product destined to live in the chasm for ever." Moore suggests Segway consider putting its technology into other devices, and seeing if any of those are better suited to the mass market. And indeed, Segway is beginning to do something like that. It has developed heavy duty carriers called Robotic Mobility Platforms that it is pitching to the military. It will also be putting its Smart Motion technology in robotic toys it is developing with the toymaker Wow Wee Ltd.

Toys and niche markets? This is not what Kamen-who still owns DEKA Research & Development Corp., the invention factory where Segway was born-expected from his baby. And he has tempered his Segway spin, though he still asserts that most major cities will ban cars from their downtown districts in 10 to 15 years. "As people become more sensitive to the global environment," he says, "and as energy becomes more expensive, people will decide that Segway is a very attractive alternative for certain specific niches." He concedes that they may well roll along beside a variety of equally clean and effective transportation alternatives.

But Kamen, like many great inventors, is an inveterate optimist. "We don't need 50% market penetration," he points out. "The niche market for us is anybody with a set of feet. There are 6 billion of them out there. If 1%-or take 0.1%-of them get Segways, that's still 6 million people."


There it is . INC sees the problem.

You tour guys are the only ones that put the PT into the publics hands.

10 to 15 years !!

Alan

Alan