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June 29, 2020

What to Learn From the Segway’s Failure

Summary:

If you figure out how to plug into and help develop the right ecosystem, you can succeed where even the magical Segway failed.

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The original Segway, whose demise was announced last week to a chorus of chuckles about mall cops and I-told-you-so’s about the nerd factor, may be the most beautiful piece of design I’ve ever seen. Only the iPhone rivals the Segway, in my mind, in terms of how well the designs anticipated how people would use the devices and in terms of the wow factor when they debuted.

Yet the Segway flopped. Is there then any hope for the rest of us, who lack the design skills that Dean Kamen brought to the Segway?

There is, because he misunderstood or ignored an issue that is key to innovation success: the ecosystem. If you figure out how to plug into and help develop the right ecosystem, you can succeed where even the talented Dean Kamen and his magical Segway failed.

I became acquainted with the Segway shortly after its debut in late 2001. The consulting firm where I was a partner at the time was putting on an innovation-related event and had gathered enough C-suite executives at major companies that Segway sent its president to do a presentation in early 2002. He was slick: He had us set up a ramp so he could bomb down the center aisle on a Segway and up onto the stage. He did the whole talk on the device, darting to some spot on the stage, drifting back to the center and generally showing how the Segway seemed to respond to his thoughts. Just to show off, he’d occasionally do a 360.

He brought a few of the devices with him so the 70 or so of us could take turns experimenting with them in the desert near the resort in Arizona where we were holding the conference. All I had to do was start to think about heading somewhere, and the Segway would do the rest because it sensed my balance shift. Whenever I’d worry about going too fast, the device would sense my hesitation, and I’d slow down. The Segway didn’t have brakes, a throttle or a steering wheel, but it felt like an extension of my body.

I’ll always remember Dan Bricklin, who invented the electronic spreadsheet and who was a fellow with the consulting firm, repeatedly asking people to try to run him over. They couldn’t. They’d build up a head of steam, but then the user would worry as he or she got close to Dan, and the Segway would pull up.

Kamen had already developed a widely used insulin pump and other medical devices, plus a wheelchair that could climb stairs and raise the user to eye height; the Segway was to be his crowning achievement. Steve Jobs said the Segway could be bigger than the personal computer. Venture capitalist John Doerr, who put up funding, said the Segway could be bigger than the internet.

Nope.

The company hoped to sell 100,000 Segways in its first 13 months but sold only 140,000 over the nearly two-decade lifetime of the product. Shutting down production next month only means laying off 21 people.

The key problem was that Kamen and his supporters convinced themselves that cities would be redesigned to adapt to the Segway — a colossally bold claim that, alas, turned out not to come true. In fact, as usual, the Segway needed to be doing the adapting, and it just wasn’t very well set up to fit into the existing ecosystem.

I happen to think that cities need some redesigning — they’re far too car-centric — and the pandemic has provided such a shock to the system that it could accelerate change, but so many trillions of dollars are invested in the current setup that rethinking will take many years, even decades. In the meantime, the Segway was going to have to either fit on the street or on the sidewalk, and it did neither well.

The sidewalk would work, in theory, but only in light traffic. In New York City, you don’t gain much advantage from a device that goes 10 mph or 15 mph if you’re dodging pedestrians who are walking at 3 mph to 4 mph (and who are telling you what you can do with your Segway, in that charming way that New Yorkers have). You also, of course, have to deal with the elements for much of the year, while you’d be protected from them if you’re in a car or taking the subway. Even under the best of circumstances, Segway riders were told to wear helmets, knee guards and elbow guards — fine if you’re a kid but not so great for professionals who aren’t willing to live with permanent hat hair.

Streets are a nonstarter. Someone on a Segway would be moving much slower than the rest of traffic and without the protection that tons of metal provide for those in vehicles. Even in a modified bike lane, the bikes and Segways could wind up going at very different speeds and getting tangled up.

There conceivably was a strategy to be had by working from the edges in. Perhaps if Kamen had seeded smaller cities, as Lime, Bird and other scooter companies are now doing (while facing their own troubles), and let popularity build in ways that would attract bigger markets. Perhaps if Segway had gone after discrete markets in controlled environments, such as warehouse workers, tourists in areas without cars and — dare I say it? — mall cops, then built from there rather than expecting cities to completely redo themselves from the get-go.

The good news is that insurers can learn from the Segway mistakes and, based on the thought leadership I see in the industry, are, in fact, beginning to pay serious attention to the demands of and opportunities in ecosystems.

There are three basic ways to do that: 1) join someone else’s ecosystem; 2) invite others into yours; 3) or participate in and foster an ecosystem that has many parts but not a clear leader.

Joining someone else’s would be, for instance, selling microinsurance through a shipping company that would offer the opportunity to bundle your coverage into the cost of carrying cargo. There would seem to be loads of such opportunities to bundle insurance distribution into car and home sales and all sorts of services supplied to businesses.

Having someone join your ecosystem would, likewise, be straightforward. You sell auto insurance, and you invite a roadside assistance provider to bundle its services into yours. You sell home insurance, and you offer security or maintenance providers the opportunity to plug into your relationship with the client.

Participating in or fostering an ecosystem without a clear leader (just yet) is less straightforward. At the moment, I’d say insurers are mostly consumers of information in these ecosystems — pulling in publicly available data to save people time when filling out forms, gathering the full history of construction work on a building, etc. — but, within the bounds of regulations, will become suppliers of information and relationships to others.

If the world of technology is any guide — and it generally is, because all industries are becoming technology industries — participating in ecosystems and forming them will become easier. That’s because business processes will increasingly be connected via software, which means that every action and decision has to be super-well defined (via an API, for application programming interface). Once processes become like software modules, they snap together at least as easily as the apps on your smartphone.

So, competition will increasingly be based on ecosystems rather than on your native competitive advantage. Perhaps your underwriting, combined with someone else’s distribution system (even from outside insurance) and a third-party claims system will compete against some other ecosystem.

The change to full-on ecosystem warfare is probably a ways off, but the change will be profound. Think back to MS-DOS, for any of you unfortunate enough to use it. It wasn’t close to the best operating system, but it had assembled the best ecosystem based on the software that ran on it and on customer relationships, so it beat IBM’s OS/2, all the flavors of Unix and even the Mac — until Jobs assembled an even better ecosystem via the iPhone.

We’ll never be as inventive as Dean Kamen, but that doesn’t mean we can’t be more successful than the Segway was, if we learn the right lessons about ecosystems.

Stay safe.

Paul

P.S. Here are the six articles I’d like to highlight from the past week:

5 Transformations for a Post-Pandemic World

COVID-19 may be the much-needed impetus for change for insurance organizations operating based on decades-old procedures and tactics.

Insurers Can Lead on Addressing Inequality

Apprenticeships can attract talent from among the underserved, and an industry initiative now makes the opportunity widely available.

Ready for Era of Real-Time Payments?

Consumers and service providers increasingly expect the same frictionless payment experiences they have in other sectors of the market.

Ransomware Grows More Pernicious

The emergence of the Maze variant creates a new threat, that stolen information will be released to the public on the internet.

5 Trends Changing Auto Insurance

Will insurers continue to provide traditional insurance in traditional ways until forced down a dead-end path, or will they embrace new trends?

Time to Streamline Group Benefits Quotes

Current, AI-based technology can cut response time for group benefits quotes by as much as 92%.

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About the Author

Paul Carroll is the editor-in-chief of Insurance Thought Leadership. He is also co-author of Billion Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years and the author of a best-seller on IBM, published in 1993. Carroll spent 17 years at the Wall Street Journal as an editor and reporter; he was nominated twice for the Pulitzer Prize. He later was a finalist for a National Magazine Award.

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