IBA Update 15 Dec 03 – New Product Hits and Misses in 2003

In February, I published five innovations to watch for 2003. These were new products and services with high expectations – each company launching these products saw them as being able to generate significant appeal.

What happened to these innovations over the course of the year? As we head towards the end of 2003, it’s a good time to review the events and patterns that emerged over the year, and to make some calls on successes and stumbles.

This week, I’ll discuss the three products on my February list – the Prius, the Segway, and Windows for the Tablet PC. Next week, I’ll look at the services, Netflix and Google News.

The chart below compares performance of each of these products to the published expectations of the companies that launched them.

Toyota’s sales expectations for the Prius were quite modest, and the auto became a success because the company was able to exceed them. In contrast, both Segway and Microsoft had much higher expectations for performance than their products were able to deliver.

The Prius has already exceeded Toyota’s expectations. On 8 December, Toyota announced that it was raising US production of the Prius by one third, to 47,000 vehicles in 2004.

As a mass market product, the Prius performs poorly in the four factor model. It has benefits and features that are not available in any other vehicle, but the product is not easy to buy and requires customer education.

The Prius is most attractive as a specialty product and a technical achievement, which is how Toyota has positioned it. The product is a success because it has significantly exceeded Toyota’s modest sales expectations, and can lay the base for future growth in this segment. In 2004, Toyota plans to launch a Lexus Hybrid SUV, and the company plans to eventually offer the gasoline/electric combination in all of its vehicles.

Both the Segway and the Prius are impressive designs and technical achievements. Both products achieve their goals with sophisticated new technology. The Segway’s intent is much more radical than the Prius, however -- while the Prius puts a new fuel system in an existing transport mode, the Segway aims to develop a new way of getting around.

Many businesses were interested in trying the Segway. About 200 companies purchased Transporters. But after trying the product, few came back to order more. It turns out that walking has a lot of advantages over riding a Segway. "You can't keep warm if you're not walking," says a postal worker in Concord, N.H. "You end up like a frozen popsicle on a stick."

The Segway factory in New Hampshire was designed to produce 40,000 Segways a month; as of September, 2003, Segway had sold a total of 6000 units.

Applying the four factor model to the Segway reveals its limited appeal as a mass product:

There’s no obvious path for substantial Segway product extensions. In contrast to the Toyota Prius, whose core technology has already generated major research initiatives at almost all auto companies, the extension of Segway technology appears limited. Johnson and Johnson launched its iBot 3000 wheelchair, which is also based on Dean Kamen’s gyroscope technology, but, not surprisingly, that product has similar issues to the Segway.

At the end of February, Business Week declared the tablet PC a tremendous success – "tablet PCs are flying off the shelves … it’s already obvious that Gates & Co. have scored a hit."

February turned out to be the high water mark for Tablet PC sales in 2003. "[The Tablet PC market] is a mess," Jim Wong, president of the Acer IT Products Business Group, said in December. "We are disappointed in the market. We believe it will happen, but it will happen too late. We keep on challenging Microsoft [to do more]."

Acer President Wang Chen-tang said in November that Acer barely sold 100,000 Tablet PCs over the last 12 months, far short of its target of 2 million units. And all the hardware makers sold only 256,000 Tablet PCs through June 2003, according to market research firm IDC.

What happened? The promise of the Tablet PC is currently greater than its performance. On CNet, 55% of users reviewing the software would not recommend it (for comparison, about 70% of CNet users recommend the iPod). There’s not enough software that uses tablet technology, and the Windows XP operating system is limited: the CNet reviewer cited agonizingly slow and often inaccurate text input recognition, and an interface that lacks a way to minimize all windows or switch easily among applications.

In last week’s update on the iPod, I mentioned the Apple "ideology" of high price and proprietary performance. Microsoft’s new product ideology might be characterized as: "release, refine, and release." Early in 2004, Microsoft plans to launch its new version of the Tablet PC operating system, which may re-start the sales of tablet computers.

1. My original update from February on Innovations to watch in 2003 is here: http://www.biz-architect.com/innovations_to_watch_2003.htm
2. Here’s the CNet review of Microsoft’s XP Tablet Edition: http://reviews.cnet.com/4505-3513_7-20637464.html?tag=search
3. Here’s an update on the Segway from the International Herald Tribune: http://www.iht.com/articles/105799.html
4. And a recap of Segway, with comments about trials, from CNet:  http://news.com.com/2009-1040-994541.html
5. Tablet PCs story from CNet Asia: http://asia.cnet.com/newstech/personaltech/0,39001147,39155730,00.htm
6. And Acer complaints continue: http://www.winnetmag.com/windowspaulthurrott/Article/ArticleID/40998/windowspaulthurrott_40998.html