We all know about the Newton, the Apple handheld computer that was supposed to become a game-changing PDA (personal digital assistant). The Newton’s failure almost obliterated the Cupertino company. But it’s far from the only crushing financial disaster in computer industry history.
Many products and services have tried and failed to become the Platonic ideals their developers had imagined. And we’re not just talking about the work of a few guys in a garage with a dream. We’re talking multimillion- (even billion-) dollar investments given to established enterprises with boards of directors and shareholders to answer to.
They messed up. But now you don’t have to. You can learn from their mistakes right here. And you don’t have to spend a dime.
The Kin Phone
A billion dollars and two years of effort went into the development of Microsoft’s Kin One and Kin Two, based on the hope that the product would become an indispensable social networking accessory. Updates from your friends acted as the phone’s wallpaper, a dynamic, multi-paneled display called “tiles.” This constantly updated access, known as “the Loop,” really did make you feel like you were in the loop.
With these smartphones, you could also easily respond and comment by dragging a single tile down to the “Kin Spot” at the bottom of the screen. Best of all, you could use your computer to access your phone’s history via the Kin Studio. If you lived and died by social networks, this was the phone for you.
The Kins also acted as a Zune, so if you bought music through Microsoft’s Zune Marketplace, your Kin phone would play it. (The Kin’s social network rival, the Sidekick, which was developed by Danger Inc., couldn’t say the same.)
What went wrong
Launched on April 12, 2010, the Kin lasted a mere 48 days on the market in the U.S. and wasn’t even released in Europe.
Although the Kin targeted social networking, it had a 15-minute delay on Loop updates. For a phone that put teenagers and enthusiastic marketers in their crosshairs, this was a serious design flaw. Pricing was also an issue: $30 a month for a data plan.
But the real issue was corporate politics. It started when Microsoft acquired Danger Inc. and put its staff to work on the Kin. The former Danger crew wanted a Java-based platform, while for the Windows Mobile Division, the future was Windows Phone 7. With delays in design, the release took two years and yet was so rushed it lacked basic features like a calendar. And a calculator.
Not even a calculator? Game over, man. Game over.
If you’re planning to enter a market through acquisition, make sure you learn what makes your acquisition’s product successful before you start issuing orders. And if you have two rival divisions in your company, for heaven’s sake, merge them and make sure the young don’t eat each other in the nest.
Iridium Satellite Phone
Ask anyone who ever had their cell phone drop a potential client’s call: Who wouldn’t want a phone that works everywhere? And by everywhere, we mean Iridium satellite coverage of your home, your office, the North and South Poles, and every point in between (except North Korea, which blocks the satellite signal).
In May 1997, Iridium Communications launched a constellation of 66 satellites, with backup satellites at the ready, to ensure you would always have instant access to your clients. And they did: The 66 satellites provided continuous telephone communications service for subscriber units around the globe.
What went wrong
Those 66 satellites? They were meant to be 77—the atomic number of the element iridium—but Iridium scaled down the network to try to avoid running out of cash. In 1999, only nine months into Iridium Communications’ life, and after winning billions of dollars in investment, the company filed for Chapter 11 bankruptcy protection.
Iridium acknowledged it had difficulty getting customers. How could that be, when it had a product that did its job better than any mobile phone in existence?
Essentially, Iridium solved a problem that didn’t need solving. Had the company done a little bit more research, it would have realized that most users weren’t willing to pay extra for a phone that works in the mountains, in the air, or at sea. Its service competed against technically less capable—but in actuality more convenient and inexpensive—cell phones.
Other snags made Iridium a losing proposition. You know your hard-to-reach tech support guy? Iridium works only if your phone can see sky (satellite phones don’t work inside buildings as easily as cell phones can, with their much closer cell masts). Plus, the phones were heavy and bulky—although a slimmer version appeared in late 2008—which knocked out the adventure travel crowd.
Technically speaking, Iridium didn’t completely fail, even though it didn’t fulfill its promises as a consumer product. It did emerge from Chapter 11 and is a going concern today thanks to a U.S. Department of Defense contract, as well as rentals at far-flung vacation sites for those entrepreneurs who can’t relax. (It’ll cost you approximately $20 to $45 a week, depending on the model of the phone, plus $1.78 per minute.)
Know your market. Don’t try to take over everything; niches can be profitable. Had Iridium stuck to government contracts, it could have been a quiet success.
Back in 1987, GO Corp. was at the vanguard of pen-based computing, and investors handed the enterprise $75 million to make the world forget keyboards and mice. In 1991, GO released its OS, PenPoint, which was designed specifically for the new market and included gesture recognition. GO’s well-received technology was implemented in several IBM computers, including the first ThinkPad.
Microsoft took notice and developed a competitor, the Windows for Pen Computing OS, which was little more than an interface for its Windows 3.0. GO then spun off its hardware division, EO, which made the Personal Communicator, a wireless device with its own applications. AT&T bought it out in 1993, specifically to pair with its new Hobbit microprocessors. The future was so bright for GO, it had to wear shades.
What went wrong
A mere two weeks after AT&T acquired EO, it cancelled the Hobbit, leaving GO with no revenue. GO was going, going, gone.
In reality, GO suffered from two problems. The first was the lack of sales, which came as a result of negative press from finicky handwriting recognition. (Also, no matter how you slice it, typing will always be faster than handwriting.)
The second was Microsoft, which seemed to develop its OS only as a response to competitors gaining footholds in the market. After GO folded, the second iteration of Windows for Pen Computing was late and didn’t deliver promised features—a sure sign Microsoft had lost interest once the competitive threat was eliminated. Microsoft then put its efforts into notebook computers.
If you’re going to sell off a division of your business, make sure your other divisions aren’t entirely reliant on it for the viability of your product—or have iron-clad contracts with whomever you sell it to. Alternatively, get enough cash for it that you can start another company, so you still have a market if the first gets wiped out.
By the early 2000s, it was becoming clear that DVDs couldn’t give us the high-definition viewing that we craved. New standards emerged to take its place, including HD-DVD.
Toshiba created HD-DVD, and it initially looked like a success. That was particularly so because HD-DVD’s main competitor, Sony’s Blu-ray, initially required a protective caddy to prevent user mishaps. HD-DVD was also backed by enterprise tech giants (Microsoft, HP, and Intel) as well as Hollywood (Paramount, HBO, Universal Studios, and Warner Brothers).
The icing on the cake: HD-DVD was cheaper than Blu-ray. And if we learned anything from the Betamax-VHS wars, cheaper wins out. It even beat Blu-ray to market by three months.
By the early 2000s, it was clear the DVD would fade away as the preferred video standard. Long live the HD-DVD.
What went wrong
Blu-ray had allies of its own: Panasonic, Sony, Phillips, LG, and Sharp. Blu-ray could also manage a whole 50 gigabytes per disk, versus HD-DVD’s 30. After two years and almost $1.4 billion dollars, Toshiba cried uncle in early 2008.
When Sony paid Warner Brothers to throw in with Blu-Ray, the world quickly declared a winner.
Fans of HD-DVD can take comfort knowing that Blu-ray may eventually fold due to the rise of digital downloads.
In any sector, when you have rival formats duking it out for dominance, you know one will eventually meet a grisly fate. Investing heavily in either side of a format war gives you a high chance of ending with a lot of expensive, useless technology. Worse, the losers have to conform to the winner’s product, the technological equivalent of making Red Sox fans wave Yankee banners (ouch).
It’s best to avoid it.
The OS/2 Operating System
IBM’s OS/2 had a long and occasionally illustrious history, starting with its humble text-based origins back in 1985, all the way through to the last release of OS/2 Warp 4 in 1996. (E-ComStation provides support for those who still rely on the OS today.) Originally a marketing and development joint venture between Microsoft and IBM to create a superior replacement for MS-DOS, OS/2 eventually became a wholly IBM platform competing against Microsoft’s Windows. IBM invested an immense amount of resources to develop and support OS/2.
OS/2 was first designed as an alternative to DOS, and later as an alternative to Windows. It became the first truly 32-bit operating system in April 1992, and had true hardware-based multitasking (taking advantage of support built into Intel’s 386 processor) as well as virtual DOS boxes, so no one program could crash the whole operating system.
OS/2 wasn’t the most stable operating system, but compared with Windows it was a paragon. Given OS/2 was a clearly superior offering, what other choice could a customer possibly make?
Microsoft developed Windows. Early iterations were unpolished, but Microsoft was a persistent marketer, and it carved out market share for its proprietary operating system. Microsoft let IBM market OS/2 to large enterprise IT organizations and quietly put all its energy into marketing Windows to consumers and smaller businesses. By the time Windows 3.0 came out in May 1990, Microsoft had discovered that it could make more money from Windows than from OS/2. An increasingly fractious rift between the two companies saw them part ways. Microsoft took its evolution of OS/2 and renamed it Windows NT.
Having let Microsoft branch off OS/2 into a rival and more successful operating system, the remaining OS/2 users demanded compatibility for their Windows applications. IBM duly built this into OS/2, calling the result OS/2 Warp, and licensed the right to run Windows programs from Microsoft.
Of course, Microsoft soon realized that it had no need to continue to provide that right and duly stopped, eliminating a large part of OS/2’s toehold in the marketplace. The rest, as they say, is history.
If you build it, they may not come. But if you market it, they will. Also: keep your friends close and your enemies closer. And your lawyers closer still.
This article/content was written by the individual writer identified and does not necessarily reflect the view of Hewlett Packard Enterprise Company.