What the Recall Reveals About Segway


The latest glitch with its flagship product shows why the company may still have trouble fulfilling its enormous expectations.

The best that companies forced to deal with a product recall can hope for is that the product in question was never very popular in the first place. That's the case for Segway, the maker of the futuristic two-wheeled "personal transporter" that was supposed to revolutionize how we all get around. Except the Segway being recalled happens to be the company's flagship product, and the limited scope of the recall shows once and for all— as suspected by pretty much anyone with a pair of eyes and a passing interest in the device—how relatively few of the brilliantly designed if impractical machines have actually been sold.

This is something Segway, Inc. has been extraordinarily reluctant to divulge, saying only that it has so far sold tens of thousands of the machines, and that its business is growing at a 50% annual rate. Well, that description was technically correct�very much so. Turns out, Segway has sold only 23,500 of the transporters. Now it�s clear why its executives were so coy about the details.

The chances of hurting yourself on a Segway have always been pretty small, and the recall doesn't change that. You really have to try—that is, confuse the machine by making it force you to slow down, hop off its platform, and then immediately jump on again—to befuddle Segway's obscure control-software. Still six people have managed to do exactly that over the past four years, and that has prompted the manufacturer to recall every last one of the machines it has sold. This is actually the second time it has had to do that; in 2003, the company recalled 6,000 machines to fix a risk associated with depleted batteries. That provides a good measure of how much Segway has grown since it began selling the device in 2002.

Of course, if the early predictions of Segway's success had been borne out, we would have a major crisis on our hands. When the machine was unveiled roughly five years ago, Dean Kamen, its official inventor, swore that the world�s car-weary city slickers would snap them up to travel distances too short to drive and too long to walk. As cities around the world move to push bulky, polluting cars out of their congested downtowns, he predicted, Segways would become the urban transporters of choice. He wasn�t alone in his enthusiasm. Such renowned investors and entrepreneurs as John Doerr, the venture capitalist who helped midwife Amazon.com and Google, and Apple�s Steve Jobs, vied for a piece of the Segway pie and did their bit to hype the machine before its anticlimactic launch. Doerr told TIME that Segway would become the fastest company to hit $1 billion in sales. Steve Jobs ventured its impact would exceed that of the Internet. If Segway has sold only 23,500 machines to date, it hasn't even made back the $100 million spent developing the device.

Experts on innovation--including Geoffrey Moore, a managing director at TCG Advisors in San Mateo, Calif., whose book, Crossing the Chasm, has shaped Segway�s strategy for conquering the recalcitrant market—point out that there are just too many little problems associated with owning a Segway to make the $5,000 you pay to own one seem worthwhile. (Where do you park it? Where can you ride it without angering pedestrians?) In any case, for most urbanites, hopping on a bike or simply walking a little more seems a fine alternative to shelling out so much money.

So how much damage will the recall do to Segway�s fortunes? That remains to be seen, although it�s clear that the last thing Segway needs is another marketing problem. But the company says this one can be solved by a software upgrade done at dealerships. And obscurity provides a shield of sorts for the struggling company. Since many people haven�t even heard of Segways, let alone seen one, the bad publicity generated by this particular recall isn�t likely to resonate in the typical consumer�s mind, or do too much long-term damage.

Sphere: Related Content

No comments: