Segway Personal
Transporter
Spicka, Sriswetha M. (Swetha)
Saurabh Sharma
Segway – a revolutionary innovation is studied in the
context of how the innovation ecosystem was managed for
this product. The paper presents the risks faced, the
strategies to mitigate risk and the success or missteps by
the key players in ensuring successful adoption of the
product.
The Tuck School at Dartmouth
10/10/2011
Segway Personal Transporter 2011
"There's no question in my mind that we have the right answer. I would stake my
reputation, my money and my time on the fact that 10 years from now, cars will be banished
from urban centers to make room for millions of empowered pedestrians – empowered by the
Segway. If all we end up with are a few billion-dollar niche markets, that would be a
disappointment. It's not like our goal is just to put the golf-cart industry out of business." - Dean
Kamen, Founder of Segway Co., and Inventor of the Segway Human Transporter, in 2004
It may be bigger than the Internet. This is about more than money; we really do want to
change the world." John Doerr, Venture Capitalist (Netscape, Google, Amazon and Segway)
“As big a deal as the PC. If enough people see this machine, you won't have to convince
them to architect cities around it. It'll just happen." Steve Job, Apple Inc.
“The Segway is so revolutionary you'll have no problem selling it. The question is, are
people going to be allowed to use it?” Jeff Bezos, Amazon
Introduction
The pre-release hype for the Segway or at that time codenamed “Ginger” was
hyperbolic. An unplanned leak that implied an extraordinary invention that would change the
world captured the imagination of everyone and speculations ran high and wild. The
anticipation reached such heights of frenzy that the inventors got worried that nothing will
meet the expectations. But, was it really expectations that killed the Segway? Or was it because
the product, albeit revolutionary, suffered from an un-evolved ecosystem around the
innovation? Who were the key players in the launch and adoption of the product? What could
the inventors have done differently? How can the Segway reach its true potential in the future?
These are some of the questions we will address here.
Revolutionary Innovation
The Segway invention came out of a 6-wheel wheelchair called IBot designed by DEKA
Research Labs founded by inventor Dean Kamen in Manchester, NH. The IBot was built to
greatly enhance wheel chair users mobility including going up and down stairs and extending up
to bring the occupant to eye-level. Using the same technology, the inventors conjured the
Segway with a vision to impact how everyone in the world gets around. It was meant to replace
any cumbersome walking to get people around.
The Segway, through a complex bundle of gyros, accelerometer, sensors, batteries and
sophisticated software running on over 10 microprocessor, senses and reacts to subtle shifts in
its user’s balance to start, stop, change direction and acceleration. Please see exhibit 1 for specs
of the first model of Segway.
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Segway Personal Transporter 2011
It left test users slack jawed and was described as akin to ‘skiing without snow’. With no
brakes, no engine, no throttle, no gearshift and no steering wheel, it could transport people and
cargo for a full day, nonstop on only five cents’ worth of electricity. Its inventor touted that the
Segway "will be to the car what the car was to the horse and buggy."
Value Vision
As stated in the quotations above, the vision for the Segway was grand. It was meant to
revolutionize the way people went from place to place over short distances. The inventor, Dean
Kamen and his team visualized sidewalks in downtowns from New York to Shanghai filled with
people riding Segways instead of pedestrians. The value proposition was that it would replace
cars over short distances and thus mitigate congestion, pollution and fuel costs. Even today, the
Segway is marketed as the most “green” means of personal mechanized transportation.
Initially, the Segway was positioned to become the chosen means of transportation of
United States Postal Service mail carriers, FedEx package carriers, National Park tour guides,
Airport security forces, and merchandize pickers at Amazon to name a few such large
institutional customers.
It was also put forth that the Segway would be easily adopted by foreign markets in the
developing world because the urban areas are just being built. So, it was hoped that the
downtown areas of many new cities in China or similar nations would be planned around the
adoption of Segway by its citizens in the near future.
For both the customer types – institutional and consumer – the Segway’s value was that it
provided a means of transportation that replaced walking. It was designed to be so in tune with
the human ergonomics that the machine itself became an extension of the user’s body. This
meant that there was practically zero learning curve, extremely safe to use and to navigate.
Finally, while the Segway intended to replace cars over short distances, it was not meant to
take a chunk out of the car market share. Instead, the idea was to entice customers to buy the
Segway in addition to the car that they would like to own for all other purposes than short
distance errands.
Against this value proposition, commercial ambitions around the Segway were high. The
hope was to capture a slice of the $300 billion-plus transportation industry. It was predicted
that Segway Inc. will be the fastest company in history to reach $1 billion in sales. In order to
achieve this, the company erected a 77,000-sq.-ft. factory in NH that could produce 40,000
Segways a month one year after launch. At an average price of $5000 ($8000 to institutions
using the high powered version; $3000 for consumers), the goal was to reach $200 M in the
first 6 months of launch.
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Segway Personal Transporter 2011
Ecosystem map and initial adoption challenges
As a new revolutionary product, the Segway needed multiple players and various
favorable conditions to exist and develop for it to be successful. The success and failure of the
Segway can be analyzed by evaluating how the inventor and his team brought these players
together towards a single goal. Or was it even possible to create a conducive ecosystem for the
Segway innovation to begin with?
An ecosystem map is developed in Exhibit 2 in order to illustrate the different players
and bring out their relative importance in the Segway launch and potential success. It shows
which players interacted with each other and how each player affected the launch and
adoption of the Segway. Amongst the players, a couple of them emerge as critical to Segway’s
adoption along the value chain. Below, we elucidate which of the actors were leveraged
successfully and with which actors Segway faltered.
Government and Municipalities
Even before the Segway could reach consumers, it had to deal with both federal and local
governments to launch the product and for the product to be adopted the way it was
envisioned.
It was important that the federal government in the US did not classify the Segway as a
motor vehicle or a scooter. This was necessary to avoid licensing, registration and other
regulations that motor vehicle users have to deal with. Segway Inc and Dean Kamen worked
extensively with officials to avoid this classification including the OSHA (Occupational Safety
and Health Association) which wanted to classify the Segway as a “powered industrial truck”.
While this was a good win for Segway, the critical players were indeed state and local
governments. All regulations over sidewalks lie within the jurisdiction of local governments and
local governments’ buy in and endorsement is critical for consumer adoption. The inventors
mused that if the Segway was adopted by premium institutions like the USPS and the National
Park Service, the local governments would not doubt the safety of the product for consumer
adoption.
But, this assumption did not pan through. Segway Inc. went through numerous
litigations in over 30 states to ensure that Segway bans and other restrictions were lifted over
the years. But, this took many years and in the process, the adoption of the innovation and the
product at a consumer level became impossible for too long. This tarnished the overall image of
the product as a safe and secure means of transportation in the minds of consumers, which is
yet to be remedied.
The value proposition that the Segway offers to the developing world (in cities yet to be
planned and built) was greatly hindered by the hassle of obtaining regulatory approval in each
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Segway Personal Transporter 2011
country that the Segway hoped to sell into. Each country had its own ban on Segway – while
some allowed Segway in institutions, most discouraged the use of the Segway on sidewalks and
bike paths entirely. Segway Inc. is slowly and steadily getting these bans lifted in some
European countries, but the damage is already done.
It is hard to imagine how Segway Inc. could have convinced all the above parties
simultaneously to arrive at a critical mass for consumer adoption. This was an adoption risk
hard to fathom and nearly impossible to influence and control.
Consumer Product Safety Commission and OSHA
The Segway inventors did get the buy in from Consumer Product Safety Commission which
certified that the Segway had “safety features that are far more substantial than we normally
see in a consumer product--features closer to those associated with medical devices." But in
spite of this endorsement, most of the post launch criticism of the Segway was around the
safety of using one on sidewalks amongst pedestrians. This was the critical chicken and egg
situation – no one wanted to be the first to ride a Segway amongst pedestrians. It would work if
all pedestrians owned a Segway but that cannot happen until a critical mass of consumers
adopted the product.
Non-profits, FDA, ADA
One of the value propositions of the Segway is that it provided increased mobility to people
who needed additional help. This meant that it could be marketed as a safe to use medical
device to this consumer segment. But attempts to classify the Segway as a medical device were
not approved by the FDA. With this window closed, the Segway founders started to work
through a Segway-focused organization “Disability Rights Advocates for Technology” to demand
for Segway sidewalk and facility access as an ADA issue but have been unsuccessful. Also, Dean
Kamen had sold the rights to the balancing technology behind the IBOT and Segway to Johnson
& Johnson and hence lost the ability to be the sole marketer of the Segway as a medical device.
Another group of players that emerged, quite unexpectedly, was the non-profit
organizations. The Segway faced stiff opposition from the American Council of the Blind and
America Walks. Both organizations lobbied against any legislation that would allow the Segway
being used on sidewalks. This resulted is delayed adoption. Today, it is legal to use the Segway
in most states although users need to look up if it is approved by local municipalities. This is one
big hurdle that affected early adoption by consumers.
An ecosystem analysis would have prepared the Segway team to expect push backs from
the above organizations and build a better strategy based on these expectations.
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Segway Personal Transporter 2011
USPS, National Park Service and other Institutional customers
For an innovative device like the Segway it was essential that this device should be accepted
by a set of quick adopters and shown as a viable better way of commuting. In order to achieve
this, Segway Inc targeted commercial users such as large scale manufacturing plants,
warehousing operations, companies in the travel and tourism sector, universities, and the
postal service. Some of the early demonstrations were to the Department of Defense, FedEx,
Boston Police Department, USPS, San Francisco International Airport and Stanford Universities.
Early adopters included the Postmaster General, who was keen to put letter carriers on
Segways, and the head of the National Parks Service, who wanted to do the same with park
rangers and police. While Segway won these initial customers, it became evident that the idea
that adoption by these institutions will entice large scale consumer adoption in the mass
market was improbable. Having postal workers and national park service employees as your
poster child, while credible, was not glamorous. In an age where means of transportation aka a
car is the mostly bought based on look and style it adds to the user, this marketing strategy did
not work to add glamour around the brand.
Automobile and Bike Manufacturers
Even though Segway Inc claimed that its product was not a threat to the big three
automakers, it is not clear if the automobile manufacturers felt the same way. In an industry
where market share is tracked to the hundredth decimal point, nothing is ignored. With the
lobbying power that these automakers wield, it is highly possible that many of the restrictions
and bans that Segway Inc had to fight were instigated by the auto industry.
Similarly, bicycle makers were suffering though a decline in bike sales in the early 2000’s.
The entry of the Segway in 2001 was closely watched by the bicycle industry and many
manufactures lobbied for the Segway to be banned from bike paths.
Insurance Companies
It was important for Segway Inc. to make sure its product was not classified as a vehicle
by transportation vehicles. But this disengaged the insurance companies from the equation
entirely. From a consumer point of view, where safety is of utmost concern, having insurance
against accidents that are bound to occur could have provided peace of mind to early adopters.
This backfired in couple of instances where people fell off the Segway – include President Bush
although it is rumored that he had forgotten to switch it on!
Segway Co.’s strategy to integrate all the players around the innovation was very
fragmented. While it won some battles, it lost the war in favorable regulations around the
product. The most critical player – government and regulatory bodies presented back breaking
challenges.
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Segway Personal Transporter 2011
As seen above, the adoption risk was unusually high and Segway completely failed in
noticing these risks. It is hard to imagine how what incentives and rewards could have
convinced governmental bodies across the world to endorse the product without reservation.
Coordination of Co-innovation
The Segway is a technologically superior and advanced product that delivers very well
on all factors of performance, safety and ease of use. But for it to be used extensively, the
product is dependent on co-innovation occurring in a few critical and very challenging areas
that are not exactly technological and hence harder to influence.
Sidewalks
The Segway is dependent on the quality and size of sidewalks. As more and more people
start adopting the Segway, it is imperative that the sidewalks are reconstructed to ensure that
there is room for maneuvering the transporter around and also have room for pedestrians. This
means that entire downtowns need to be rebuilt or preplanned around the adoption of the
Segway. This includes planning and building safe parking spots for the Segway in cities and
towns to encourage the use of the product. The important question becomes – why would city
planners plan around the mass adoption of the Segway before it reaches a critical mass of
adoption amongst consumers? And would the consumers not wait for cities and sidewalks to be
conducive for their use of the Segway before they buy one? Segway Inc would need some
major clout to impose such requirements over city planners. This presents a co-innovation risk
for the Segway that is almost impossible to mitigate.
Design
As seen in cars, sleek design and futuristic look are very important for buyers in their
purchasing decisions. While the Segway was a magical technology, the design and look were
traditional and clunky. The Segway was very heavy and uncool looking for many initial adopters.
Some of the initial criticism came from Steve Jobs who thought that the ‘design sucked’!
Segway Inc. used internal designers mainly from its technical team as it was imperative for
Dean Kamen to keep the project top secret.
Long-charged batteries
Although distance and time of running were not the critical reasons behind the launch
failure of the Segway, this co-innovation risk exists. The limitation in distance is driven by the
charge that the Segway can capture in its rechargeable batteries to run it for longer times.
Speed is another factor that is affected by batteries but the value proposition was to be faster
than walking or jogging and it was.
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Segway Personal Transporter 2011
Other factors such as using the Segway in bad weather conditions and how that affects safety
and comfort presented challenges that could not be mitigated. Another challenge was
consumer trend towards reducing carbon footprint also means not just reducing fuel but also
metal and other non-biodegradable material. So, increasing fuel costs do not make a consumer
go away from cars towards the Segway, but instead to longer times walking!
Informed Expectations
"It's hard to say whether I should be ecstatic that we've even sold one of these things for $5,000
or be devastated that cities aren't filled with them. It's difficult to gauge what my expectation
should be."
- Dean Kamen, Founder of Segway Inc., and Inventor of the Segway Human Transporter,
in 2004
Based on the story so far, it is clear that Segway inventor Dean Kamen was too
enamored by his invention to notice the humongous adoption risk that the product faced. The
fact that entire cities need to preplanned or reconstructed and mountains of regulatory bodies
needed to be convinced to allow consumers to use the product did not deter Dean Kamen and
Segway Inc. to set sky-high targets for volume and revenue from Segway sales and building a
facility capable of making 40,000 Segways in a month!
Developing an ecosystem analysis as shown in Exhibit 3 and looking at this risk could
have helped the team be more realistic and actually savor in the success that they did achieve.
In the first six years of sales, 40,000 Segways were sold for $5000 apiece for total revenue of
$200 M or approximately $33 M each year. Looking at the initial investment in the Segway of
$100 M of R &D, that looks like a winning situation for any product. Since then, over $10000
Segways have sold and the product enjoys high customer satisfaction ratings. Any start-up with
such an invention would kill to be in this position but with the initial expectation of making
billions of dollars in the first few years, it is just not good enough for Segway Co.
Hence, the Segway is considered the biggest flop in its time, and is described as an
impractical and idiosyncratic invention that is the topic of many jokes. This could certainly have
been avoided by understanding the risks associated with the invention and setting the right
expectations for the company and its investments. This could be done through an ecosystem
analysis as shown in Exhibit 3.
Future outlook
Segway Inc. is currently going through its mid-course adjustments. They are at a stage
where realization has set in that mass-marketing strategies concentrating on selling Segways to
the entire walking population of the world diluted its efforts and led to low volume sales.
Instead of concentrating on a value proposition aimed at revolutionizing the way people get
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Segway Personal Transporter 2011
around and changing the world, its marketing strategy is focused on specific target customer
segments such as tour rentals, airport security, utilities, resorts, event centers, golf courses and
parking facilities. Its innovation strategy is now focused on providing enhanced design features
to these customers such as built in Garmin GPS, cross-terrain abilities, golf course mobility,
enhanced range and lithium ion batteries as an upgrade.
The company is steadily meeting its revenue and sales targets and the Segway continues
to be adopted by many individual users such as pizza delivery guys (Exhibit 4), short distance
commuters and small business owners who are fuel-price sensitive. Also, reducing prices are
enticing more users. Cities that are trending towards reducing their carbon foot print are
acquiring Segways for employees.
Conclusion
The Segway was clearly a technological marvel. The development of the innovation was
executed perfectly through top notch talent and focus on safety, ease of use and reliable
performance. But, execution risk is not the only challenge an innovation faces. While the
Segway was developed into an impeccable product, it faced unprecedented adoption and coinnovations risks. These risks were greatly exasperated because of the marketing strategy and
value proposition around the innovation and its exorbitantly ambitious goals. Targeting the
entire world population and expecting cities to be rebuilt around the product proved to be
fantasies.
These lofty ambitions led to ineffective and diluted marketing strategies and
presumptions about managing key players such as local governments, automakers and nonprofit organizations. It also led to inefficient and over ambitious investments that affected
profitability and measures of success. By carefully studying the innovation ecosystem, Segway
could have scaled back its expectations, reevaluated its innovation strategy based on informed
and corrected expectations. All this could have helped avoid the ridicule it faced ever since its
launch entirely.
Looking ahead, Segway Inc. can continue to achieve sustainable profits and success
around its products by focusing on niche customer segments that can truly benefit from its
value proposition. Achieving good adoption by the targeted segments as listed above can, in
and of itself, sustain the company for many years to come without having to change the world!
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Segway Personal Transporter 2011
Exhibit 1:
SEGWAY'S SPECS
COST: About $8,000 for industrial models; consumer versions may cost $3,000.
MAXIMUM SPEED: 5 m.p.h. to 17 m.p.h., depending on settings
RANGE: About 17 miles per battery charge on level ground; decelerating or going downhill generates
electricity, extending its range
RECHARGE TIME: One hour of charge for two hours of operation
PAYLOAD: Passenger — 250 lbs. Cargo — 75 lbs.
WEIGHT: 65 or 80 lbs., depending on the model
Exhibit 2: Ecosystem map of all the key players and how they interact
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Segway Personal Transporter 2011
Exhibit 3: Innovation ecosystem for the Segway
Exhibit 4:
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