What Segway Learned About the Value of Feasibility Analysis the Hard Way

Introduction

The Segway PT is a two-wheeled, self-balancing transportation device that consists primarily of a set
of tall handlebars on top of two disc-like wheels. There are no chains or visible mechanical workings.
Riders lean forward to move forward and back to move backward. Turning is done mechanically via
hand controls. The device is driven by a quiet, non-polluting electric motor and can travel up to 10 miles
per hour. The name “Segway PT” stands for “Segway Personal Transporter.”

The Segway was built in secrecy and was unveiled on December 3, 2001, on the ABC program Good
Morning America. The Segway PT was known as Ginger and IT before it was unveiled. The invention,
development, and financing of the Segway were the subject of a book, Code Name Ginger, which was
slated to be published after the Segway was introduced. The leak of information from the book led to
rampant speculation about what the Segway was. Some people speculated it was an antigravity machine
while others thought it might be a helicopter backpack. The initial reaction to the Segway PT was
enthusiastic. Venture capitalist John Doerr predicted that it would be as important as the Internet.
Apple’s Steve Jobs predicted that cities would be built around it. To cope with the expected demand for
the product, Segway’s factory in Bedford, New Hampshire, was designed to build up to 40,000 units
per month. Initial sales were targeted at between 10,000 and 50,000 units during the first 12 months.
But, after 21 months, only 6,000 units had sold.
What went wrong?

Feasibility Analysis

While the Segway was a technological marvel, in retrospect there were fundamental flaws in both its
product/service feasibility analysis and its market/industry feasibility analysis. These issues are
discussed next. When reviewing Segway’s prelaunch and postlaunch behavior, one has to wonder how
so many critical issues seemingly weren’t analyzed or were missed. It provides lessons for future
entrepreneurs to be more rigorous in their thinking regarding the feasibility of a new product or service,
regardless of how much of a technological marvel it is.
Product/Service Feasibility

The Segway itself was extensively tested and it performed well both prelaunch and postlaunch. It was
tested and retested during development, and was subjected to all the conditions it might experience in
the field: extreme heat, extreme cold, rain, snow, high humidity, salt, dust, and so forth. It came through
with flying colours. Its durability was also rigorously tested. In fact, when it was introduced, the
company said that tens of thousands of hours had been dedicated to riding the Segway to see how it
stood up under repeated use. The testing was apparently successful. Despite all the knocks the Segway
has taken over the years, there have been few reports of mechanical problems.

Yet, curiously, although the company put substantial effort into the Segway itself, people immediately
questioned its price and how it could be used. First, it was priced at $4,950, which put it out of reach
for many consumers. Second, while there were a few Segway dealers initially, there weren’t many so it
was unclear to people that if they bought a Segway, where they’d get it serviced. Finally, while most
people admired what the Segway could do, they just couldn’t see it fitting into their environments and
lives.

There are even more penetrating questions. The Segway is best suited for densely populated areas where
people could ride their Segway to work. But how would that work in a place like Manhattan, in New
York City, where both the sidewalks and the streets are packed? It takes both hands to operate a Segway
safely. So, how would a businessperson carry a briefcase or a student carry books? The U.S. Postal
Service, a large potential market for Segway, tested the device for use by mail carriers, who still deliver
mail by foot. The postal service abandoned the idea after mail carriers complained that they couldn’t
sort mail or hold an umbrella while operating a Segway.

Segway’s failure to address its potential users’ questions in these areas provides an important reminder.
When conducting product/service analysis, it’s important to evaluate how the product or service will fit
into the existing way that its potential customers live and behave. A company may have a product that
on a stand-alone basis is fantastic. But people don’t use products or services in isolation. They must fit
into the existing framework of their environments and lives to be beneficial.

Segway scrambled to try to fix some of the usability issues, with mixed success. For example, the
company hired lobbyists to try to persuade large city governments to make using the Segway on public
sidewalks legal. Ironically, San Francisco, usually thought of as a progressive city, passed an ordinance
specifically making the Segway illegal on its sidewalks as a result of safety concerns. The San Francisco
Board of Supervisors was convinced that the Segway posed a risk to pedestrians.

Market/Industry Feasibility Analysis

In regard to markets, from the outset Segway positioned itself for a large rollout. It assumed success. A
large amount of its capital, for instance, was dedicated toward production capacity and regulatory
issues, rather than proving its concept. In most cases a more measured approach is pursued. A company
rolls out incrementally and invests capital in production capacity once it validates that there is a market
for its product.

Segway also went national from day one. Rather than identifying niche markets to penetrate and build
from, the company saw its product as a solution in all markets. Many observers who have commented
on Segway’s missteps have singled out this issue, and feel that Segway should have gained traction in
one market or a small number of markets before expanding. For example, what if Segway would have
picked one city—say Boston—where in the downtown area a large number of people live near their
jobs. They could have given Segways to 1,000 people to use for three months, free of charge, based on
the condition that they use their Segways to travel back and forth to work each day. Had that test gone
well, it would have generated tremendous positive publicity, and provided an example for people in
other urban areas that the Segway could be used effectively. A similar approach would have been to
ask a cross-section of bicycle clubs, for example, across the country to start using Segways when they
weren’t biking. If the test went well, Segway could have started using bike shops to sell and service
Segways. It could have then developed a more powerful version of the Segway PT and added
motorcycle shops. This is how a company integrates itself into existing distribution channels rather than
trying to create a new channel just for itself, which is costly and difficult.

Instead of pursuing these types of approaches, Segway went for the home run and never found a large
market. As the company has downsized its expectations, it has had some success in niche markets.
These include police departments, military bases, warehouses, corporate campuses, industrial sites, and
theme parks. The Segway still, however, suffers from a usability stigma. At Walt Disney World in
Orlando, Florida, for example, the Segway can be rented at the Disney Boardwalk and driven in
specified areas, but can’t be used in other parts of Disney World. It’s more of a theme park attraction
than a practical device.
Segway’s decision to go for broad markets may also have been an artifact of its funding. It reportedly
raised $80 million prior to launch. Its investors were most likely attracted by the “big opportunity” that
it envisioned, and may not have settled for a slow-build approach.

Segway Pivots with No Significant Changes in Its Long-Term Prospects

Reeling from criticism and poor sales, in March 2003, Segway started a dealership expansion program.
In October 2003, it launched the Segway HT p-series model, which was lighter and more portable than
the original model, and was priced at $3,995. Around the same time, it dropped the price of the original
Segway HT from $4,950 to $4,495. In March 2005, Segway introduced its 2005 product line-up, which
featured three new models: the Segway HT i180 with enhanced range; the Segway XT, a cross terrain
transporter; and the Segway GT, a golf transporter. It also launched an improved line of batteries.

While Segway experienced moderate success with each of its new offerings, none of them materially
changed the long-range outlook for the company. Perceptions of the company also remain generally
unchanged. For example, in 2008 Professor Karl Ulrich used the Segway in his undergraduate product-
design class at the Wharton School of Business to demonstrate that creativity alone doesn’t insure
market acceptance, much less profits. He pointed out that although the Segway is potentially handy for
a host of users, ranging from security guards to golfers, it’s not ideal for any of them. It’s not much
faster than walking. And if you’re going farther than a mile, a bike works much better. Plus, compare
the cost of a Segway to a bike. Which value proposition do you find more attractive?

Segway Today

Segway was sold in early 2010 to a group led by British millionaire Jimi Heselden, chairman of Hesco
Bastion. Sadly, he died in an accident involving a Segway on September 27, 2010. Segway continues
to operate and serve several niche markets. According to the company’s Web site, over 1,000 police
and security agencies are using Segway PTs in their patrolling operations.