Introduction

New product development is said to be the lifeblood of a company. This is especially true

today than ever before in history. Today's economic environment doesn't lend itself well

to trying to sell more of the same (Hill, 2009). Companies that hope to exist must now

evolve new products at an increasing rate to enhance their competitive posture or even to

survive. There are no sacred niches that can be harvested for long periods of time

(Annachino, 2003: xvii). Consumers demand innovation even more in the toughest of

time. New product innovation or development thus has the potential to mitigate economic

downturns and position manufacturers for the upswing with increased market share and an

innovative product line. It also gives distributors a viable, cost-saving product to pass on

to end-users (Hill, 2009). As a result, this study aims to investigate the new product

development process to understand how new products are created in a methodological

manner to help companies improve its performance in the current business environment.

An interesting and controversial case is chosen for this study, namely the Segway case.

Through dissecting the new product development process of Segway, problems are

identified and recommendations on how management can get involved in the production

process are also provided. This study is immensely useful because of the phenomenal

nature of how the idea of Segway came about and how it was created. From analyzing

Segway, many lessons can be learnt and applied to new product development in future.

Problem

The failure of Segway, as a new product, to live up to its expectations in terms of sales in

units and revenue, profit level, and public perception and acceptance after its launch

presents the main problem for this study. The solutions are believed to stem from

improvements and recommendations that can be made from the new product development

process of Segway, which will be subsequently analysed. Throughout the study,

secondary data is mostly utilized. Hence this poses a limitation to the objectivity and

timeliness of the study due to the fact that most information sources are written by non-

Segway personnel and ranging from 2001 to date.

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Theory

The importance of new product development (NPD) has grown dramatically over the last

few decades, and is now the dominant driver of competition in many industries. In

industries such as automobiles, biotechnology, consumer and industrial electronics,

computer software and pharmaceuticals, companies often depend on products introduced

within the last five years for more than 50 percent of their annual sales. However, new

product failure rates are still very high. Many R&D projects never result in a commercial

product, and between 33 and 60% of all new products that reach the market place fail to

generate an economic return (Blagoevski-Trazof, 2007: 195).

In order to recoup investment in NPD and make an economic return in an environment

characterized by rapid product obsolescence and market fragmentation, a company’s new

product must meet the following two basic objectives: 1) minimize time-to-market and 2)

maximize the fit between customer requirements and product characteristics (Blagoevski-

Trazof, 2007: 197).

Minimizing time-to-market is necessary for several reasons. A company that is slow to

market with a particular product or technology is unlikely to fully amortize the costs of

development before that product or technology generation becomes obsolete. Companies

with compressed NPD cycle time are more likely to be the first to introduce products that

embody new technologies. As such, they are better positioned to capture the advantages

of a leader of a market segment. These companies can build brand loyalty, attract clients

in a number of stages of new product acceptance way before the competitors, use scarce

assets, and create switching costs that tie consumers to the company. In many industries,

issues of dominant design are paramount. When a new technology is being introduced in

the market competing products and technologies are often based on different standards.

Different companies will promote different technological standards, and the company that

establishes its particular design as the dominant standard can expect enormous financial

rewards, while those that fail may be locked out (Blagoevski-Trazof, 2007: 198).

For a new product to achieve significant and rapid market penetration, it must match such

customer requirements as new features, superior quality and attractive pricing. Despite the

obvious importance of this imperative, numerous studies have documented the lack of fit

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between new product attributes and customer requirements. This is the major cause of

declines in a new product sales and adoption (Blagoevski-Trazof, 2007: 198).

According to Crawford and Benedetto (2009: 24), the new product development process

consists of five stages:

Phase 1: Opportunity identification and selection

This phase entails generating new products opportunities as spinouts of the ongoing

business operation, new products suggestions, changes in marketing plan, resource

changes, and new needs/wants in the market place. Research, evaluation, validation and

ranking of these opportunities are needed. Major ones should be given a preliminary

strategic statement to guide further work on them.

Phase 2: Concept generation

A high potential or urgent opportunity is selected and customer involvement begins.

Available new product concepts that fit the opportunity are collected and new ones are

generated as well.

Phase 3: Concept evaluation

New products concepts are evaluated on technical, marketing and financial criteria. The

best two or three are chosen from ranking.

Phase 4: Development

In terms of technical tasks, the full development process and its deliverables are specified

including designing prototypes, testing and validating prototypes, scaling up production

and market testing. In terms of marketing tasks, preparation for strategy, tactics, launch

details for marketing plan, business plan and product augmentation are needed.

Phase 5: Launch

Commercialization of the development is executed by beginning distribution and sale of

the new product. The launch programme must also be managed to achieve the goals and

objectives set in the product innovation charter (PIC).

Typically, R&D and marketing departments provide input into the opportunity

identification and concept generation stages; R&D takes the lead in concept design, and

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manufacturing takes the lead in development. According to critics, one problem with such

system emerges at the concept design stage, when R&D engineers fail to communicate

directly with manufacturing engineers. As a result, development proceeds without

manufacturing requirements in mind. A sequential process has no early warning system to

indicate that planned features are not manufacturable (Blagoevski-Trazof, 2007: 201).To

rectify this problem and compress NPD time, a company should use a partly parallel

process. The development, for example, should start long before concept evaluation is

finalized, thereby establishing closer coordination between these different stages and

minimizing the chances that R&D will design products difficult or costly to manufacture.

This should shorten the NPD cycle time (Blagoevski-Trazof, 2007: 202) to save cost and

ensure the products are created as intended.

Presentation of the firm

Segway Inc., a US-based international company, is named after its flagship product, the

Segway Personal Transporter (PT), the first self-balancing transportation device in the world.

The company was founded by Dean Kamen in 1999 with the vision to develop highly-

efficient, zero-emission transportation solutions using “dynamic stabilization” technology.

Segway went on sale for the first time to the public on Amazon.com in 2002. As of 2007,

Segway had a worldwide distribution presence in 60 countries, including South Africa. As of

2008, over 1,000 police and security agencies are using Segway PT’s in their patrolling

operations worldwide (Segway 1, 2009).

Current revenue figures for Segway is unavailable, however, in 2003, the company’s revenue

was about US $25 million and the sales volume was 6,000 units, falling short of the 50,000 to

100,000 expected unit sales from management (Amstrong, 2006). In September 2006, the

company had to recall 23,500 units sold to date due to a software flaw that could cause the

scooters’ wheels to instantly reverse direction and potentially injure riders (CIO, 2006). More

recently, according to CEO Jim Norrod, sales have risen to an all-time high in 2008 due to the

rising fuel cost prompting corporate consumers such as universities, police force, security

companies, and large retailers to switch from cars and scooters to Segway to save on fuel. Mr.

Norrod said he expected sales of the second quarter of 2008 to jump 50% from a year earlier,

versus a 25% year-over-year increase in the first quarter (The Wall Street Journal, 2008).

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Empirical study

Opportunity identification and Selection

The concept of Segway as a human transporter came to Dean Kamen when he saw a

special opportunity to create a new discovery to replace the car and solve the problem of

congestion, air pollution and dependency on fuel in urban living. "Cars are great for going

long distances," Kamen said, "but it makes no sense at all for people in cities to use a

4,000-lb. piece of metal to haul their 150-lb. bodies around town." In the future he

envisions, cars will be banished from urban centers to make room for millions of

"empowered pedestrians" (Heilemann, 2001: 1). That led him and his company to focus

on creating devices that took up a minimal amount of space, were extremely

maneuverable and could operate on pedestrian sidewalks and pathways (Segway 1, 2009).

One of the resources that was considered was the IBOT wheelchair, a six-wheel machine

that goes up and down curbs, cruises effortlessly through sand or gravel, and even climbs

stairs to help improve mobility for the disabled. More amazing still, the IBOT features

something called standing mode, in which it rises up on its wheels and lifts its occupant to

eye level while maintaining balance with such stability that it can't be knocked over even

by a violent shove. While working on this invention, it dawned on Kamen that it was

possible to put a human being into the same system where the machine acts as an

extension of your body. Exactly how the Segway achieves this effect isn't easy to explain,

but Kamen offers one: "When you walk, you're really in what's called a controlled fall.

You off-balance yourself, putting one foot in front of the other and falling onto them over

and over again. In the same way, when you use a Segway, there's a gyroscope that acts

like your inner ear, a computer that acts like your brain, motors that act like your muscles,

wheels that act like your feet. Suddenly, you feel like you have on a pair of magic

sneakers, and instead of falling forward, you go sailing across the room." (Heilemann,

2001: 2)

Concept Generation

To generate the concept for Segway, the company must identify the consumer problems

and try to solve them.

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The first problem is of Segway not being taken seriously by consumers who regard this

invention as simply a high-end toy, a jet ski on wheels for the riches with money to

splurge on. Thus the team decides to concentrate at first on major corporations,

universities and government agencies--large, solid, established institutions--rather than

dive straight into the consumer marketplace (Heilemann, 2001: 3).

The second problem is that consumers need a vehicle that does not take up space like a car

to in order to reduce congestion. Thus Segway has to be designed to occupy minimal

space, slightly larger than a person, to solve this problem. Also, Segway needs to be small

enough to get around crowded warehouses where tight corridors make it difficult to use

bulkier vehicles or crowed pedestrian areas such as airports or amusement parks where

larger vehicles are not allowed in. Additionally, consumers want to minimize the hassle in

parking large vehicles such as cars in crowed public places, hence Segway must be light

weight and small so that consumers can carry with them inside the destination (Harris,

2008: 3).

The third problem is that consumers being environmentally conscious want a vehicle that

does not consume fuel like the bicycle. Also, by not consuming gasoline, consumers can

save on additional expenses caused by the rising fuel costs. Thus Segway must be

designed not to run on fuel, but rather on electricity (Harris, 2008: 3).

The last problem is that of safety whereby traffic regulators question the level of safety of

this new vehicle in terms of its accident probability, driver protection measures, and

chances of vehicle breakdown and collision. Thus Segway must be equipped with three

computerized keys that set speed and performance limits to ensure safety on pedestrian

pavements (Heilemann, 2001: 4).

Concept Evaluation

In order to evaluate the concept, a scoring model for full screen of the Segway concept

must be created.

Category Factor Scale Score

Weight (1-5)

Weighted score

Technical accomplishment

Technical task difficulty 1: difficult 5: easy

4 4 16

Research skills required 1: none 5 3 15

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5: perfect fitDevelopment skills required

1: none5: perfect fit

4 2 8

Technical equipment/processes

1: none5: have them

5 3 15

Rate of technological change

1: high5: stable

5 2 10

Designing superiority assurance

1: none5: high

5 2 10

Security of design 1: none5: have patent

5 2 10

Technical services required 1: none5: have it all

2 3 6

Manufacturing equipment/processes

1: none5: have them

3 5 15

Vendor cooperation 1: none5: have them

2 3 6

Likelihood of competitive cost

1: above competition5: 20% less

1 2 2

Likelihood of quality product

1: below current levels 5: leadership

5 5 25

Likelihood speed of to market

1: 2 years or more5: under 6 months

1 5 5

Team people available 1: none5: have them

3 3 9

Dollar investments required

1: over 20 million5: under 1 million

1 2 2

Legal issues 1: major5: minor

2 3 6

Total 160Commercial accomplishment

Market volatility 1: high5: stable

2 4 8

Probable market share 1: low5: high

5 4 20

Probable product life 1: short5: long

4 2 8

Sales force requirements 1: no experience5: very familiar

1 4 4

Promotion requirements 1: no experience5: very familiar

2 4 8

Target customer 1: strangers 2 3 6

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5: closeDistributors 1: no

relationship5: current/strong

4 4 16

Retailers 1: no relationship5: current/strong

2 4 8

Importance of task to user 1: trivial 5: critical

5 3 15

Degree of unmet need 1: none5: totally

5 4 20

Likelihood of filling need 1: low5: high

5 3 15

Competition to be faced 1: tough5: weak

4 3 12

Environmental effects 1: negative5: positive

5 3 15

Global applications 1: none5: fits global

5 3 15

Probable profit 1: low5: high

2 4 8

Total 178

From the full screen, it is understood that the Segway concept should be developed

because of its high scores in potential technical accomplishment and commercial

accomplishment.

The sales forecast method done by Segway is unavailable; however, according to the

founder Dean Kamen, before selling a single Segway, he predicted that his company

would sell 10,000 units per week, or 50,000 units a year (Rivlin, 2003).

Development

An important part of concept development is design. Segway’s design centers mostly on

technology as the company claims that it develops systems, not individual components

(Segway 2, 2009). The technology is all designed for ease of manufacture, differentiation,

meeting customer needs, and the environment. The different design functions that Segway

has include:

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Dynamic stabilization

That's fancy speak for the technology that enables balancing. It's proprietary and full of

benefits such as incredible maneuverability (true zero turning radius), a small footprint

and providing a fantastically unique riding experience (Segway 2, 2009).

Electric propulsion

Besides being clean and extremely efficient, electric propulsion enables fine adjustments

to be made to each wheel (for turning and smoothing out the ride), and a precise,

software-based approach to traction control and braking (Segway 2, 2009).

Smart battery management

Segway is one of the world's largest customers of large format batteries, and was at the

forefront of the development of Lithium Ion batteries for transportation. Advanced

sensing is applied to allow for more efficient energy use that leads to a longer battery life.

Also, Segway adds in regenerative braking capability (being able to recharge while

decelerating) through smart battery technology (Segway 2, 2009).

Intuitive user interfaces

Segway's approach to user control is that of minimalism and a natural connection between

man and machine. The innovative sensing technologies allow for more than traditional

controls that haven't changed dramatically since the introduction of the automatic

transmission (Segway 2, 2009).

Digital dashboard

Speed, battery life, and other connectivity information are all conveyed over a secure

wireless connection to a handheld device that can be mounted on the dash (Segway 2,

2009).

Launch

In 2000, for almost a full year before it was revealed to the public, Segway was one of the

most eagerly anticipated pieces of new technology in history. Shrouded in secrecy, known

only by the codenames 'Ginger' or 'IT', the device was the subject of unprecedented

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speculation about what it might be, or do (Telegraph, 2008). Statements from business

and technical luminaries who were among the privileged few to have actually seen Ginger

fuelled wildly imaginative conjecture about a technological miracle from the pages of

science fiction. It was a hydrogen-powered hovercraft; a magnetic anti-gravity device; a

time-travel machine; a mind-reading robot (Telegraph, 2008). Thus when Segway was

revealed to the US, it was an anti-climax. Coupled with the high price, Segway never got

a chance with consumers afterwards.

'I think that the hype it got was going to doom it... nothing in the world could ever meet

the expectations that people had for it.” said Dean Kamen in defending the subsequent

under performance of Segway (Telegraph, 2008).

Kamen later described the information leak about Segway as 'the single worst thing that

has ever happened to me in business'. Marketing studies conducted for Segway before the

launch estimated that the device would sell 31 million units during its first 10 to 15 years;

six years later, just 23,500 machines had been sold worldwide (Telegraph, 2008).

Hence it can be concluded that Segway had made a mistake in adopting a miscalculated

pre-launch marketing strategy. It did not control the hype built by external parties and did

not have any contingency plan after the launch to change public perceptions. Also,

product failures causing the recall of units sold (CIO, 2006) did not speak well for

Segway’s image even after its launch. The solution of an upgrade campaign whereby

customers can bring their Segways to dealers to get their software updated was useful but

insufficient to reverse public opinions (Saturley, 2006).

The channel of distribution that Segway chose for its launch proved to be a failure too

because by distributing through Amazon.com, the consumers do not get a full experience

of riding a Segway. Moreover, the high cost of shipping forced Segway to rethink its

points of sale to dealership rather than Internet retail (Saturley, 2006).

Analysis

From the empirical study, it can be seen that Segway succeeded in many of its new

product development phases. Analysis of each phase is provided as follows.

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Phase 1: Opportunity identification and selection

Segway’s founder, Dean Kamen, has been sharp in managing to spin out an opportunity

for a human transporter using the ongoing business operation that he was working on. The

vision he had for a new vehicle that is capable of improving the urban lifestyle by

reducing congestion, pollution and dependence on fuel also helped him to strengthen this

opportunity and increase its credibility in selling the idea. Thus this phase has been

achieved successfully.

Phase 2: Concept generation

In terms of identifying potential problems consumers might face and solving them,

Segway only succeed in the problem of making the vehicle small and fuel independent. It

is still found wanting in the price aspect, as Segway is still too expensive for an

alternative to a car. Also, the safety aspect is significantly lacking because of the many

software glitches causing the recall and its inability to convince authorities of its safety

measures. Thus Segway has performed poorly in this phase.

Phase 3: Concept evaluation

In this phase, the full screen has been useful in analyzing the potential of Segway in the

marketplace. However, when it comes to the sales forecast, it is proven to be too high. It

is not possible to conclude which forecasting method had been used. However, the

company should have been much more thorough and modest in forecasting the demand

for Segway by using appropriate forecasting methods as this is a brand new product type

that had never been introduced before. This phase is therefore poorly executed.

Phase 4: Development

With regards to the technical tasks, Segway has been extremely impressive in its

designing process. Its technologies serve the objectives of the vehicle well and in an

advanced manner. Thus this phase has been a success.

Phase 5: Launch

Segway did not manage its launch properly, reflected by the poorly controlled pre-launch

hype in the media leading to subsequent anti-climax among the public, the wrong choice

of distribution channel to sell the product, and its insufficient advertising during its critical

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first few years. This phase has brought Segway from the most anticipated idea a few years

back to the laughing stock of the technology community.

Conclusion

From the analysis, a few recommendations are provided on how the company

management can get more involved in the new product development process of Segway.

In terms of concept generation, Segway should have identified more customer problems

and seriously thought about how to address them. The problems of pricing should have

been solved by offering better financing options to purchase the vehicle such as leasing

and installments. Also, better safety measure and testing should have been mandated by

the management team to ensure the product was ready for the market to avoid recall and

public embarrassment. More market research and consumer research would certainly help

the management team to understand the concept more and how to succeed.

With regards to concept evaluation, better forecasting methods should have been used to

realistically predicting the potential sales of Segway in its initial years. The management

team was perhaps over optimistic about the potential sales because of the great hype built

in the media before the launch. However, many other factors must be considered in order

to have an accurate forecast such as consumer perception, willingness to buy, level of

disposable income available, legal restrictions, etc. Thus better market research should

have been executed to ensure the forecast was not far off from reality and also to reduce

waste from over production.

Lastly, in terms of launch, the management needed to be much more involved through

various channels. The secrecy about the invention should not have been kept for such a

long time because the media would blow it out of proportion and shape the public

expectation to an almost insurmountable level. Instead partial preview of the new Segway

should have been offered to the public in several stages to control the excitement and also

to educate the public on what Segway was all about. Much more aggressive marketing in

terms of advertising and promotions should have been enforced by the management team

to prepare for the launch. Also, the choice of distribution channel should have been better

chosen through market research, i.e. asking consumers where they would want to see and

buy Segway, how they perceive Segway as a vehicle, etc. Overall, the management team

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should have more diverse in expertise and professional background, including sales,

operations, marketing, finance, etc., not just engineering and technology. This surely

would have helped in managing the launch of Segway better.

In conclusion, this study has achieved its objective of investigating the new product

development process of Segway and drawing lessons for the management team on how to

improve on its shortfalls. Throughout the study, many secondary data sources were used

as the main source of information. This poses a limitation for the credibility of the study,

as no primary data source from the company itself was available. However, interesting

and useful insights have been obtained from the research to help the management team

improve the performance of Segway moving forward. Specifically given the recent

economic downturn, consumers will be much more cautious in transportation choices as

their amount of disposable income decreases. Hence Segway needs to position itself much

more aggressively as a cost saving, environmentally friendly and convenient alternative to

cars and bicycles in order to attract new customers. More importantly, better financing

options for aspiring consumers must be provided and the number of points of sale must

increase in order to reach the consumers better to push sales and profits.

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References

Amstrong, D. (2006) Segway: A bright idea but business model wobbles. Available at

http://faculty.msb.edu/homak/homahelpsite/webhelp/Segway_-

_Bright_idea,_Wobbly_Idea_WSJ_2-12-04.htm (Accessed on 10 October 2009)

Annacchino, M.A. (2003) New Product Development: from initial idea to product

management. Elsevier: USA.

Blagoevski-Trazof, A. (2007) Managing New Product Development Process. Available at

http://www.bea.org.mk/Upload/Content/Documents/Report%202007%20MANAGING

%20NEW%20PRODUCT%20DEVELOPMENT%20PROCESS.pdf (Accessed on 10

October 2009)

CIO. (2006) Segway recalls all 23,500 scooters sold to date. Available at

http://www.cio.com/article/24842/Segway_Recalls_All_23_500_Scooters_Sold_to_Date?

taxonomyId=1461 (Accessed on 10 October 2009)

Crawford, M. and Benedetto, A.D. (2009) New Products Management. 9th edition. New

York: McGraw-Hill.

Harris, T. (2008) How Segways work. Available at

http://science.howstuffworks.com/ginger2.htm (Accessed on 10 October 2009)

Heilemann, J. (2001) Reinventing the wheel. Available at

http://www.time.com/time/business/article/0,8599,186660,00.html (Accessed on 10

October 2009)

Hill, J. (2009) Slow economy? Innovate with new products. Available at

http://www.inddist.com/article/316742-

Slow_economy_Innovate_with_new_products.php (Accessed on 10 October 2009)

Rivlin, G. (2003) Segway’s breakdown. Available at

http://www.wired.com/wired/archive/11.03/segway.html (Accessed on 10 October 2009)

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Saturley, M. (2006) Can Segway fulfill its promise? Available at

http://www.allbusiness.com/sales/customer-service/4058281-1.html (Accessed on 10

October 2009)

Segway 1. (2009) Company Milestones. Available at http://www.segway.com/about-

segway/segway-milestones.php (Accessed on 10 October 2009)

Segway 2. (2009) Segway Technology and Advanced Development. Available at

http://www.segway.com/about-segway/segway-technology.php (Accessed on 10 October

2009)

Telegraph. (2008) Dean Kamen: part man, part machine. Available at

http://www.telegraph.co.uk/science/science-news/3353906/Dean-Kamen-part-man-part-

machine.html (Accessed on 10 October 2009) 

The Wall Street Journal. (2008). Segway slides as gasoline jumps. Available at

http://online.wsj.com/article/SB121357738002676071.html (Accessed on 10 October

2009)

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TABLE OF CONTENTS

Introduction........................................................................................................................1

Problem................................................................................................................................1

Theory..................................................................................................................................2

Presentation of the firm.....................................................................................................4

Empirical study...................................................................................................................5

Opportunity identification and Selection..........................................................................5

Concept Generation..........................................................................................................5

Concept Evaluation...........................................................................................................6

Development.....................................................................................................................8

Launch...............................................................................................................................9

Analysis..............................................................................................................................10

Conclusion.........................................................................................................................12

References..........................................................................................................................14

 

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