Quote dump for "megamistakes"

This post contains a dump of the less important quotes from Megamistakes that I omitted from the main post in order to keep it short.

#1: Quote dumps related to bad timing

On the fax machine, quote from p. 57 of the book:

Originally, the facsimile machine, or sending mail by phone, was targeted toward business customers. Although a bright future was predicted for those devices, it took nearly twenty years for the product to exhibit rapid growth. Twenty years ago, in 1968, Xerox and Magnavox were joined by Litton, Stewart-Warner, and a host of other entrants in an attempt to garner the lion’s share of this growth market. They all believed it was “on the verge of a boom akin to that of the office copier.” One executive predicted that the sales would climb to 500,000 units in just a few years, even though only 4,000 were currently in use for business corespondence.

The innovation failed to catch fire. It was too expensive and took too long to send a single document — ten 8 1/2-by-11-inch sheets in an entire day! No wonder companies called the courier.

By 1987 the situation had changed. Prices had been reduce dramatically, and performance had increased. Driven by consumer and small business purchases, sales skyrocketed to nearly 300,000 units in 1987. After twenty years, the balance between price and performance finally stirred a growth market for this innovation and warranted the optimism that had originally been applied to it. In the case of facsimile machines, change came much more slowly than expected.

The book later notes (p. 118):

Facsimile machines lingered for decades until technological advances enhanced the benefits and allowed price declines to spawn a larger market. Only now, after many false starts, has the market for facsimile machines exploded. The balance between price and performance has been struck. The machines send documents faster and cheaper, and are now a “hot” product.

Here are some of the technologies that Schnaars notes as failed predictions, but that have since emerged in a form approximately similar to what was predicted:

Computerphones (now implemented as smartphones, though the original vision was of similar phones as landline phones rather than mobile phones). Quote from p. 83:

The computerphone, a recent innovation which married the data processing capabilities of the personal computer to the voice and data communications capabilities of the modern telephone has also failed to excite consumer interest, although initial expectations for the product were high, Entrepreneurial firms such as Zaisan Corp. introduced reasonably priced, powerful computerphones in 1984. Other firms followed. It was expected to be a classic case of large firms following smaller pioneers into the market.

The market for computerphones was expected to reach $1 billion a year within a few years. In 1984 Business Week reported: “Most analysts are predicting fast growth in the computer-phone market.” Most experts were wrong. The market never materialized. The makers of the machines were unable to convince business buyers that they needed the product. A PC with a modern modem seemed to do the job just fine. A sales pitch that argued that the computerphone eliminated desktop clutter proved unpersuasive. Less than a year later Business Week reexamined the computerphone market. One computer retailer reflecting on his lack of success selling the product notes: “People see it as an expensive PC with a phone on it —with no need for it.” Others felt that computerphone manufacturers had not really figured out what the market wanted. Such severe shortcomings are likely to dampen enthusiasm for the product for years to come.
Picture phones (now implemented as smartphones and also as computers with built-in webcams, though note again that the original vision involved landline phones). Quote from pp. 86-87:

One of the most stunning failures of high technology was AT&T’s picture telephone. Although expectations for the product were high, and many experts considered it a near certainty that the innovation would revolutionize many markets, it has so far served very few customers after years of intense effort. The company had been working on the product since at least the 1930s. The invention of the transistor in 1948 allowed the product to be reduced to a more manageable size. Commercial seervice was to begin in 1964, the same year the product was featured at the New York World’s Fair.

The advantages of the picture phone were clear. You could meet face to face with customers and colleagues without the expense and bother of business travel. On the long term, electronic meetings would render personal meetings obsolete. Ultimately, the picture phone would serve the home market, where household callers could not only speak but speak and be seen.

With the picture telephone, salesmen would travel electronically rather than physically. They could literally see their customers without leaving their desks. Productivity would increase while travel expenses declined. Besides, according to one expert, central business districts were dispersing. Soon it would be difficult for cities to support public transportation.

Other advantages would also accrue to users. With a keyboard they could tie into mainframe computers and work out problems at their desks. The picture phone would also serve as a precursor to videotex. Customers could view airline reservations, stock quotations, and a host of other databases.

Picture phone service was installed at Union Carbide as a test. The company loved it. It cut down on interoffice visits and kept business meetings on business topics.

World’s Fair visitors were awed by the picture phone. So were the forecasters. A 1969 article in The Bell Laboratories Record noted that “just as the telephone has revolutionized human habits of communicating and made a major contribution to the quality of human life, many of us at Bell Labs believe that the PICTUREPHONE service, the service that lets people see as well as hear each other, offers potential benefits to maind of the same magnitude.” Advertisements in the business press of the late 1960s announced the product’s features and pictured the desktop model. It was predicted that there would be 100,000 picturephones in use by 1975. By the 1980s “these phones would be widely used by the general public — perhaps replacing some form of transportation, such as trips to local stores to examine merchandise before making purchases.” Study after study predicted the same opportunities for the picture telephone.

A study entitled “A Long Look Ahead,” conducted for AT&T by the Institute for the Future in mid-1969, proved no expcetion. Big changes were in store for AT&T. “The world of 1985,” the study warned, “will be markedly different than today’s.” There would be 3 million picture telephones in use in the United States, generating revenues of $5 billion. [...]

What happened to the picture telephonewas far different from what was predicted. Customers may have been awed by the product bu they were also awed by its price. When it came to paying for the service they decided to forgo the video portion of the product. They decided to just listen rather than look and listen.

The product was not killed, however. In the early 1980s it evolved into the Picturephone meeting service. Special rooms were set up where the “leading edge” copmanies could hold face-to-face meetings without actually meeting face to face. Mostly, the service offered the same benefits as those offered nearly twenty years earlier.

The meeting service met mostly with failure. Video teleconferencing never made a dent in business travel. Other business services offered by AT&T soared while the picturephone service slumped. Pressing the flesh proved insurmountably superior to pressing buttons. John Naisbitt’s contention that high technology leads to a higher demand for personal contact, what we calls “high touch,” certainly rings true in the case of the picturephone.

The advantages of the picturephone over ordinary telephone service were questionable and surely expensive. In the early 1970s some blamed a recession for the product’s slow start. But the product’s problems lay deeper. Post-mortems usually attribute the product’s demise to high initial costs. But high costs alone did not destroy the picturephone. What really killed it was that it offered a benefit that was awesome and amusing but essentially unwanted. There is little need to see a person over the phone for perfunctory personal and business communications. Furthermore, in situation where personal contact is crucial, seeing people over the phone is a poor substitute for meeting them in person. Consequently, the video phone was really competing with the traditional telephone, not “in-the-flesh” meetings. Furthermore, the traditional audio telephone proved to be more than sufficient medium. Sensibly and successfully, that is where the emphasis is now placed. Enhancing the audio telephone has led to cost-effective benefits and profitable services. The lack of benefits for the picture telephone over the voice-only telephone, coupled with the much higher price that had to be charged for the service, disconnected the prospects for this technological product.
Videotex (an early offering whose functionality is now included in, or rather superseded by, GUI-based browsers accessing the World Wide Web and other Internet services). Quoting from p. 82:

A more recent example is videotex, widely hailed as a growth market in the early 1980s. It has penetrated the French market — although the French have heavily subsidized the technology. In the United States it has gone nowhere. Most consumers have no strong desire to manipulate checking accounts electronically or scan data bases in their spare time. And they are certainly unwilling to pay a hefty fee for the equipment necessary to do so. Meanwhile, providers of those services search tirelessly for a service that consumers will find beneficial.

#2: Computing: the gaping-hole exception to the rule?

Full quote (pp. 123-124) (emphasis mine):

Most growth market forecasts, especially those for technological products, are grossly optimistic. The only industry where such dazzling predictions have consistently come to friution is computers. The technological advances in this industry and the expansion of the market have been nothing short of phenomenal. The computer industry is one of those rare instances, where optimism in forecasting seems to have paid off. Even some of the most boastful predictions have come true. In other industries, such optimistic forecasts would have led to horrendous errors. In computers they came to pass.

Integrated circuits were widely expected to create wondrous products and stunning growth markets. Over the past few decades there have been numerous calls for integrated circuits. As early as 1962 many foresaw the potential of these devices. It was widely, and correctly, predicted that integrated circuits would follow the time-honored pattern of increasing sales volume and declining unit costs as the technology was transferred to larger markets. In 1962 John W. Mauchly, one of the innovators of early computer technology, predicted: “By the 1980s businessmen will be carrying personal computers around in their pockets.” Given the widespread use of portable and laptop computers, and the fact that at the time (1962) computers had not been widely diffused even to business, his prediction is amazingly accurate. It was not unusual, however. Throughout the 1960s, there were equally glowing forecasts for computer gear.

Similarly, Fortune reported in 1962: “These exquisite artifacts [microprocessors] may later the electronics industry, economically as well as technologically, as dramatically as did the transistor.” They did. Unlike other sectors of the economy, technological changes in computers were dramatic, even if they were largely expected to occur.

In 1968, in response to critics who saw the end of growth in the computer industry, Thomas J. Watson of IBM noted that “there doesn’t seem to be any real limit to the growth of the computer industry.”

Finally, in 1973, Intel’s Robert N. Noyce started that “the potential applications [for microcomputers] are almost unlimited.”

The most fascinating aspect of those predictions is that in almost any other industry they would have turned out to be far too optimistic. Only in the computer industry did perpetual boasting turn out to be accurate forecasting, until the slowdown of the mid-1980s.

The tremendous successes in the computer industry illustrate an important point about growth market forecasting. Accurate forecasts are less dependent on the rate of change than on the consistency and direction of change. Change has been rampant in computers; but it has moved the industry consistently upward. Technological advances have reduced costs, improved performance, and, as a result, expanded the market. In few other industries have prices declined so rapidly, opening up larger and larger markets, for decades. Consequently, even the most optimistic predictions of market growth have been largely correct. In many slower growth industries, change has been slower but has served to whipsaw firms in the industry rather than push the market forward. In growth market forecasting, rapid change in one direction is preferable to smaller erratic changes.

Quote dump for “megamistakes”