A fun, satirical practice you’ve probably heard of is the Darwin Awards. These are handed out every year to individuals who’ve picked a spectacularly dumb way to eliminate themselves from the gene pool. In other words, people who did themselves in through their own lack of brainpower.
But we’ve noticed that you could apply the same sort of contest to technology companies. Throughout the years, tech startups have sprung up and collected a vast amount of investor funding or turned a neat profit at first, only to implode through sheer incompetence. To win our hypothetical “IT Darwin” award, we have to list only the companies which truly could have made it big, but blew a huge opportunity through sheer incompetence.
#10: The Iomega Zip Drive
Today, our high-density storage media standard is the USB flash drive or mobile cards. But there was a time, nearly 20 years ago, when a simple high-density storage medium was already being successfully sold, with up to 750MB storage capacity, at a time when consumers were crying out to be freed from the tyranny of the 1.4 MB floppy disk. That was the Zip Drive, and today it’s famous for the “click of death”, a hardware failure of disastrous proportions. If only they’d tested more thoroughly before ship time, they’d be in a far better position today.
#9: The SCO Group
We’re not even sure if you could have called the Santa Cruz Operation a company any more. For its decades at the top of tech news blog websites, it become something else – a cult, a secret society, a terrorist cell, we’re not sure. SCO would have been a major player in the business-server Unix market, if they hadn’t decided that they, alone, owned the concept of a Unix system and then shut down their whole business to become a company that does nothing but sue other technology companies. Thus launched their furious and zealous lawsuit attack over ownership of Linux, grappling with IBM, Red Hat, Novell, and even retail chains. From which, they have not made a penny, for going on 14 years now. Sites like GrokLaw keep announcing the end of the SCO lawsuits, having been decided, appealed, decided, appealed, denied, extended, withdrawn, bankrupt, re-financed, and reborn.
#8: Web TV
Around the ’90s, there was a market that wanted mobile devices but those weren’t ready yet. The attempted solution was home thin clients. These consisted of just a keyboard, mouse, and screen, with minimal guts beyond what it took to get online. Then came WebTV and said, “Hey, who needs a screen?” It was grandma’s dream; she could get online and use email without worrying about that technical computer stuff, and WebTV didn’t even have writable storage, so literally no virus could infect it! WebTV got bought by Microsoft, who turned it into MSN TV. Like many Microsoft acquisitions, it then mouldered away into dusty obscurity.
#7: The Xerox Alto
Name any convention used on your desktop/laptop computer right now. Graphical display? Mouse pointer? Icons? Network? Text editor? Photo editor? Computer games? Every last bit of it was invented at Xerox PARC, by brilliant engineers who were years ahead of their time. So what did Xerox do? It said, “We’re a photo-copier company; home computers are just a fad!” and when management was pressured to sell the computer anyway, they sabotaged it by pricing it at about three times what any sane individual would pay for it. And so went Xerox, out of the computer market, with all the goodies that they’d invented being greedily snapped up and copied even today by everybody else.
Speaking of early desktop markets, how about the Tandy computer? Radio Shack stores in malls across America suddenly sprouted desktop PC demo kiosks, and for a brief while every cool kid on the block had a Tandy (the TRS-80s deserve their own history page alone). Then a legion of engineering geeks came to them for soldering tools and circuit boards, and Radio Shack became the only store in town where you could get these things. Then in the late 1990s, Radio Shack coldly turned its nose up at the specialized geek market and decided, oh no, we just sell phones now. This took them out of the specialty store with no competition and into direct competition with the biggest retail chains in the world. Despite their plummeting business, they suicidally stuck to this idea for another 15 years before finally declaring bankruptcy. Fine, we’ll just order our Arduino parts online then.
Ever heard of Carmen Sandiego? The Learning Company launched that software franchise. In fact, they had a string of hit software titles in the ’80s and ’90s, including legendary games like Oregon Trail, Prince of Persia, and Myst. Now along comes Mattel Corporation… yes, the Barbie dolls… who blindly bought the company with no forethought. They acquired it for $4.2 billion in stock, chopped all its successful titles, changed the brand name to Mattel Interactive, and began making clunky software about Barbie dolls. This experiment flopped. In what is even today celebrated as the worst company acquisition of all time, Mattel sold off The Learning Company at a $3.6 billion loss. Software is hard; let’s go shopping!
We have Bitcoin now, and if you ever wondered why Bitcoin seems so complicated, learn your lesson from Beenz. Beenz was a company in the late ’90s that started with $100 million start-up funding and a vague idea of how to make Internet currency work. The problem was, boldly making your own money is the kind of thing most governments frown upon, so the company had to structure the currency as “Internet points.” You’d have to earn them like tokens from Internet vendors by doing various humiliating tasks, and then Beenz could be spent for trinkets at other websites. The whole transaction felt more like filling a book with Blue Chip Stamps or using a retail rewards card than spending money. Consumers found the process too gimmicky, and then the expensive, kooky marketing and branding was better suited to a toy company than an Internet currency. Beenz vanished in the Dot-Com bust, one of the most spectacular failures of that wave.
Just like Beenz was the Bitcoin before Bitcoin, Webvan wanted to be what Amazon eventually became. Except that Webvan was to be more of a direct grocery retailer. We see our first mistake here; these were Internet entrepreneurs who knew nothing about managing cartons of milk and heads of lettuce. They also tried to launch too much too fast, and guaranteed a delivery time of just 30 minutes, a method that works great when you sell just one thing – pizza – but not so great when you’re filling complicated grocery orders. Plus, they insisted on doing the purchasing, warehousing, and delivery all by themselves, whereas even today Amazon is happy to deliver through plain old UPS. Webvan launched in 1999 to the tune of $375 million investor funding, exploded in the most spectacular Dot-Com bubble ever blown, and was being auctioned off in chunks by 2001. If they’d been any more over-ambitious, they would have insisted on milking their own cows too.
A company that became absolutely famous for being synonymous with online piracy. Napster was to be a simple file-sharing service with a focus on peer-to-peer sharing of MP3 files. Well, nobody is going to abuse that, will they? Napster went down in a hail of lawsuits, most famously from the band Metallica, and they made matters worse by throwing good money after bad trying to defend themselves in court. Today we have music and video distribution all over the web, but the difference is either the services are legally responsible (YouTube will take down content after copyright complaints), or are dodgy international anarchists (Pirate Bay). Moral of the story: Lawyer up, bro!
Even though Pets.com wasn’t the biggest dot-com bubble disaster, it had the bad luck of becoming the face of it, thanks to their infectiously cute sock puppet mascot. Every time the TV news reported on dot-com stocks plummeting, they showed the video clip of the puppet. Pets.com was to specialize in pet supplies, being an online retailer very much in the model of Webvan. Their mistakes were over-estimating the market for pet owners who also were tech enthusiasts, and not taking into account that many pet products, such as kibble food and kitty litter, are heavy to ship and cheap to buy, making for really low-profit stock. But their biggest blunder was their overspending on marketing, including a multi-million dollar Super Bowl ad. They literally never made back their advertising budget. Pets.com ended with being auctioned off in chunks and the money being distributed to the shareholders, so they at least got something. And the mascot for the Dot-Com Bust went whimpering home with its tail between its legs.
What have we learned?
We’ve learned that being the innovator isn’t always the best position; sometimes the first two or three attempts at an idea are doomed. We’ve learned not to become over-optimistic when spending in the startup days (and today’s start-ups seem to still forget this lesson). We’ve learned to test your product before it ships, test your market to make sure you’ll have customers, and don’t turn your back on those customers once you’re established. And we’ve certainly learned that branding your product as too cloyingly cute is a big turnoff.
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