In my last post I wrote about how HP failed to create a disruptive product in the early 1990s. They had a fantastic new technological innovation planned and two markets in mind. The problem is that the market they sought (PDAs) failed to develop. Let’s ask why.
They chose the PDA market because they had set an incredibly aggressive $100M revenue rate two years post launch (3x higher than average for HP). Then, after they went to the Chicago CES, they heard about two fantastic opportunities (1) PDAs and (2) Nintento, but feared that the Nintendo market “might not spawn a large market fast enough to achieve [HP’s] desired break-even time.” Thus, they went after sustaining innovation – working to increase capacity, reduce size, and power consumption - they are drive manufacturers after all. As Gilbert and Shapero said in their article The Lessons of New-Market Disruption “picking the wrong customer will lead to failure.”
It’s easy to just say they were unlucky, but that’s too simple and we can’t really learn from “bad luck.” Instead, we can look back to their aggressive revenue expectations that kept them from tackling an emerging market. If the group would have had less fear, they may have reviewed the market options with open minds. Even better, they could have actually tested their hypotheses before committing R&D dollars towards one of the options. If only they would have gone to CES with a few prototypes and gotten real market feedback before jumping in head first.