Ten Tech Companies That Blew It in the Past Two Decades

I had a high-tech CEO ask me the loaded question to end all loaded questions the other day. What makes a technology company succeed?

It’s almost impossible to come up with a single answer, or even a single set of answers. What do Google, Microsoft, YouTube, MySpace, Digg, Mozilla, Adobe, Dell, and Apple have in common? I came up with a number of factors off the top of my head — empowering users, keeping a steady pace of innovation, good PR, making easy-to-use products — but none of them seemed to be the end-all, be-all of high-tech success.

So I decided to look at the question from the opposite angle. What makes a technology company fail? Here are a handful of companies from the past twenty years that strike me as prime examples of organizations who lost a commanding lead and/or market dominance in a particular field due to their own idiocy or incompetence.

Atari 2600 console1. Atari. The mass market videogame console was more or less invented by Atari in the late ’70s. Their only real competitor for years was Mattel’s Intellivision, which may have had vast technical superiority but had inept marketing. (George Plimpton? You’ve got to be kidding me.) But instead of innovating, Atari took the road of suing anyone and everyone who touched its much-beloved system. (Activision, Coleco, Starpath, Odyssey, Nintendo, Phillips, and Epyx all suffered Atari’s litigious wrath.) There was also a precipitous drop-off in videogame quality, as anyone who remembers notoriously bad media tie-ins like E.T. The original company was sold off many times and finally diluted to nothingness in the ’90s. The name still had such cachet, however, that Infogrames later licensed it for themselves.

2. Netscape. Netscape partisans and Microsoft haters have long promoted the urban legend that Microsoft drove this company into obscurity. And while Bill Gates & Co.’s anti-competitive practices certainly helped, ultimately the blame lies with the company itself. Netscape was running neck-and-neck with Microsoft in the browser wars for several years until its hideous Navigator 4 browser (which earned the company the Nutscrape label, among many other less complimentary names). Undeterred by their slipping fortunes, the company followed Navigator 4 with… nothing. For years. They pursued a ruinous portal strategy instead and sold out to AOL, who let the company completely die on the vine. Now Netscape is stuck with a dying portal website and an also-ran browser that piggybacks on both Internet Explorer and Firefox.

3. Palm. The early PalmPilots finally found the magic formula that had eluded so many other companies for so long. They were easy to use, integrated tolerably well with your PC, and were extremely reliable machines. No wonder the company built up such a network of software developers. And then a long series of ownership switches threw the platform’s future in the toilet. The result? Microsoft’s Pocket PC platform (now Windows Mobile) overtook the Palm on basic, must-have features (like oh, say, enabling a contact to have both a home and business address, which the Palm still can’t do). I read recently that the Palm OS actually still funnels everything through emulation software for its ancient Dragonball processor, which is a good indicator of how far behind the innovation curve these folks have gotten.

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The Jukebox in the Sky

Fortune Magazine’s David Kirkpatrick recently took a gander at the iPhone hype and concluded that the Apple model of music distribution is a thing of the past. “I doubt most people will want to buy or ‘own’ music at all,” writes Kirkpatrick in his article Looking Beyond the iPhone. “It will be far more useful to pick from a giant online library and listen to whatever we want wherever we are.”

The author then goes on to hold up as a model for the future RealNetworks’ Rhapsody service, which RealNetworks CEO Rob Glaser calls “the jukebox in the sky.” It sounds like a great deal: $10 a month for all the streaming music you can listen to. The catch is that you don’t get to own any of it; everything resides on the Rhapsody servers, you’re just checking it out for a few minutes.

Jukebox with wingsLet’s put aside the fact that RealNetworks’ products turned into clunky, adware-laden pieces of crap several years ago with the release of their RealOne player. Let’s also put aside the fact that the company has lost so much ground in recent years to Apple’s iTunes and Microsoft’s Windows Media that they hardly have the clout to revolutionize the music business anymore.

The real (Real) question is this: Do people want a jukebox in the sky?

Kirkpatrick points to the coming ubiquity of wireless broadband networking. Within the next ten years or so, we’ll all be using 3G or WiMax or some as-yet-unchristened technology to access information anytime, anywhere. You won’t need to bring your music with you on little metallic discs — or little plastic iPods — because it will all be available for the taking on the big jukebox in the sky. Why pay to “own” music at all when downloading it is effortless? Just download what you want, when you want.

But here’s the problem with that scenario. Broadband access isn’t the only technology that’s growing by leaps and bounds. Disk storage is exploding too, and getting cheaper by the day.

As I write this, I’m looking at a last-generation iPod sitting on my desk with 30 GB of storage. Not quite enough to store my whole music collection yet — I rip my MP3’s at a full 320 Kbps, as God intended them to be ripped — but the newer 80 GB iPods might do the trick. Within a few years, we’ll be carrying 500 GB iPods. Seagate and Hitachi have 1 terabyte hard drives coming out this year. Flash memory is getting so cheap that you can find piles of thumb drives sitting next to the check-out counter at computer stores.

Guess how much data the entire printed Library of Congress contains? 10 terabytes. Yes, that’s it, 10 terabytes. Assuming we continue along this exponential trend of increased storage, you’ll be blowing your nose with 10-terabyte Kleenex soon enough. What does that mean? That means you’ll be able to carry your entire music, video, and book collection around in your pocket in 20 years. Let’s take it even further: in 40 or 50 years, you’ll be able to carry around every book ever written and every piece of music ever recorded around with you. Give it another 10 years for video.

So would you rather carry your digital media with you in your pocket, or would you rather carry your radio receiver with you and access your media on the great jukebox in the sky?

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