Why The Sweet Smell Of Tech Success Can Be Rife With Failure

In 1946, a few weeks before Christmas, Frank Capra’s Christmastime classic “It’s a Wonderful Life” was released in theaters.

It was mostly a flop. Audiences barely noticed it, reviewers panned it and by the end, it had cost the production company so much money that it ended up being sold off to Paramount when it couldn’t recoup the losses from the film.

So why is it a classic today?

Because of the magic of television – and a filing error. In 1974, the owner of the rights to the film simply forgot to file for a renewal of the copyright. That meant the film passed into the public domain and could be broadcast for free, which television stations nationwide have taken advantage of en masse for the last 45 or so years. And while audiences didn’t like in 1946, enough repetition over time has built such fondness that “It’s a Wonderful Life” has now become what is probably the best-known Christmas movie in the American canon.

“It’s the damnedest thing I’ve ever seen,” Capra once told The Wall Street Journal about the film’s surprising revival. “The film has a life of its own now and I can look at it like I had nothing to do with it.”

Sometimes the difference between a total flop and a surprise success the second time around is just a little dumb luck and a slight change of context.

And classic films aren’t the only place where a flop can presage a hit: In fact, many of today’s favorite consumer innovations come care of a failed first iteration that was widely derided before it was praised.

For example…

The Tablet

The Miss

Microsoft’s Tablet PC

In 2001, at the COMDEX Fall computer show, Microsoft’s then-CEO Bill Gates introduced to the world to the Microsoft Tablet PC. The size of a legal notepad and half the weight of most of today’s laptop PCs, the Tablet PC was a full-powered, full-featured PC that ran Windows XP and combined the power of desktop computing with the flexibility and portability of a pen and paper notepad.

Microsoft was incredibly confident in the product, as were many big names in the early 2000s market: Acer, Compaq, Fujitsu and Toshiba all promised to put out versions of the Microsoft Tablet PC by 2002.

Bill Gates famously – or infamously, as it turned out – said that “within five years, I predict it will be the most popular form of PC sold in America.”

That is not quite how the story turned out. After a splashy launch, the feedback on the early tablet wasn’t stellar. It was bulky, the screen interactivity was buggy and – most critics noted – the Windows XP operating system worked wonderfully for desktop computers, but was a bad fit on a tablet, and mostly served to make it slow.

Plus, wireless internet was still in its early days in 2001 and 3G was nonexistent in the U.S. until 2008, which put a damper on the functionality of the first-generation tablet.

And it was very expensive: $2,000 was the average price, but it really couldn’t replace a computer, relegating it quickly to category of niche products – and one that had almost disappeared entirely from the market by 2004.

The Hit

The iPad

The iPad more or less fixed – or at least came into being during a time period that had fixed – most of the problems that plagued the Microsoft version of the tablet.

Moreover, Apple made some of its own good timing by releasing the iPad three years after the release of the iPhone, giving consumers lots of time to get used to (and fall in love with) the interface, the touchscreens and the App Store. That time lag also let Apple build up a veritable army of developers chomping at the bit to build for the iPad at its release.

Moreover, the iPad, though not cheap by any stretch of the imagination, started at $500 and not $2,000, meaning it was a more attainable middle-class product. And what Apple also understood was that for most consumers, the iPad was not any more of a replacement for their computer than their iPod or iPhone had been, and thus did not need a desktop operating system. It was seen as an enhancement to a computer, and was programmed as such.

As Bill Gates even later admitted, the iPad on the whole was a better-timed, better-designed product.

“Steve Jobs did some things better than I did. His timing in terms of when it came out, the engineering work, just the package that was put together. The tablets we had done before weren’t as thin, they weren’t as attractive,” Gates told Charlie Rose in an interview.

The Electric Car

The Miss

GM’s EV1

After a favorable reaction to an early ‘90s prototype electric car, in 1996 General Motors began an extremely limited release of its all-electric vehicle, the EV1.

Ultimately, 117 of the cars were produced, initially made available to drivers by lease-only agreements in the cities of Los Angeles, Phoenix and Tucson, before expanding into San Francisco. At the time, GM advertised the small pilot as a “real-world engineering evaluation” and market study into the feasibility of producing and marketing an electric commuter vehicle in select U.S. markets.

The cars were well-received among consumers, but that was improved with later models, and recharging was difficult outside one’s own home. Power was also a concern, as the EV1’s top speed was about 80 miles an hour -which reportedly took some doing to reach. There was also a recall of some early editions of the car, due to what GM called “thermal incidents.”

However beloved the cars may have been by its owners, however, GM eventually decided to pull the plug on the program entirely, determining that electric cars would always be an unprofitable niche market. All cars on the road were repossessed, lessees were not allowed the option to purchase their cars from GM and nearly all of the taken EV1 cars were destroyed by crushing at GM’s order.

The short life and death of the first edition of the electric car is now a favored topic of conspiracy theorists and is the narrative force behind the documentary “Who Killed the Electric Car?”

The Hit

Tesla

The EV1 “flopped” not because consumers rejected it, because they were never really given the choice to do so en masse – its parent company lost faith in the product before it was put up for purchase.

And whatever else one can say about Tesla founder Elon Musk – no one can argue that he lacks for confidence in his product.

But perhaps more important than Musk’s considerable self-confidence is the fact that while GM went small with electric vehicles, believing they were a niche product for a small subset of commuters who might intend to use the car for short-distance driving, Musk has gone big in all directions, believing electric cars will surpass and replaced internal combustion-based cars.

While the EV1 looked a little bit like a tiny spaceship one could drive on a freeway, Tesla’s cars are larger, faster, more luxurious and can go much further distances than the original edition of the electric car – and Tesla has doubled down on distance driving by building charging stations for electric vehicles nationwide.

Tesla has its share of problems, but it nonetheless came out of 2018 as America’s bestselling luxury car – and with celebrities lining up to sing its praises on social media, it would be hard to argue that it has failed to establish itself as a mainstream brand.

Now if it could just get all of those backorders filled.

Nintendo

The Miss

The Famicom Console

In 1983, inspired by the success of Atari 2600, Nintendo rolled out its Family Computer platform in Japan, also known as the Famicom for short. The Famicom did not have an easy entry into the market.

Due to a faulty motherboard, the first edition of the system had to be recalled entirely, as they too were apparently connected to “thermal incidents.” The Famicom eventually built a moderate following in Japan, but one that was already waning by the mid-1980s.

Attempts to get the product distributed in the United States were also beset by a series of false starts. A distribution agreement with then-giant Atari fell through after a spat between the two firm’s executives, and the entire American video game industry crashed entirely in 1983, permanently scuttling the Famicom’s (or the Nintendo Enhanced Video System, as it would have been called in the U.S.) forever.

The Hit

The Nintendo Entertainment System (and Then Almost Everything Else Nintendo Did for the Next 30 Years)

In 1985, Nintendo made another run at the American market with its redesigned Nintendo Entertainment System (NES). The product was a slow grower at first – its sales throughout its soft launch in 1985 were sluggish, and the company teetered on the edge of insolvency – but by 1986, it was the biggest selling toy and leading Christmas gift on sale in the United States.

What Nintendo did right the second time around – and what they and Atari did wrong the first time – wasn’t actually about video game systems or design. It was in defining and controlling its relationship to video game developers.

Third parties had to be licensed to develop games for Nintendo’s system – and those licensing agreements committed developers to developing exclusive content for Nintendo and confined them to releasing just two games a year. Content restrictions were added to weed out “inappropriate” material, and the quality of the games had to pass muster with Nintendo.

Developers did not historically love this arrangement, but they wanted access to the large and growing base of rabid NES fans all over the world.

Nintendo’s restrictions were eventually released when credible competition sprung up in the form of first Sega, and then Sony and Microsoft.

But even with those restrictions relaxed, Nintendo today is a company with a market cap of $38 billion. Not bad for a firm whose first several attempts at a gaming console flopped mightily.

But then, good ideas don’t always look good at first. Sometimes they are miscategorized. Bubble wrap was marketed as a wallpaper before IBM realized it made a good packaging material. Or sometimes they are ahead of their time, as Microsoft was with the tablet.

So what will be the next big second act? Well, Google Glass flared up and burned out fairly spectacularly a few years ago – and these days, Focals by North is giving it another go with a sleeker design and a resetting of the smarts.

And, every so often, there is a rumor that Amazon is going to take another stab at the Fire phone.

But it seems a good second act is often a bit of surprise, as it takes a rather unpredictable combination of better design, better timing and, of course, better luck.