Animation by Justin Tran
Animation by Justin Tran

Work Culture

Why some breakthrough ideas don’t break through


Published on November 08, 2019

Before Amazon, Netflix, and iPhone became part of our everyday lives, there were forerunners with similar ideas that broke new ground, but didn’t take root.

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Why do some businesses not reap the rewards of having a world-changing idea, or even being first-to-market? Sometimes, the second mouse gets the cheese. Other times, an entrepreneur has the right vision at the wrong time. But what about brilliant ideas that don’t reach enough people in time to take off? In some cases, the missing ingredient is more fundamental than funding or finding the idea first. 

The track is as important as the train

When Webvan began taking grocery orders online in 1999, they were trying to combine the premium offerings of Whole Foods with the affordability of Safeway, and deliver them to your door in 30 minutes. Sounds like a strong proposition, even 20 years later. No wonder investors (and hungry, lazy folks like me) were hopeful. 

But after raising $375 million in their 1999 IPO, and reaching a peak value of $1.2 billion, the company lost $800 million and filed for bankruptcy just two years later. Today, following nearly the same business model, Instacart has raised nearly $2 billion at an almost $8 billion valuation. Amazon sees so much potential in the grocery delivery business that it spent $13.4 billion on Whole Foods and just dropped its delivery fees to compete for more delivery customers. 

What did Amazon gain by gobbling up Webvan's leftovers?

So why did Webvan crash and burn so spectacularly that they became a business school case study on how not to scale? One reason is that they pushed too hard to gain “first-mover advantage,” wasting millions building their own warehouses and fulfillment infrastructure. Instacart or Peapod Online Grocer, on the other hand, built their businesses on the infrastructure of existing supermarkets.

The domain was bought by Amazon, which hired four former Webvan employees to help launch AmazonFresh. What did Amazon gain by gobbling up the grocer’s leftovers? Reuters reported that Amazon Robotics—formerly Kiva Systems—was built on Webvan technologies. It went on to become an important part of the AmazonFresh strategy. While some thought the acquisition of Whole Foods might mean the end of the line for AmazonFresh, the deliveries keep a-rolling, now as a free perk for Prime members.

Grocery startups aren’t the only ones to get derailed by a lack of infrastructure. Consider the market for electric cars. With rising gas prices and growing concern about the future of fossil fuels, you might expect to see an acceleration in sales. But adoption in the U.S. EV sector has been significantly slower than in China and Europe. 

Despite impressive demand for Tesla models, EV sales are lagging for other automakers. Part of the reason is that investment in a network of charging stations hasn’t been as robust as expected. While public utilities should be positioned to provide the infrastructure, they haven’t invested in this area. In the US and Canada, utilities only own 156 of the 26,341 operational EV charging stations. Until drivers are confident they can find places to recharge, the road ahead looks limited. 

Lesson #1: Without the right distribution channels, some new ideas won’t get adopted no matter how many mavens are raving about it. 

When fast adapters find early adopters

Before they became the dominant name in video streaming with 150 million subscribers worldwide, Netflix repeatedly pivoted and bet on untested technologies. 

Scaling on the shoulders of the USPS, Netflix first built their business by mailing DVDs back when VHS was still the standard format—and years before the technology to stream movies even existed. 

At first, Blockbuster seemed to be better positioned to win the DVD-by-mail wars by building on their brick-and-mortar success. But they were slow to see the opportunity of emerging technologies. And while Blockbuster was looking, Netflix was leaping. 

The ones who learn from failure and iterate often go on to greater success.

When the the pivot to streaming video happened, Netflix invested in the future. They jumped into streaming as soon as they could, building on AWS. Now, according to an Amazon case study, “Netflix uses AWS for databases, analytics, recommendation engines, video transcoding, and more… about 1,000 Amazon Kinesis shards work in parallel to process billions of traffic flows.” 

Meanwhile, Blockbuster went bust. Ironically, in a watershed decision in the early 2000s, Blockbuster passed up the chance to purchase Netflix for just $50 million. By the end of decade, Blockbuster was filing for bankruptcy, while Netflix was on its way to dominating the market.

Lesson #2: Adapting to the way your infrastructure evolves can make all the difference.

Even a big vision can have blind spots

In the early 90s, two teams were racing to launch breakthrough devices in a new product category—personal digital assistants (PDAs). Both teams had worked under the umbrella of Apple—but ended up in fierce competition.

While a band of ambitious, idealistic engineers at General Magic were developing Magic Cap (marketed by Sony as Magic Link), a separate group at Apple was stealthily working on the Newton. More than a decade before the smartphone changed the world, these teams were laying the groundwork for the Wi-Fi world to come. 

As chronicled in a new documentary, General Magic had a team of brilliant visionaries. But turning visionary ideas into viable products isn’t always a slam dunk.

Unfortunately, as Fast Company noted, “the world wasn’t ready.” People didn’t see a need for it yet. And though AT&T had built a network to connect the product, the product didn’t connect with customers. So AT&T decided to shut down its PersonaLink services in 1996.

Infrastructure is a key factor in the speed of adoption.

But the knowledge gained by the employees didn’t go to waste. A General Magic alum went on to fame as the creator of the iPod and later as the co-founder of Nest. So the story does have a happy ending—just not for General Magic. 

Lesson #3: The ones who learn from failure and iterate often go on to greater success.

Lighter infrastructure leads to faster adoption

It was March 1876 when Alexander Graham Bell made the first successful call to Thomas Watson. But it took another 100 years before phones would become a household item. Compare that to cell phones. They reached 96% adoption in only 15 years. 

Infrastructure is a key factor in the speed of adoption. Though cable TV was first introduced in 1948, it lagged behind broadcast TV because it took longer to build out the heavy infrastructure required to reach customers across the country.

History shows that the lighter the infrastructure, the more likely an innovation will take root and grow. One example is cloud-based software, which has become one of the fastest-spreading technologies to date. From social media to remote collaboration tools, cloud apps have changed where and how we communicate and work in only around a dozen years, bridging continental gaps and bringing people together across time zones.

Lesson #4: Big ideas get bigger when they’re not weighed down by heavy infrastructure.

Build a bigger giant or stand on another’s shoulders?

We’ve been hearing all about the smart tech that 5G and AI will unleash. But will this lead to truly useful innovations or novelties no one really needs? 

If history is any guide, the innovations that endure are likely to be ones that build on established inroads to take nascent technologies further. To make progress toward solving urgent problems like climate change, a lot of existing infrastructure will need to be adapted, updated, and transformed. 

Renewable energy continues to offer hope as scientists invent new ways to improve solar cell efficiency. But one obstacle to adoption has been the need for better energy storage. The good news is, the storage capacity of lithium-ion cells is expected to increase 10x. And ambitious startups, like Energy Vault, are working on sustainable ways to deliver renewable energy around the clock. 

As the author of Where Good Ideas Come From points out, innovation doesn’t magically appear out of thin air. That’s just the romantic story we’ve been told. Light bulb moments don’t do much good without power lines to deliver the electricity. 

Lesson #5: Iteration and infrastructure matter as much as innovation.