How to Live Up to Innovation Hype

Companies known for inventive tech were dubbed the Next Big Thing and then disappeared. Now they're back, and they're growing

By Reena Jana

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In February, Matthew Desch, chief executive officer of Iridium, the maker of portable phones with service provided by a network of satellites, was visiting the National Air & Space Museum in Washington, D.C. He overheard two men talking unfavorably—and inaccurately—about his company, which can provide telecommunications in remote areas, such as in deserts or the middle of the ocean, where there are no cellular towers.

"Yeah, Iridium isn't around any more. It went bankrupt in 2000," one of the museum-goers said as he looked at a display of an Iridium satellite. Desch wanted to tell the men that Iridium is actually still around after private investors resurrected it in 2001 and that the company saw $212 million in sales and $54 million in profits in 2006.

Desch walked closer to the display and discovered why the men were misinformed about Iridium's current profitable state. The plaque beside the satellite read like an obituary, declaring Iridium's life span from 1999 to 2000. According to the sign, Iridium—initially funded by Motorola (MOT) in 1998 to an avalanche of publicity—was kaput, after going bankrupt when the phones failed to catch on with consumers. To Desch's dismay, the museum sign had no information about the company's subsequent resurrection and current success.

On the Upswing

"Iridium had such a public failure and a private success later. Failure looms as the biggest thing that happened to us," says Desch, who joined the company in 2006. But Iridium, based in Bethesda, Md., is now growing, with increases in revenues, profits, and other metrics such as rising user numbers in new markets, like military, disaster relief, aviation, and utilities. Iridium's service has 180,000 subscribers, and those numbers are growing at a rate of 15% to 20% per year.

Other "Next Big Thing" companies that, like Iridium, launched innovative products and services but didn't live up to the initial hype, include Friendster, the social-networking site that was overtaken by MySpace, and the Segway Personal Transporter, the two-wheeled scooter.

Both are also now seeing upswings in business growth. These companies, in their latest incarnations, have refined their technologies, remade their business models, and reached out to new audiences. And each learned painful yet valuable lessons on the merits of putting sales strategies first and hype second. They are valuable case studies for aspiring innovators.

A Matter of Marketing

Academics point out that many innovative technologies, because they are so fresh and so unprecedented, can be hard to market to a targeted audience.

"It is often difficult to know the best use for a new technology at the outset. Viagra began as a failed drug treatment for cardiovascular disease. Java began as software for a failed market in set-top boxes," observes Henry Chesbrough, executive director of the Center for Open Innovation at UC Berkeley's Haas School of Business. The key to these innovations' success, Chesbrough says, isn't the great technology itself. It's finding a smart way to package it, determine consumer demand for it, and then sell it to the widest possible audience.

"If these [new] technologies weren't taken to market, their owners may never have found that better use," Chesbrough writes in an e-mail. "Innovators need to learn how to play poker in pursuing these technologies, rather than playing chess, where the objectives and possibilities are clearly defined at the outset." In other words, it's necessary to restrategize as the game of marketing and selling a new product changes with the marketplace, rather than try to keep up with rigid, preset expectations and tactics. Not to mention the adage, if at first you don't succeed, try, try, again.

The Friendster Phenomenon

Desch says Iridium coped with its initial failure by becoming more flexible, turning its phone into a wholesale rather than retail device.