A wonderful post with lot of real life case-studies from one of the influential investors in the Sillicon Valley – Andrew Chen!
The first and most well-studied root cause of the Bad Product Fallacy is from the theory of disruptive innovation. Many products can look like toys before they become successful. Just take Instagram as an example – it was just a photo filters app at the beginning, and is now one of the largest media properties in the world. Or personal computers, which was initially meant for hobbyists since they were underpowered and weren’t useful for business applications.
And this a wonderful example how McKinsey failed to estimate market for cellular phones.
In the early 1980s AT&T asked McKinsey to estimate how many cellular phones would be in use in the world at the turn of the century. The consultancy noted all the problems with the new devices—the handsets were absurdly heavy, the batteries kept running out, the coverage was patchy and the cost per minute was exorbitant—and concluded that the total market would be about 900,000. At the time this persuaded AT&T to pull out of the market, although it changed its mind later.
– The Economist, Oct 1999
But of course, mobile phones as a luxury was quickly fixed. By making the cost per minute cheap and fixing the other technical issues, the mobile phone has become the most ubiquitous computing device in the world.
Hindsight is 20/20!!!
You can read this complete article here – Andrew Chen on Bad Product Fallacy