The 10 stupidest tech company blunders

'This iPod thing will never catch on'--and 9 more unbelievable (in hindsight) missed tech opportunities.

6. Recording Industry Plays the Same Old Tune

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Perhaps no other industry has missed more tech opportunities than the music business.

In 1999, Shawn Fanning's Napster made it incredibly easy for people to share music online. The record companies reacted by suing Napster for contributing to copyright infringement. Then-Napster CEO Hank Barry called for the music industry to adopt a radio-style licensing agreement that paid royalties to artists for music distributed via the Net. His calls fell on deaf ears.

Napster fans quickly moved on to other peer-to-peer file-sharing networks such as Gnutella and Grokster, and music "pirates" became the RIAA's public enemy number one.

In 2000 MP3.com launched a service that allowed members to upload songs from their own private CD collection and stream them to any PC. The recording industry sued MP3.com for copyright infringement and eventually won. MP3.com was sold and changed business models.

Add to all that the RIAA's suits against Grokster, Morpheus, Kazaa, and some 30,000-odd music "pirates." Talk about your broken records.

Today, of course, music-subscription businesses and streaming services such as Pandora dominate digital music. Had the record companies partnered with Napster, MP3.com, or any of the other file sharing networks instead of suing them, they might control digital music sales today--without nearly as many problems with piracy.

7. Compuserve Blows Its Chance to Dominate the Net

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Look at today's interactive, social-media-obsessed, user-content-driven Web, and what do you see? A spiffier version of CompuServe circa 1994. But instead of dominating the online world, CompuServe got its butt kicked by AOL and that company's 50 billion "free" CDs.

In the early 1990s the Compuserve Information Service had "an unbelievable set of advantages that most companies would kill for: a committed customer base, incredible data about those customers' usage patterns, a difficult-to-replicate storehouse of knowledge, and little competition," says Kip Gregory, a management consultant and author of Winning Clients in a Wired World. "What it lacked was probably ... the will to invest in converting those advantages into a sustainable lead."

Then AOL came along, offering flat-rate "unlimited" pricing (versus CompuServe's hourly charges), a simpler interface, and a massive, carpet-bombing CD marketing campaign. Organizations that had an early presence on CompuServe forums moved over to the Web, which CompuServe's forums were slow to support. In 1997 AOL acquired CompuServe, and "CompuServe classic" was finally laid to rest last June.

CompuServe's failure wasn't due to a single missed opportunity so much as a collection of them, says Gregory. "I really believe [CompuServe is] an important example that reinforces a critical lesson--never stand on your heels in business."

8. Newspapers Fail to Read the Writing on the Wall—Craigslist

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Newspapers are dying, and by nearly all accounts (certainly, all newspaper accounts), Craigslist's fingerprints can be found all over the crime scene. People have blamed the mostly free online ad service for cutting the legs out from under classified advertising, one of the newspaper industry's cash cows.

As recently as 2005, classified ads brought more than $17.3 billion into U.S. newspapers' coffers. Since then, the use of classified ad sites like Craigslist (as well as Amazon, eBay, and Google) has more than doubled, according to the Pew Research Center, while classified ad revenues have been halved.

If a consortium of newspapers had bought out Craigslist back in 2005, when classified ad revenues were flying high, things could be quite different today. But first they would have had to persuade Craigslist creator Craig Newmark to sell.

In a January 2008 interview with InfoWorld, Newmark said that his company's role in the collapse of the newspaper industry has been greatly exaggerated--mostly by newspapers. "I figure the biggest problems newspapers have these days have to do with fact-checking," he remarked.

9. The Google Before Google

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In the mid-1990s the hottest search engine technology wasn't the work of Yahoo, Alta Vista, Lycos, or Hot Wired; it was the Open Text Web Index. Much like Google today, Open Text was lauded for its speed, accuracy, and comprehensiveness; by 1995 Open Text Corp. claimed that it had indexed every word on the roughly 5 million documents that constituted the Web at that time. That year, Yahoo incorporated Open Text's search technology into its directory.

But two years after partnering with Yahoo, Open Text abandoned search and moved into enterprise content management. A year later Google made its debut. The missed opportunity? Not realizing how big search was going to be.

"If anything made Open Text special, it was that they came closer to having Google-like technology than anyone else in their time," says Steve Parker, a communications consultant who helped publicize Yahoo's launch of Open Text's search technology. "With a three-year lead on Google, you have to consider whether Google would have been forced to burn cash at a much faster pace, and if they might have run out of time to overtake the market leader. If things had gone differently, that might have been good enough to get [Open Text] to king of the hill."

10. Microsoft Saves a Rotting Apple

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Ten years ago Apple was in serious trouble. Mac sales were being eroded by cheaper clones from Power Computing and Radius. The company was running low on cash, its stock was trading for around $5 a share, and it was hunting for a new CEO to replace Gil Amelio.

Then Apple received a much-needed infusion of cash--$150 million--from a seemingly unlikely source: Microsoft, which also promised to continue developing its Mac Office suite. The deal was negotiated by then-Apple adviser Steve Jobs, whom the Macworld Expo faithful booed at the deal's announcement. Shortly afterward, Jobs took over as Apple's "interim" CEO. We all know what happened after that.

If Microsoft hadn't missed its opportunity to let Apple wither? We'd be struggling to play WinTunes on our WinPhones. The online music and video markets would be stagnant--or worse, controlled by Hollywood. And we'd be longing desperately for better alternatives to Windows.

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