Actually, there has long been a strong culture of bikes as transportation for ordinary people in Europe, and to a great extent this has bled over to US cities as more commuters have taken up cycling and created a demand for more utilitarian gear. In the late 90s I had the same complaint you make above, but this is no longer the case. Along with their road and MTB lines all the major marques have introduced a range of 'street' or 'city' models.

The real challenge of improving anything in cycling, from an industrial design perspective, is that a bike is a product whose primary virtue is minimalism. Adding features can be useful for certain niche markets (suspension for downhillers, aero bars for racers) but for the most part a bike is only improved when one can deliver the same (or improved) characteristics of handling, comfort and durability while using less material. Sometimes this is a question of design improvement, but this is rare -- many designs recur over decades (like integrated headset bearings) without ever really becoming essential. More often improvements come from better materials and fabrication techniques.