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The Rise and Fall of Iridium

Solution Id Length Case Author Case Publisher
2700 1649 Words (6 Pages) Andrew C. Inkpen Thunderbird School of Global Management : TB0179
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A wireless, satellite-based personalized communications network called Iridium was developed so that any form of a telephone message, involving voice, data, fax, and paging, could be sent to a recipient at all times and from wherever place in the world. Iridium was founded in 1986 when the general manager of Motorola's Strategic Electronics Division, which did a lot of work in the space industry, established a tiny R&D unit inside his division. Motorola had previously worked on space-related projects as a subcontractor for defense projects. Companies like Lockheed Corporation served as the primary contractors and contracted Motorola and other businesses to handle the electronics development. When Iridium finally launched, there were multiple unreasonable assumptions that the management had taken, which harmed the company and eventually resulted in it being bankrupt. A few of the primary wrong assumptions were: believing that consumers understood the product through the marketing campaigns that they launched. Another one was the misalignment among the Iridium’s partners. Due to these and many more assumptions, the company could not have a successful launch.

Following questions are answered in this case study solution:

  1. What went wrong with Iridium, identifying assumptions made about the future and who was responsible for the assumptions. Were these assumptions reasonable? 

  2. Provide your conclusion about who should be held responsible for Iridium’s failure and why. Your recommendation of at least two strategies entrepreneurs can use to avoid risky assumptions about the future. 

  3. Do you think it is feasible to have a control process to help entrepreneurs quickly realize that they have made a wrong assumption? Explain your position.

Case Study Questions Answers

1. What went wrong with Iridium, identifying assumptions made about the future and who was responsible for the assumptions. Were these assumptions reasonable? 

There were manifold reasons for Iridium’s failure. I believe that the issues with the initial distribution of subscription equipment, an absence of completely qualified service staff and sales staff, and a absence of efficient marketing coordination between Iridium, its gateways, and its service providers were the main causes of its sluggish expected number of subscriptions and the growth in revenue. Iridium World Services' starting roll-out had multiple problems. The first one is - Kyocera had serious issues meeting Iridium's quality control requirements. It was not able to ship sizable numbers of phones till early March 1999. The second was that the distribution of phones and pagers to diverse marketplaces across the world was quite challenging. Next, even though the company's satellite phones and pagers had been prepared since it began conducting business, the production of mobile cassettes for its dual-mode satellite/cellular phones from Motorola, as well as a number of other accessories, was delayed. Lastly, the training and specification of service providers and their sales teams proved to be challenging for Iridium and its gateway operators. Iridium thought that the majority of these initial manufacturing and distribution issues had been resolved by Motorola and Kyocera. To properly deal with the issues that have developed in relation to the distribution and marketing of Iridium World Services, Iridium believed that it might need more time and energy. Although Iridium gave its regional partners control over distribution, companies such as Sprint, which owned 3.5% of Iridium, did not offer phones or service before the new system was implemented. The service was not promoted by Sprint's sales staff, and the handset was not available in its stores. In addition, the core target market of business travelers has been hesitant to move from even just a few small cell phones to a large device that weighs half a kilo, costs more than $3,000 to purchase, is expensive to use, and barely fits in a briefcase. Since Motorola was the main contractor, the system had to be delivered by December 1998. Motorola effectively created a new system for designing, manufacturing and installing satellites by meeting the deadline. But a longer testing period should have come after the deal was finished. The software's approximately 20 million lines of code unavoidably needed to be debugged. Iridium began offering the service for purchase before all tests and bug-fixing was finished. When service issues arose as a result of insufficient testing, the publicity was catastrophic, causing some people to believe that the product was launched too soon. The assumptions were totally unreasonable because the company believed that the people knew about the extent of their services – which was that a certain equipment investment was required first to avail of the promised services of the company. However, people believed that Iridium services would be able to be used anywhere they were. That was not clearly the case. Next, there was no streamlining of services among the partners of Iridium. The company assumed that things would work themselves out. Primarily, the Iridium’s management was responsible for these assumptions.

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