Three Forces Combined to Create Iridium’s Failure

Three Forces Combined to Create Iridium’s Failure

Three forces combined to create Iridium’s business failure. First, an “escalating commitment,” particularly among Motorola executives who pushed the project forward in spite of known

and potentially fatal technology and market problems. Second, for personal and professional reasons Iridium’s CEO was unwilling to cut losses and abandon the project. And third, Iridium’s board was structured in a way that prevented it from performing its role of corporate

governance.

Problem 1: Escalating commitment due to changes in the market dramatically after the long concept- to- development years

During the past 10+ years that passed between Iridium’s initial concept to its actual development, its business plan eroded.  

First, the gradual build-out of cellular dramatically shrank Iridium’s target market – international executives who regularly traveled to areas not covered by terrestrial cellular.

Second, it became apparent over time that Iridium’s phones have significant design, operational, and cost problems that further limit usage.  

By the time it developed the concept for Iridium in the early 1990s, Motorola had experienced over 60 years of success in bringing often startling new technology to consumers around the

world. Out of this success, however, came a certain arrogance and biased faith in the company’s own technology.  Just as Motorola believed in the mid-1990s that cellular customers would be

slow to switch from Motorola’s analog phones to digital phones produced by Ericsson and Nokia, their faith in Iridium and its technology was unshakable.

2. Lack of Adequate Corporate Governance

Iridium’s board had 28 directors out of 28 directors 27 of them were either Iridium employees or directors designated by Iridium’s partners.  This composition with the big size created problems:

First, the board filled with all Iridium partners designated lacked the insight of outside directors’ expertise, objective viewpoints.

Second, Unreliable partners delayed setting up marketing teams and distribution channels.  The

fact that most of the board was comprised of partner appointees made it difficult for Iridium to apply pressure to its partners to speed up setting up the necessary sales and marketing infrastructure prior to service launch.   In the end, Iridium’s board failed to provide proper corporate oversight and limited Iridium’s ability to work with its partners effectively.