Iridium was conceived by three engineers working for Motorola. Although the concept was both promising and ambitious, it was dogged by major challenges right from its initiation up to when the venture was switched off permanently in March 2000. To start with, the satellite system by Motorola was very complex and required additional antennae and greater power. The initiation of the project was met with skeptical public reaction considering that Iridium needed to raise significant funds prior to the launch of the service. Additionally, the proposed technology of the project was not yet proven. It was also costly in comparison with the existing cellular services.
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Funding for the project was another major challenge facing Iridium. The project hoped to raise $ 800 million through partnerships with telecommunication companies like AT & T. However, since these telecommunication companies perceived Iridium as a service provider, and hence a direct competitor, they declined to enter into a partnership with the company.
The project also faced the problem of securing the spectrum needed for the service, and this saw it undertake intensive lobbying for a global spectrum. Some countries viewed this as a direct threat to state-owned Postal, Telephone, and Telegraph system. Also, the Iridium project was announced even before the FCC had allocated it to the necessary frequencies. Software glitches and delays in handset deliveries also led to the postponement of the project launch. Other delays include the late delivery of handsets by Kyocera and delays in the training of sales force by companies that had signed distribution agreements with Iridium by the time of launching the service. Iridium was also faced with the challenge of a first-mover risk, considering that the company was venturing into untested waters. The company was riding on an ambitious promise to potential investors on the basis of unproven technology.
Were there any mistakes made in addressing the above challenges?
Iridium was a large project with a diverse scope. As such, it took too long to implement. By the time Iridium was up and running, the market had already changed. Also, Iridium took too long to adjust its strategy to suit market needs. Incoming parts from subcontractors and partners were also not inspected as they should have been. Another mistake made by the project was to structure the systems before developing its business plan.
What may be done to mitigate the problems?
In order to mitigate the problems facing Iridium, the company’s executives should have assessed the project as a real option. Executives often face challenges when dealing with projects whose concept-to-development times are long. At the initial conception stage, such projects appear like sound investments. However, by the time Iridium launched its product, a competition was already stiff as other telecommunication companies had also launched similar products. The company’s executives should have considered a two-stage project model. The first stage should have been strategic, promising increased investment in the second stage upon evaluation of the first stage.
The project should also have relied on a viable business plan. While Iridium had invested heavily in R & D, it took too long to launch its satellites, thereby giving competitors enough time to realign themselves. Consequently, Iridium found it hard to surmount key cost, operational, and design problems. A viable business plan would have given the project’s decision-makers enough insight to preclude further investment.
A.D. MacCormack and K. Herman, “Rise and Fall of Iridium”, Harvard Business School, vol. 601, pp. 1-22, 2001.