The Rise and Fall of Iridium

Essay by SaintiUniversity, Bachelor'sA+, May 2005

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Business Information System II

The Rise and Fall of Iridium


1. Who was to blame for Iridium's failure? Why? At what point could you have known Iridium would fail?

2. What is your evaluation of Iridium's system design? What impact did the choices that were made have on subsequent evolution of the venture?

3. What is your evaluation of Iridium's organizational design? What changes could you have made to increase the probability of Iridium's success?

Q1. In the case of Iridium several parties are to blame for the failure. They are:

Dr. Edward Staiano the former CEO of Iridium was responsible for Iridium's development in a significant way. When he came from Motorola, the company offered him stock options besides his fixed salary to create a financial incentive. With the stock options he could only have made money personally if the project succeeded so he seemed to be blind for any negative development concerning the result of the project.

The fact that he was a very overambitious character and personally connected to the project in public, he stuck to the untenable business plan. Parallel to this he made the mistake to underestimate the development of the cellular telephone market and overestimated the market for sattelite phones(He predicted 500.000 subscriber at the end of 1999).In spite of supply problems and a lack of testing he launched the project, so even if some of the few customers were willing to pay 3000$ for a handset, they couldn't get one or service didn't work properly. All these factors indicate so called "escalating commitment".

Motorola Executives Robert Galvin, chairman of Motorola at the time was the one who initially supported the project. Due to recent losses he, together with his son Christopher, saw Iridium as a potential symbol of Motorola's technological prowess for...