Iridium Solution Case

Word Count:590

1) LEO had some advantages that we should recognize: a faster transit time (just 2 to 8 milliseconds); a higher quality service and also required far less power. But while the lower orbit of LEO required smaller satellites it also required more satellites for global coverage (77 in Iridium case). Other problem was that the low orbit made satellites more susceptible to the blockage of signals (by buildings, doors, etc.) and they also would need to be replaced every five years (a short lifetime period). The handset also had many problems: too expensive; too big and too heavy. The call rates could reach $8 a minute. The decisions were made based on a 1980’s perspective of a global cellular system, but the team spent a lot of time in the project and the world and the market changed.  One other important decision was to change the design from 1 to many gateways, in order to solve concerns that the countries involved wanted to monitor international communications from their own country. The gateways became a regulatory and political “asset” and increased a lot the level of necessary investment, which compromised the results of the project.

2) The business organization design was had some good and bad things: the engineering team was formed by 15 great men, among them 3 were highlighted: Bertiger, Leopold and Peterson, who had incredible backgrounds in their adventures in the space. But even being a so qualified team, they committed some mistakes, for example: they did not do all the tests prior to launch the product (users reported blocked access, rampant interference, dropped calls), did not check the capacity assessment and did not consider the time to build and implement the infrastructure to support the system.  A problem was also the board of directors, formed after the risk decision to create many gateways as an investment opportunity, which incurs in 28 board members from 17 countries trying to coordinate overall business decisions. Besides being so difficult to coordinate themselves, there was a clear agency problem: they were more interested in short term results than in the success of the project.  The partnership, for example Kyocera, was several months late in delivering equipment. Another one, Sprint, not even had trained its sales force in time for the launch of the product. To cover some of these problems, I would tie the compensation of the management team to long term success of the project; I would recognize all deliverables prior to launch any project: the test product, the partnerships, the capabilities assessment and etc.; I would update my technology along the years, since the product became easily replaceable by others simpler cellphones and I would have a smaller board to take more efficient and fast decisions. Last, I also would have a simpler system to value my asset with a massive margin of safety.

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