Motorola and the Iridium flop

Many people argue that companies are able to use innovation to create needs within customers. The iPod is a classic example, people defend that the world never needed such fashionable device before Apple created it. In my opinion, however, it is not possible to create needs within customers.

One can influence people and consumption behavior with marketing techniques but he can not create a need out of nothing. Every successful innovation addresses a task that customers were already trying to perform in the first place.

The Iridium project launched by Motorola in the late 1990s illustrates this point perfectly. Around that time the mobile market was in ferment and service operators around the world were fighting to conquer the increasing number of mobile subscribers.

Most mobile networks, however, were based on base stations that could cover a couple of kilometers each. Such technology obviously limited the range where operators could offer their services.

In order to solve such a problem Motorola tried to develop a network that would cover literally the whole world. It looked like a great innovation and the management team was enthusiast about the idea that people would be able to talk anywhere from the Sahara Desert to the North Pole. The project required an investment of 7 billion dollars and it involved 88 satellites that were placed into orbit around the Earth.

After the network was in place they started selling the services. The handsets were large and clumsy, after all they required a much more complex technology. They would also sell for $3000 a pop and call charges were incredibly high. But hey, those would allow users to communicate anywhere in the globe!

A couple of months later, once the novelty worn off, people started to realize that there was not such a strong need to make calls from a remote city in Siberia or from an island in Polynesia, after all. But it was already too late. Motorola did not only missed the sales expectations by far but it was also forced to keep paying the maintenance of the satellites, which accounted for 2 billion dollars… monthly.

Motorola invested into what could have been a very successful innovation, but there was no customer need to be met in the first place. In 1999 the Iridium project filled for Chapter 11 bankruptcy.

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