Too many engineers in the kitchen can doom a company
As many people can tell you, I like to talk about the importance of combining innovation and strategy to ensure long-term company growth. And I’ve learned that lesson firsthand.
I used to work for Motorola and, while there, bought some stock in Iridium. Iridium was a satellite phone system designed to replace our limited coverage issues with phone service that worked anywhere on Earth. Innovative and cool!
My stock purchase was only $1,000, but I knew that the stock would do well. I even chose not to sell when the stock almost doubled, believing that there was still a substantial upside. Instead, I held on until the astonishing drop to a nearly zero valuation.
What went wrong?
The answer includes several technical and market-based solutions, but I’ll focus here on the doomed organizational strategy. Of the many case studies written on Iridium’s turn from excitement to failure, perhaps the best is in the book “Why Smart Executives Fail” (Finkelstein, 2003). A synopsis of the Iridium portion is available at http://www.rentcell.com/Iridium.pdf.
Mr. Finkelstein points out that the market strategy used to support building this innovative multi-billion dollar communications system was never updated to account for rapidly spreading cell phone towers and service areas, the rapidly dropping costs for cell phone use, and that users would find satellite handsets too cumbersome.
Considering this information, the program should have been terminated. No one can predict the future, and even the best strategy today can be flawed tomorrow. Iridium’s key failure – the board never effectively updated its strategy to account for a decreasing market share – caused significant profit erosion and bankruptcy.
A more successful board would have mixed marketing and strategic vision with brilliant innovation. Can you share any good examples of companies that failed to maintain a proper balance of innovation and strategy?
What about your business?
If you are wondering how the mix of innovation and strategic planning stacks up at your shop, this quick questionnaire on my website offers a simple, confidential self-assessment.
Photo credit: Cliff (Wikimedia)
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