Although the lessons learned from Iridium’s failure could run on for pages, the company ignored three principles that are essential to the success of any new digital service: meet customer expectations and assumptions, make it better, bigger and cheaper, and rewrite your business plan every day.
The expectation created by Iridium was elegantly and simply a cell phone usable anywhere on the planet. Unfortunately, customers also assumed cell phones can be used indoors, calls usually go through clearly and, while standing still, stay connected.
Motorola’s last, great effort at making Iridium consumer friendly was a smaller, sportier phone with a rugged case. I took a demonstration unit and free air time to New Zealand, where an Ironman race (3.9-km swim-180 km bike-42.2 km), a hike over a volcano and a couple of days watching the America’s Cup finals would test Iridium’s claims that it was the perfect solution for international, uh, business travel.
I finished the race under 15 hours, made it over the volcano and watched the Cup finals without once falling in the water. Iridium did not do as well. The weather was nice in New Zealand, so I didn’t mind being outside. However, it usually took several attempts to connect, the quality was lousy and the longest call only lasted about six minutes. Two or three minutes was typical. Arguably, Iridium met the letter of the expectations it created, but it came nowhere near meeting customer assumptions. From the consumer’s perspective, the phone did not work. Period.
DBS (direct broadcast satellite) companies in the United States learned about customer assumptions when more than half of prospective buyers walked away after finding out they couldn’t get local channels via a small dish. For five years those companies unsuccessfully fought that assumption. Finally, the companies gave in and began adding local channels after a grueling series of mergers and consolidation made it both necessary and possible.
Fifteen years ago, Motorola pioneered the zero defects movement, but ironically couldn’t make Iridium better than the competition. On the odd occasion a call went through, it was usually poor quality. The network wasn’t bigger either, at least not where it counted. In New Zealand, Aussies and Europeans walked off the plane, pulled out GSM phones and started talking. I had to wait until I cleared customs and walked outside. Sure, I could make calls from the top of a volcano, but I spent more time in offices and airports than in craters. And even on long training rides, there were precious few spots outside cell range.
The high cost of Iridium’s service compounded problems, yet I quickly found I’d rather pay for a landline than put up with a free but frustrating satellite phone. Terrestrial broadcasters need to remember the better, bigger, cheaper principle and score on all three points as they convert to digital. Viewers won’t spend money on new digital televisions if all they get is the same content with marginal quality improvements. And they’ll assume they can get digital signals over cable and satellite for the same price as analog services. A free digital signal isn’t enticing if it requires mucking about with antennas — ask any DBS operator.
Iridium’s business plan met 1980s needs with 1990s technology and died spectacularly in 2000. Globalstar aims to avoid that trap by flying bent pipe birds and keeping the guts of the network on the ground where it can be easily updated. EchoStar, DirecTV, BSkyB, Canal+, PerfecTV and other satellite broadcasters are running hard, working to integrate things like local signals, multimedia content and a variety of two-way services into networks that still support millions of legacy devices. Today’s leaders change strategy continually, embracing markets that can turn dominant companies into dinosaurs overnight.
Rewriting a business plan requires flexibility and nerve. But it’s necessary if broadcasters intend to meet customer expectations and assumptions, and provide services that keep pace with ever increasing standards of quality, scale and price. Tearing up a business plan that has remained wildly profitable for the better part of a century might seem unthinkable, but until recently so was flying a brand new satellite constellation worth billions of dollars straight into the ocean.