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Innovation Management and Failiure

Innovation Management and Failiure. Finkelstein and Sanford- The rise and Fall of Iridium Van de Ven- Central Problems In the Management of Innovation. Learning from Corporate Mistakes: The Rise and Fall of Iridium Sidney Finkelstein and Shade H. Sandford. Concept and development of Iridium.

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Innovation Management and Failiure

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  1. Innovation Management and Failiure Finkelstein and Sanford- The rise and Fall of Iridium Van de Ven- Central Problems In the Management of Innovation

  2. Learning from Corporate Mistakes:The Rise and Fall of IridiumSidney Finkelstein and Shade H. Sandford

  3. Concept and development of Iridium • Motorola engineer first gets the idea behind Iridium in 1985 • Satellites would allow subscribers to make phone calls from any global location • Motorola established Iridium as a separate company in 1991 and had its initial service in November 1998

  4. Motorola experienced declining sales and needed technological success to protect its reputation • Motorola invests $6,6 billion for satellite design, launch operations and management • Strong top management team with many years experience from Motorola

  5. The Launch • Spectacular launch Nov 1, 1998 • Handset costs: $ 3, 000 Cost per minute: $ 3 - $ 8

  6. Results • Devastating results by April 99 • Only 10,000 subscribers • CEO quits before quarterly results • Bankrupt August Friday 13, 1999

  7. Reasons for Iridium’s collapse • Cellular build-out reduces need for Iridium From concept to development: 11 years • Technological limitation and poor design Unable to use phone indoors Phone “the size of a brick” • Manufacturing problems Launching of service before enough phones were available • Insufficient marketing and sales plans Delay in marketing teams in foreign countries

  8. What really went wrong? • Breathtakingly elegant and innovative technology • Untenable business plan • Why did they go forward with an increasingly flawed business plan?

  9. What was the problem? Problem 1: Executives made decisions based on the size of previous investments Problem 2: Staiano’s leadership: a double-edged sword “If I can make Iridium’s dream come true, I’ll make a significant amount of money.” Problem 3: The composition and size of the board of Iridium Lessons learned: Evaluate long concept-to-development projects: competitive landscape

  10. Discussion 1. How important is diversity and independent perspectives in corporate boards? Examples, think Norwegian! 2. Pros and cons with financial commitment. For example a leader with many stock options

  11. Central problems in the Management of Innovation Andrew H. Van de Ven

  12. Introduction • A conceptual framework • Written in 1986 • FAQ from CEOs • What environment/ culture/ infrastructure is necessary to be able to innovate? • The reason for the massive emphasis on project organization and team work?

  13. Innovation…. • …is defined as the developement and implementation of new ideas by people who over time engage in transactions with others within the institutional order.

  14. Important factors and their problems • Ideas and managing them into good currency • People and managing attention • Transactions and managing part- whole relationships • Context over time and institutional leadership

  15. Managing ideas • Ideas are developed over time and in a social and political dynamic environment • Implementation • Good currency

  16. Managing Attention • Psychological limitations to managing complexity • Stability versus creativity/ change • Need for Innovation

  17. Managing part- whole relationships • Multiple functions from idea to reality- transaction between the different parts are difficult • “Impeccable micro structures into macro nonsence” • Self- organizing groups, redundant functions, requisite variety and temporal linkage

  18. Institutional leadership • Need to transform the structure and practices in the organizational and institutional environment • The goal is to create an infrastructure and culture for innovation and organizational learning - Negative feedback - Experimentation and selection approach - Preserving uncertainty and diversity

  19. Iridium- an alternative interpretation • 400 MUSD for 25 % of total stock share, 750 MUSD in loan guaranties, an option for additional 350 MUSD • 6,6 BUSD in contracts • 50 MUSD in contracts per month with Motorola, lucrative, should be half • SG Cohen has estimated the value of Motorola`s total exposure to be between 1 – 1.15 BUSD

  20. Motorola gained 750 MUSD in profits from Iridium • Additional to this, Motorola have the patent protection for the satellite technology, approximately 1000 patents at the time when Motorola was entering the satellite communication industry • Staiano CEO 1996 • Lack of focus

  21. Final discussion • Is Irididium an example of bad management in Iridium or good management in Motorola? Could this have happened in Telenor- Opera? (How does the Iridium leadership differ from Van de Ven`s article?) • Who had the financial commitment and strategic control in the case of Motorola/ Iridium, Telenor/Opera, and what does this say about the organizational integration?

  22. Everybody: • Can you relate Iridium and Opera to one of these organizational models?

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