Guest post by Steve Pearson
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 first hand.
I used to work for Motorola and, while there, bought some stock in Iridium. Iridium was a satellite phone system that could replace all of our limited coverage problems with phone service that worked anyplace on earth. Innovative and cool!
My stock purchase was only $1,000 but I just knew that stock would do well. I even chose not to sell when the stock almost doubled, believing that there was still a strong upside. Instead, I held on until the astonishing drop to a nearly zero valuation.
What went wrong?
The answer includes a number of technical and market-based answers but I’ll focus here on 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 here .
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 their 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.