Friday, July 15, 2016

Iridium, the Book

The book by Bloom on Iridium, Eccentric Orbits, is an amazing tale of persistence and corporate bumbling. This review is somewhat personal because I had direct contact with Motorola over this period and specifically with many of the principals noted. As to the author's characterization of many of those I knew personally, they were in my opinion "spot on".

My first dealing with Motorola was in the Fall of 1976. I was at Comsat and just finished the architecture for Intelsat V. I was asked to think about domestic mobile satellite communications. I got one helper, a summer employee, my first, and it was also her first job as well. Her name was Anne Holton, the daughter of the former Governor of Virginia, now the wife of the current Senator, also a former Governor. Thus Anne and I set out to design a system to provide domestic mobile service. Anne got the job of market research and her first task was get from the Virginian State Police their requirements and what we would need to get them as a customer. Note that we started with revenue first, real revenue, and as Bloom notes again and again that was not the Motorola way. Our competition was Marisat, the Comsat predecessor to Inmarsat. It was a satellite system for ships. We wanted it for cars. The system became MobSat, a horrible name but back then we thought it appropriate.

In the Fall of 1977 I took a trip to Schaumberg to meet some now forgotten Motorola VP to see if we could get them interested. I managed to spill my coffee all over his desk so I believe we were viewed as a bunch of bumblers. My main point was first a customer base and then a simple design. I also presented an Intersatellite link plan we had considered in Intelsat V, a microwave plan, because we had an MIT study that let us understand that lasers were just not yet up to it. We did not get any interest.

Then in 1985 I got a call from Bob Galvin's office. Please come out to Schaumberg. I went, and I did not know Galvin. I met him in his office and he said let's have lunch. Down we went to the cafeteria, me and the Chairman/CEO. He got a peanut butter sandwich and I was clueless as to what I should have. Here I was with Galvin and he wanted me to help him get into the service business. Why? Simply, Bob said, paraphrasing:

"We sell pagers, and for the revenue per pager, the paging company gets that every year. We sell cell phones, and for the revenue we get for a phone the cellular company gets that every year several fold. We have a data radio product, I would like you to see how we could be not just the manufacturer but the service company, so that we get to keep the recurring revenue."

My task, should I accept it was simple, use this product to see if Motorola could get itself in the service business. I had spent the last five years in Cable and was well versed on service businesses. But at Warner we made nothing, we had vendors.

I spent the next five months trying to see if Motorola could do this. It was my introduction to a mid-West manufacturing culture. I was assigned handlers, namely people to "help" me who reported back to the VPs who saw this as a threat. I started out to see if there was revenue. That I was told was not the Motorola way, I should focus on technology. I told them, "If all else fails, listen to the customer." So I went to find customers for mobile data. Three months of talking to customers, one on one, listening and asking questions to listen some more. What was clear was that what Motorola had could work but it was a technology in search of a market. The food chain necessary for its success was absent. Customers such as distributors needed software and what we now call "apps" to get this to be useful. Many saw the vision, but the steps to be filled in were considerable. I managed to complete the business plan but met with one Motorola obstacle after another. The "Comm Sector" sales team tried its best to intimidate me with their way of selling. You don't sell a service the way you sell a piece of hardware. Their problem fundamentally was how did they get paid? What was the commission plan? If they did not have a clear path to getting paid they had no interest.

The most important observation I made was when I went to Kraft. They were in the food distribution business. The had trucks, distributed food, took orders, and the like. A great target for the use of data; managing trucks, inventory and the like. I could see a rationale. I spend a half day with a manager there, nice person, willing to listen. At the end of the meeting he asked me; now just how do I use this? I told him that he just has to connect his software to the terminal. His response was; what software? Metaphorically I realized that there was a gap in the food chain. They made chees, managed factories, Motorola made data terminals and even networks. There was a massive gap in connecting the two. Whose job was that? I told Motorola that if they wanted to be in the service business then they had to provide a full end to end solution; thus the software was their problem. But Motorola did not do software. The sale force wanted to know why the customer could not get their own software. I decided not to pursue that discussion.
When having presented the plan and noting that perhaps it was both bit too early and that Motorola had a hardware culture not a service business culture I got a job offer. I was smart enough to politely turn it down.

Now in 1990 I took over as COO of the cellular company at NYNEX. One of my main tasks was to move to digital. Since I knew Irwin Jacobs from MIT, he was my Faculty Adviser, I naturally went to Qualcomm. I fought against the TDMA parties such as Southwest Bell and McCaw and managed to move CDMA up to the US option. I managed to get AT&T, subsequently Lucent, to move in that direction, but had a difficult time with Motorola. They somehow did not get it. I even went to Chris Galvin in Florida for a pitch.

Then when I went to do PCS, I used MIT Lincoln Labs as my technical support. Hearing of Iridium and knowing the principals, I thought what we knew at Lincoln, may be of help to Motorola. After all, Lincoln had built a few satellites and had demonstrated inter-satellite links as well and a few mobile terminals. The meeting was with the top folks at Motorola, just read Bloom, and we told them that perhaps they should consider taking some smaller steps, this was a massive jump with lots of uncertainties. We were politely escorted out. Never heard from them again.

Then in 1997 when I started my international fiber and IP company, I needed VOIP nodes and Motorola had one. At least that is what I thought. Actually they just OEMed one from a former colleague which I did not know about. But after a year they suggested investing, and somewhat foolishly I agreed. As usual the agreement required almost instantaneous repayment via hardware and system service contracts. The subsequent dealing with Motorola was filled with excruciating pain. I had investors over ten time zones and I continually had major issues with Motorola, a five-minute issue would take weeks! We finally sold the company in 2005, and the problem disappeared.

Overall my view of Motorola was simply:

1. A hardware manufacturer with a strong sales force and dominance in their classic markets.
2. A company which did not understand the service business.
3. A company where many managers dealt with issues by confrontation not by collaboration.
4. A company where getting customers first was not the way to do things. Selling a box, a technology, was the key. Get the customer to buy a box, not solve the customers problem and become an ongoing part of the solution. They did not understand IBM and the "service" culture.

Thus with almost thirty years of dealing with Motorola, they had some great technology folks, great political infighting skills, fantastic hardware sales, but it was a culture in my opinion of survival of the fittest, not necessarily pursuit of the best.

To preface my review of Bloom's book it is worthwhile to briefly lay out my experience in this area with satellites, mobile systems and Motorola. I had a thirty-year relationship with Motorola, as a joint venture partner, as a consultant to the Chairman, as a customer when COO of NYNEX Mobile now Verizon, and as the CEO of a company in which they had invested. The relationship allowed me to see most of the principals in the book first hand and further to see the company in a broad context. I also spent time in the satellite world, actually architecting one of the first mobile systems in the 70s. I also had a parallel experience to Colussy, albeit an order of magnitude smaller.

Thus I approach Bloom's book with a somewhat jaded experience set. I also approach it with a firsthand knowledge of the principals and moreover of the technical and business facts as I was exposed to. Bloom tells a fantastic story. I have no knowledge of his principal, his Odysseus, and his sailing through Scylla and Charybdis. But I can commiserate with him and his frustrations. I dealt with only 20 countries and an order of magnitude less in scale of the financing. But the trials and tribulations all ring true. It is told with a sense of being there and having to deal with the many characters thrown in the way. One wonders how anything gets accomplished given what the entrepreneur goes through in today's world. There are very few who set out and continue to the completion. Bloom takes the reader on that journey, and his inclusion of the steps are essential to appreciate the success.

Bloom presents a fast paced tale of the birth and near death of the Iridium satellite system. This is really a story of three "characters" First of Iridium, the satellite system developed by Motorola to provide global telecommunications coverage. Second, Motorola and its management and how they mis-managed the whole process. Third, it is about Colussy, the man who sought to revive Iridium just at its death's doorstep, and managed to working through the problems of financing, bankruptcy, Motorola, the US Government, and some 200 plus countries. The book then is the interplay of all three of these characters, animate and inanimate.

First, Colussy, ostensibly a successful businessman, in retirement, sees an opportunity in resurrecting Iridium just as Motorola is ready to push a self-destruct switch. Just what he sees is often problematic because each time he takes a hill, there are several more in front of him. But he manages to persevere. His interactions are all too familiar to any person who has tried to start a business, especially one spanning many countries and involving the US Government.

Second is the Iridium project. Here Bloom touches on some of the details but this is not a book for anyone who wants to understand Iridium. It is clear again and again that Bloom is not technical and that he does not want to venture down that path. However, understanding Iridium is essential to understanding the overall problem.

During the 1990s, mobile communications was expanding. It moved from analog in the late 80s to digital systems in the 90s with CDMA and TDMA in the US and GSM (a TDMA variant) throughout the world. With digital one had ever improving voice compression systems but the need to expand coverage was ever increasing. Cell sites had at best a 1-mile radius of coverage and that meant about 3 sq mi of coverage per site. The large cities were being covered at a rapid rate but major portions of the world had none. To achieve that would be very costly. Thus Motorola, and some others, came up with what could be called cell sites in the sky, lots of satellites. In addition to work properly they had to be low, to reduce the delay in the voice signal. Classic satellites like those of Intelsat were at 23,000 miles and the voice delay was about 0.25 sec, which was unacceptable. Thus Motorola came up with a constellation of dozens of small satellites that were close to the earth and allowed low power and minimal delay. However, they had to "hand-off" calls, like cell sites did on the earth, but to do so in space, thus using a complicate dynamic inter-satellite link. Then of course they needed bandwidth and agreements with 200 countries, no mean task.

Third, we have Motorola. This book is as much about Motorola as about anything. Motorola was a Chicago based company with a great record in radio communications for the public and government entities. They made boxes, transmitters, receivers, processing units. They sold boxes to customers who then did something with them. Mobile companies integrated then into cellular systems, paging companies integrated them into paging services, and police and fire departments integrated them into their operations. Thus Motorola was a manufacturer with great quality and a sales force that sold the boxes better than anyone else.

However, Motorola was not a service company. It was a product company. What is the difference between a product business and a service business? It is best characterized by the metaphorical statement: The dogs have to eat the dog food. Product business sells to the owner of the dog. Nice label, good price, great placement, fantastic advertising and promotion. The service business requires that the dog food be consumed, again and again. The dog does not care about the label, about the sales person. The dog sniffs it and eats it, or not. Service means that one must understand their end customer.

Iridium was to be a service company. The structure became Byzantine however, in an attempt for Motorola to still execute its role as a product company. Motorola just did not understand the service business. It thus created a monster in the way it structured Iridium, protecting its underlying product business construct.

Also Motorola management was often times blunt and aggressive. It grew up dealing with truckers, police departments, local governments, and never really dealt with customers. They knew how to "push" a sale through a difficult channel, and yet did not understand end user customers. The dogs at the end of the dog food.

Bloom lays out each of these elements on a step by step basis giving examples so that by the time the reader completes the book they all fall elegantly in place.

Now the problem was, as Bloom notes, Motorola had a brilliant team on the design of the system. The built off of the Star Wars technology of Brilliant Pebbles and related designs. What is clear from Bloom, but perhaps should have been more emphasized, is that no one seems to have thought of revenue or costs. Who was to buy this system and what price? The team never seems to have signed up users ahead of time, they relied on weak third party inferences that there were customers.

The second problem was that the system design, albeit elegant was very technically challenging and the overall system was complex. Bloom lays this out in detail.

The third problem was just time. It took longer but at the same time the world was changing. GSM penetration exploded, digital was pervasive, and the Internet was the stalking horse of the future. Voice was becoming a tertiary service at best. Data, namely Internet access, was becoming the critical element. I was at the time this was occurring switching from a IP voice business to a fiber Internet backbone system. The irony was that Motorola was one of my investors and they should have seen this happening as it did in literally a few months! Namely the world was changing under their plan.

Thus Bloom starts out with Chris Galvin commencing the deorbiting of about 80 satellites, namely allowing them to just drop from orbit and hopefully burn up before hitting anyone. Then the tale takes Colussy through the never ending impediments thrown in his path by Motorola, as Motorola itself is starting its own downward spiral, which will take a bit longer.

Bloom then takes Colussy from the near death of the system to his final snatching victory from the jaws of defeat. It reads superbly and should be viewed as how not to do something in the corporate world and how a real entrepreneur works.

Bloom on the other hand from time to time makes statements which do not necessarily reflect the facts. It seems clear he got them from somewhere but reality may have had an alternative.

On p67 Bloom makes the statement that Comsat was not interested in voice communications. Having done the architecture for Intelsat V at Comsat in 1975 I remember, and still have the documents, that were mostly voice. This is a typical statement I see again and again in Bloom and it detracts, and was unnecessary for his exposition.

On p69 he talks of inter-satellite links. Lincoln Lab had designed and launched several satellites for the Air Force, the LES series. I was at Lincoln before Comsat. I was in that Group and interfaces with DoD. When I did Intelsat V we looked at inter-satellite links and the design actually had them. It would be microwave because the problem of pointing a laser were too complex. In 1993 my colleagues from Lincoln and I met with the Motorola Iridium management to discuss these factors. It was then known that laser pointing still had a bit to advance.

On p 90 there is a discussion of the antenna. The Marisat satellites of the 70s had such antenna for the same reasons.

On p 111 there is a discussion of the Galvin discussions. Here as elsewhere the question keeps coming up; where is the revenue coming from. I recall one of the senior management saying they were targeting executives on elephant hunts in Kenya. I did not know any of these folks but somehow the source of revenue should have been a bit stronger than that.

On p 122 was the balloon discussion. I had seen at least a dozen balloon proposals over the years and I still see a few. Needless to say they never materialized for a variety of reasons, most obvious from just an operational perspective.

On p 150 the discussion of Motorola and the Russians is classic. I never had any problems with the Russians, but then I did not act so arrogantly.

On p 180 there is a discussion regarding the fact that the system was not interoperable with mobile and it had poor propagation characteristics inside buildings. By the late 90s GSM could work inside a beer house in Prague. Thus user expectations were changing. The system required a complex interoperability capacity and that just added costs and complexity.

On p 183 there is the discussion of the FBI and CALEA. Any telecom operator would know of CALEA, namely we had to have access for Government agencies using a CALEA warrant. This was something they should have known, especially given their government businesses. Also their cellular systems we often carrying more wiretaps than the fixed line businesses.

On p 198 is the most telling part. "How to get the million subscribers/" One would have thought they had this laid out before spending penny one, but alas this was classic if you had never been in the service business.

On p 330 it relates the crash of a Soviet satellite and the concern. The reason for concern was twofold. First the Russian made indestructible satellites. They just did not burn up. Second this satellite if I remember had a nuclear power source, I believe plutonium. It landed somewhere in western Canada. The concern was radiation as well as the indestructible Russian design.

Overall the book is superbly well organized and does a great job in presenting each of the characters. It also presents a near tragic tale of over management and under estimation. To recall my father's warning; prior planning prevents poor performance. My corollary was; always make sure there is a second exit.