CHAPTER 3An Introduction to Customer Discovery

No startup business plan survives first contact with customers.

—Steve Blank

A journey of a thousand miles begins with a single step.

—Lao Tzu

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IRIDIUM WAS ONE OF THE BIGGEST STARTUP gambles ever made—a bold and audacious $5.2 billion bet. Founded by Motorola and a global partnership of 18 companies in 1991, Iridium planned to build a mobile telephone system that would work “anywhere on Earth,” from ships in the middle of the ocean to the jungles of Africa to remote mountain peaks where no cell towers existed.

How? With an out-of-this-world business plan. First, the company bought a fleet of 15 rockets from Russia, the U.S. and China. Next, it launched an armada of 72 private satellites into orbit, where they acted like 500-mile-high cell towers providing phone coverage to any spot on Earth. Seven years after Iridium’s founding, its satellites were in place. But nine months after the first call was made in 1998, the company was in Chapter 11 bankruptcy. When Iridium crashed back to Earth, it ranked as one of the largest startup failures on record. What went wrong?

When Iridium was founded in 1991, worldwide cell-phone coverage was sparse, unreliable and expensive. Cell-phone handsets were the size of lunch boxes. Iridium put together a business plan that made assumptions about customers, their problems and the product needed ...

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