MSI - A billion pound start-up

Organizational Behaviour

Case Purpose

Companies can be both successful and unsuccessful at the same time. In particular, quick financial success in one part of a business can make things more difficult elsewhere. In this case, we look at a start-up company in which the major decisions that drove the financial fortunes of the company were very well taken, but the technical foundation of the company became unmanageable.

Case Description


MSI was founded to supply systems for designing mobile phone networks to mobile phone companies. It had some good technical ideas and there was a very strong market for anything that would help mobile phone operators improve the quality of service to their customers – particularly in the area of signal and coverage.

On the back of supply the technical tools, MSI negotiated deals with operators that gave them a stake (perhaps 5%) in the networks themselves. As the value of the networks boomed, MSI itself became worth a huge amount of money.

Business Model(s)

Two ways of generating value

It appeared that MSI could generate value in two different but linked ways. The operational work of the company was in building, selling and delivering systems, and this generated some value.

However, much larger amounts of money, at least on paper, could be made by using the system to negotiate a stake in new mobile networks around the world. In this way the capital value of the company became immense but it was disconnected from the operational work of the company.

The company’s product

The company’s technical staff, processes and procedures were focused on the core systems. However, although these systems were central to the company’s self-image, they were no longer central to the company’s preferred business model.

The business models were still notionally linked. If the company had stopped supplying systems altogether, it would have been in breach of the license agreements that gave it a stake in telecomms networks. It would also have been unable to set up new deals. It needed to be seen as a successful technical supplier and useful technical partner.


The staff of the company

MSI rode the boom in mobile phones and prospered well in its early days. The people who joined early in the company’s history were given share options that before long turned them into paper millionaires. These people were influential in the informal systems of the company, respected as elder statesmen in a fast-moving situation and were indispensable in what they knew. They were never, however, brought into the core management team.

These "elder statesmen" were now in a difficult position. They had a large stake in the corporate gamble that was going on; and their role, in effect, was to sit tight and do nothing. But their professional investment and pride was in a product that was crumbling around them and they were denied the right to sort out the management situation that was so bloated and counterproductive.


The founder owners of the company still held intense personal political power. There was a real prospect that if you rocked the boat you would be fired, possibly losing your paper fortune in the process. The new managers that were brought in were hired for their reputation and their technical skills but they never acquired any political power. In these circumstances all their actions created costs but not results.

The ambivalent position of the company products, being at the same time vital but irrelevant, was reflected directly in the management structure where the technical people were at the same time vital to maintain the image and ostensible purpose of the company and irrelevant to the nature of the deals being put together.

Company culture

Technical Squibb

Processes were invented and implemented. Plans were made for what needed planning next. Customers grumbled about the systems they had, and it seemed impossible to ship meaningful new releases. (Technical staff blamed this on the weight of management and supervision.)


The culture was to buy one "solution" after another and never to confront the situation.

The company was flush with money and able to buy the very best in consultancy advice and software tools. They thought that by doing so they would improve their process of developing and shipping their core product. By getting the process right, everything would fall into place. However, the abstract "process" merely floated free: people used it because it was obviously the answer because of all the investment in it. In private, employees complained that nothing was getting delivered, but nothing of this kind could be said in public.


In this difficult situation the atmosphere became feverish. There were in-groups and out-groups, people who were acceptable and people who were not. The question of "competence" came to have huge significance and energy. There were rumours about people who had left or who might leave setting up rival organisations.


Eventually the company was sold, and this allowed the elder statesmen to sell their stake and move on. But the core question of what the organisation was for either in business terms or in membership terms was never addressed. The owners of the company trusted and valued the early workers enough to make them rich but not to allow them to grow or to use the assets that had been generated.

Your Task

MSI has two business models, representing contrasting ways of generating value. Explore the differences between these business models in economic and ethical terms.

Explore the consequences of these contrasting models on the functioning and internal behaviour of the organization.

According to some observers, the company became unable to do "real work". Can you account for this phenomenon? Explore the consequences of the contrasting business models on the meaning and significance of the work.


Case prepared by Aidan Ward, October 2002.

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This page last updated on October 15th, 2002
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