TerraCog Global Positioning Systems:

Conflict and Communication on Project Aerial

 TerraCog, a successful privately held high-tech firm that
develops GPS (global positioning system) and similar
products for consumer markets, has been caught off-guard
by a competitor's new product that makes novel use of
satellite imagery. When TerraCog pursues development of a
directly competing product, dubbed Aerial, the projected
costs threaten to scuttle the project. The key unit managers
gather in contentious meetings that feature anger, blame,
and bewilderment, but produce no effective conclusion. At
the end, it falls to Emma Richardson, a newly-promoted
executive vice-president, to push the group toward a go/no-
go decision.
 Learning Objectives
1.To examine conflict and communication within
groups.

2. More specifically, to understand how

organizational decision making can be affected by
the personal style, departmental allegiances, and
other characteristics and situational factors of
participants, as well as by group processes.

3.To analyze a tense managerial situation that

demands a tactful but decisive leadership response.
 Key Facts & Issues of the Case
 Emma Richardson has been tasked with overseeing the
launch of the Aerial GPS, which TerraCog hopes will help
it regain market share lost to competitor Posthaste.
However, TerraCog managers are unable to agree on the
price point for the Aerial GPS.
 Project Aerial Decision
• The decision to incorporate satellite imagery into the
GPS was initially rejected, giving the competition a head
start.
• The eventual decision to begin Project Aerial and use
satellite imagery was made solely by the president,
Richard Fiero, and the vice president of sales, Ed Pryor.
• The design & development team was not enthusiastic
about Project Aerial.
 Aerial Product Development

• The design & development team has designed the Aerial

prototype according to the specifications of Fiero and Pryor.
• The Aerial does not represent a technological advance over
competing products; by incorporating satellite imagery. It
merely matches competitor performance.

 Price Point Conflict

• The production cost of Aerial is considerably higher than
expected, due to its more expensive components.
• Meeting the TerraCog CFO’s profit-margin requirement
would make it impossible to meet the
competitor price point.
At the end of the case, Emma Richardson must lead
TerraCog to choose one of the following options:
1. Launch Aerial at full price (~$475) to maintain
the standard margin requirement.
2. Launch Aerial at a competitive price (~$425)
at zero profit, while simultaneously working on
redesigning to cut cost.
3. Delay Aerial launch while working on a lower-
cost redesign.
4. Abandon Aerial.
 Focus areas
 How have departmental and Individual
Objectives led to the current situation?
 What is the current decision making
process?
 What are the strategic and organizational
implications for each of the company’s
options?
 What should Emma Richardson do?
 Case Analysis
 Three general causes of the conflict/ dilemma:
departmental and individual objectives, group
structure, and the decision-making process.
 Objectives—Departmental and Individual
 Conflicting objectives among the stakeholders
due to departmental affiliation. The managers
are right to advocate for departmental interests,
since they can provide valuable perspectives on
issues that are particular to their function.
However, the TerraCog managers appear to have
such limited vision that they cannot act for the
greater good of the organization.
 Seemingly, each manager is attempting to
improve his position, vis-à-vis the Aerial product,
so that in subsequent evaluations of performance,
his department will appear favorably.

• Sales: The overriding goal of the sales team is to

have the right product to boost volume. It appears
that sales representatives are compensated on top-
line sales revenues only, and not on profitability.
Thus they are willing to squeeze margin to hit a
competitive price point.
• Production: Goal is to estimate costs at a “safe”
enough level so that production can meet cost,
scheduling, and quality goals; these factors represent
the criteria by which the department is evaluated and
rewarded.

•Design & development: The greatest concern for the

design & development department is to avoid a forced
redesign of the Aerial product. By convincing the rest
of the organization that they have designed exactly to
specification, the team maintains its internal
credibility and protects the opportunity to pursue
projects of greater technical interest to them.
 Individual objectives are an additional source of conflict.
These relate to departmental concerns, but provide
additional issues that further complicates the discussion
and make a resolution more difficult to achieve.
 Ed Pryor, vice president of sales: is concerned not only
with his compensation, but with his reputation. He
doesn't want to disappoint his sales team, and he may
have promised a product that he now feels compelled to
force TerraCog to deliver.
 Tony Barren, director of production: The case alludes to
a recent production problem for which Barren is held
responsible. Job insecurity and perhaps resentment at
having been blamed for prior problem cause him to be
conservative in his commitments.
 Allen Roth, director of design & development: is
interested in promotion to Harold Whistler’s position
as vice president of design & development, and
believes that having a new product he can call his
own will be important. The Aerial product has been
a distraction, and Whistler’s suggested redesign
undermines Roth’s credibility.
 Cory Wu, software & firmware design: argues that
his modest “tweaking” of firmware was an
appropriate response to the requirements stated by
the sales manager. Wu’s most acute concern may be
the suggestion from the sales team that the product is
sub-par. Being present at the meeting, he seems
compelled to defend his competence as a designer.
 Harold Whistler, vice president of design &
development: Whistler is no longer fully involved
in the company he cofounded. However, his
unexpected participation in the second meeting
suggests that he enjoys hands-on involvement.

 Emma Richardson, executive vice president:

Richardson is in an awkward role, having recently
been promoted and finding herself in the middle of
a problem she did not create. The Aerial conflict is
a test of her leadership abilities, and she must reach
a solution that helps TerraCog and does not hurt
her working relationship with the other managers.
 Group Structure
 The group that has formed to launch Project
Aerial seems poorly designed.
 Richard Hackman argues that group
performance depends on a well-structured
group, which requires five conditions: the
team must be a real team, have a compelling
direction, have an enabling structure, operate
within a supportive organizational context,
and have expert team coaching. In Terracog,
at least the first two conditions are absent.
• A real team: It is an ad hoc group attempting
to set a price point for Aerial.
Historically, product launches have been
guided closely by President Richard Fiero
and Harold Whistler. However, there is no
clarity around who should be on the new
team and the nature of each individual’s role.
The group makeup varies somewhat in the
second or “resumed” prelaunch meeting: the
inconsistency of participation in the two
meetings suggests that this is not a dedicated
team, but rather an unavoidable meeting of
individuals forced to complete a task.
 Compelling direction: While the goal of getting
Aerial into the market is clear, the group lacks a
sufficiently clear purpose.
Has it gathered merely to set a price point on
Aerial? Should it discuss the appropriate
positioning and overall marketing plan for the
product? Does it have a responsibility to consider
broader strategic implications of its decisions? The
lack of focus in the meetings reflects this absence
of a clear, compelling direction.
Decision-Making Process
 TerraCog suffers from a flawed decision-making process
that limits input when it might be most helpful.
Involvement in decision making can range from input
and recommendations to veto and decision rights. Well-
managed organizations assign the appropriate roles for
each key decision.
 There were several points during Project Aerial when
TerraCog would have benefited from a more thoughtful
process.
• Ignoring the Posthaste BirdsI product: TerraCog’s
management was quick to dismiss the satellite imagery
feature. Greater and faster input from sales reps in the
field, who saw their accounts’ reaction to the new
product, could have led TerraCog to move more
decisively. Instead, a decision was made that did not
incorporate all available insight, and TerraCog lost
valuable time.
 Starting Project Aerial: The design & development team
provided virtually no input when TerraCog finally decided to
pursue Aerial. They could have raised two valuable
questions: What is the opportunity cost of allocating
resources to Aerial rather than other projects? What are
the costs and benefits of keeping the current product
platform versus designing an entirely new platform for
Aerial?
 Developing the Aerial product: Once the design of Aerial
began, TerraCog operated with a “silo” mentality. The sales
team did not have further input into the product, nor was the
production team given a chance to review the design and
offer recommendations on managing product cost. The
“handoff” approach – from design & development to
production to sales – meant that the problem was not
discovered until the launch date was at risk of being missed.
 While there is a lack of cross-functional
involvement during product development, there is
a lack of clear roles in the pricing discussion.
Multiple views are presented, but it is unclear
who has the final decision and who has approval
or veto rights. As the executive vice president,
Richardson is tasked with leading the group, but
the behavior of the other managers indicates that
they believe they can veto any decision. While
Richardson prepares to push the group to a
resolution at the end of the case, the absence of
clear decision roles may make it difficult for her
to assert and enforce a decision.
 Other Issues
 Two other issues that merit discussion: the lack of a
transition plan and poor meeting tactics.

 Transition plan: President Richard Fiero and

cofounder Harold Whistler have not effectively
transitioned their responsibilities to the other
managers. The same tasks remain, but the exact
process and the “owners” of the process have not
been clearly thought through. Indeed, the poorly
designed group structure is a reflection of their
failure to develop team processes that will enable
others to succeed.
 Meeting tactics: As executive vice president, Emma
Richardson needs to manage the Aerial meetings. 3
mistakes are evident.
 First, the initial report from Tony Barren, director of production,
catches everyone by surprise. “Pre-wiring,” or an earlier
conversation with Barren about his findings, could have prepared
Richardson for how to set an agenda; instead, the group quickly
reaches an impasse & Richardson has to cut the meeting short.
 Second, Richardson does not lay out a clear agenda. The
meetings seem to develop organically, with each participant
raising topics as they see fit.
 Finally, the seating chart suggests that no thought was given to
where the participants would sit and how this might affect group
dynamics. The breakdown of the second meeting into separate
conversations reflects the effect of physical proximity in a
contentious meeting without a strong leader.