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Here we are with the first iteration of our three-weeks series on the private race to space that we are witnessing in those last years. Today’s “guest” is SpaceX, company funded and founded by billionaire and real-life Tony Stark Elon Musk (that guy from Tesla, PayPal et cetera – personal hero of mine).
If you haven’t read the introduction to the series, it is a good moment to do so. Just click here.
This article has a companion track that (IMO) ameliorates the reader experience: it is Frank Sinatra’s “Fly Me To The Moon”
SpaceX. If they had a sarcastic mission statement it would have been:
We at SpaceX aim at making massive reusable rockets for suborbital payload delivery in one of the most expensive places to do business (just outside L.A.), going against the pack and vertically integrating from ground up, and oh, we just do it for the purpose of going to Mars.
There’s literally no company like it: they entered an incredibly highly concentrated (de facto a duopoly between Boeing and Lockheed Martin) and highly regulated market, gaining the favour of NASA and establishing contracts with government and privates for billions of dollars. All of this designing rockets from scratch so leanly that they cost a fraction of their non-reusable counterparts, in a handful of years.
If that does not give you goose-bumps, you probably don’t have a heart.
But going deeply into the company, why and how are they doing it?
Mr. Musk has always been clear of the why of SpaceX. He wanted to make life multi-planetary by reaching Mars, but current launch alternatives were just too expensive, so he saw a sector ripe for innovation, decided that he could do it better, and thus entered the market. Fast forward some years and they are planning the first private manned flight around the moon.
Having this strong vision means having a highly motivated workforce, that pulls together a company that is working full time in a lean and mean configuration. It also means attracting the best possible workforce that strives for being part of this mission to the Red Planet. Every rivet, nut and bolt is mounted with the long term idea of going to Mars.
But how are they doing that?
The How: developing strategic and competitive advantage.
When proposed with the task of designing a business model, SpaceX could have either taken a classical approach, by cutting costs related to operating the business by applying incremental improvements on previous technologies (i.e. Using Russian ДНЕПР), or it could have decided to develop an all new platform.
As a matter of fact, the innovation at the core of the strategic advantage of SpaceX resides in the entirety of the business model rather than to bits and pieces of the company, since cuts weren’t just made to the physical rocket itself but to everything surrounding it – overhead, support services, development timeframe, and more. This was possible thanks to long-term strategic thinking and by adopting a vertically integrated structure.
The long-term strategic thinking that permeates most of the business choices operated by SpaceX can be related to a critical analysis conducted on the sector: by looking at the mistakes incurred in by previous incumbents, SpaceX successfully identified in a cost related strategy the key driver for its marketability.
The company’s recognition of the importance of low cost access to space was critical, especially in the aftermath of the huge expenses incurred by the government when faced with the previous spatial exploratory feats (i.e. Space Shuttle program), and they changed the value proposition of the sector by turning to the development of reusable launch systems that allows for more frequent yet cost effective outer space payload deliveries.
SpaceX incurred a huge investment by building a novel rocket engine from scratch instead of adopting the existing engines that the competition still adopts. By taking this (risky) bet, investing with the future in mind instead of embracing a shorter-term approach, SpaceX ensured itself a competitive advantage which is allowing the company to grow at a much faster rate compared to the competition which is lagging behind in great difficulties.
From the company side, SpaceX proactively looked for bright minds in the top universities, by offering them big and bold projects and by encouraging “out-of-the-box” thinking. By searching for the best member for teams “with a wide cross-section of expertise” , the company is able to actively catalyze resources in the most efficient way, and by managing every part of the process it can consistently innovate and deliver impressive results.
Dissecting the success of SpaceX
In short, the main reasons that allowed SpaceX to go from scratch to orbit in such a spectacular way can be summarised in:
- Elon Musk;
- Being able to apply lean thinking when designing their businesses, by applying both the technical and social aspects of it, such as encouraging cross-sectional teams and paving the way to organizational learning;
- Adopting a vertically integrated structure (Rocket building requires components that are made specifically with the end result in mind, and in the framework of developing proprietary engines and structures, a vertically integrated solution may ensure the best results in terms of structural efficiency);
- The development of a reusable technology;
- Product scalability and modularity;
- again, ELON MUSK.
Next week we will talk about Jeff Bezos’ Blue Origin and its business model, so be sure to be around next Sunday!
Get the latest space updates every Sunday here on International Space Sunday, or follow me on twitter @carlostoppani.
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