Space and SpaceX: Another Small Step For Man, a Nearly Untapped Opportunity for HBS Graduates

1. Simplicity: Musk decided to use kerosene rockets, which are not as powerful as liquid hydrogen ones, but are significantly cheaper and easier to design.

2. Vertical integration: SpaceX makes 80 percent of the rocket in-house, reducing the number of suppliers – who usually charge extremely high prices. This in turn allows for faster processes and more interaction in the design stages, ensuring the best compromise solution is achieved between the different teams.

3. Scale: By standardizing and using modularity (the Falcon Heavy is basically three Falcon 9 rockets put together), SpaceX can achieve greater economies of scale.

4. Continuous improvement: Musk’s company has produced eight different versions of its Falcon 9 rocket in the last eight years, improving each step.

5. Resilience: Each rocket has at least nine engines (more economies of scale) of which up to two can fail without compromising the mission, which reduces the amount of reliability needed, which is expensive to achieve.

6. Strong focus on innovation: While SpaceX was able to leverage NASA’s knowledge, it still had to develop new manufacturing processes and technologies – such as supersonic retropropulsion, key for landing on Mars and for reutilization – which not even NASA has yet developed.

7. Reutilization: SpaceX realized that a rocket’s mass is over 90 percent fuel, but that fuel only costs $200,000 whereas the rocket is worth $60M. Therefore, by recovering the rockets, refurbishing them and launching again, they could achieve significant savings. SpaceX expect to use each rocket 10 times before a major overhaul and 100 times in total, with turnaround times of 24 hours, which would lead to very high utilization.Elon has achieved all of this, avoiding the cost-plus structure that the space industry usually used when contracting with governments, and therefore saving taxpayers millions. In addition, the threat of new competitors, such as Blue Origin, funded by Amazon’s CEO Jeff Bezos, may put pressure on SpaceX to transfer the expected savings from reutilization to customers. The fact that space companies are starting to look like technology companies, with investors also joining in – such as Joseph Landon (MBA ‘07), Managing Partner at Space Angels Venture Fund and CFO at Planetary Resources – should lead us to think that there are significant opportunities for MBA graduates in the sector. Matthew Weinzierl, an HBS professor who has written several cases on the space industry and organized the Afternoon in Space session, bringing together students and industry experts, recognizes that space companies increasingly want to hire MBA students, particularly if they also have an engineering background. Other HBS alumni in the sector include Ariane Cornell (MBA ‘14), Head of Astronaut Strategy at Blue Origin. MIT is another stronghold with its New Space Age conference that took place in March as well as its dual MSc in Engineering and MBA program. For many, the space industry might still look too risky, too complex and too ambitious. Elon Musk had the courage to overcome those fears, and by applying well-known and developed business techniques, has started a revolution. So if you think you have a great idea but still feel doubtful, please remember that nanosatellites’ cost of manufacturing and launch have already dropped below $100,000. That might be even lower than your MBA debt.