Last week I was outside of Vandenberg Air Force Base to watch the launch of SpaceX’s Falcon 9 rocket. (It was perfect weather and an amazing experience for my first launch!) To commemorate it, this is another one of a handful of product case studies I wrote to help understand successful product launches.
Falcon 9 was finished in early 2010, and had been in development since 2005. Its first flight occurred on June 4, 2010, a demonstration flight to orbit where it circled Earth over 300 times before reentry.
- 1st flight to ISS: May 22, 2012
- 1st cargo resupply (CRS-1): October 7, 2012
- 1st successful commercial flight: September 29, 2013
Development costs for v1.0 were estimated at $300M. NASA estimated that under traditional cost-plus contracts costs would have been over $3.6B. Total combined costs for F9 and Dragon up to 2014 were ~$850M, $400M of that provided by NASA.
By September 2013, the SpaceX production line was manufacturing 1 F9 every month.
(1) Value created — Simply describe the innovation. How did it create value?
The Falcon 9 is a two-stage rocket that delivers payloads to Earth orbit or beyond. It’s a transportation vehicle to space. F9 drastically reduced launch costs, allowing NASA and small satellite companies to send payloads at a fraction of the cost.
(2) Value captured — Competitive advantages, barriers to entry. Why didn’t incumbents have a reason to fight them?
- Ahead on the learning curve — highly advanced, experiential, expert knowledge
- Capital and time barriers — lots of money and time needed to get to scale
- F9 was a disruptive innovation, built from the ground up at low cost. Incumbent launch companies had no reason to start from scratch and lower their profits when they had strong (mainly cost-plus) contracts with existing customers. Industry was viewed as very inelastic and that little demand existed at low end.
(3) Job-to-be-done — What job(s) does the innovation fulfill?
When I need something in orbit, I want it to be delivered for me, so I can focus on what I’m best at. The only substitutes are other launch services providers.
Where in the “stack” does it fit in? (Why then?)
- Uses existing launch pads leased from NASA (Kennedy) or the Airforce (Vandenberg).
- Uses existing launch control and tracking.
- Advancements in software (simulations, design, control).
- Built on 60+ years of aerospace engineering knowledge.
- With incremental advancements in engine tech, software, and materials it was only a matter of time before an upstart rocket company used them to lower launch costs. But without Musk it may have taken another 10+ years to get to the same point.
Any unique technical abilities/insights that enabled it?
- Highly specialized knowledge in many engineering disciplines.
- General insight to rethink rocket and engine design from ground up without taking existing practices or designs for granted.
Build a “1 size fits all” rocket that can launch many different configurations, rather than expensive, custom launches favored by incumbents. (Having only a single rocket design hugely cut down on manufacturing, support, and launch costs compared to competitors.)
How difficult was it to develop?
- Extremely difficult due to complexity and perfection that’s required for success.
What major needs does it fulfill? The rocket . . .
- Can deliver its payload safely.
- Can deliver payloads to LEO or GTO (multiple on same flight if config allows).
- Can be transported across the country by truck.
- Allows for many different payload configurations.
- Can withstand many tests and delays in adverse conditions.
How did design affect product outcome?
- Designed to be “one-size-fits-all” — the ability to adapt the 2nd stage to many different payload configurations — allows for further reduction of costs.
- Designed from the beginning for the 1st stage to be reusable, which had the potential to drastically reduce costs.
(6) Most important metrics
- Launch cost per kg of payload
- Launches per year
- % of successful launches
Innovation: What about the innovation made it amenable to distribution?
- Relative advantage, in cost, was very high.
- Upstart in low competition industry (highly visible).
- Compatible with existing satellite configurations — or just custom-built configs from customers.
- Successful launch(s) highly visible.
Communication channels: How did people find out about it?
- High value enterprise sales (with only a small list of potential customers)
Delivery (supply chain): How was the innovation physically delivered to users?
Both stages are built in the SpaceX facilities in Hawthorne, CA and driven cross-country to the launch site, then assembled on location in the leased SpaceX launch facilities.
Time: The timeline of distribution.
- Development took ~5 years.
- Received NASA contract during development.
- 1st demo flight to ISS took place ~2 years later.
- 1st commercial flight >1 year later.
- The “early adopter” in this case was the government, which acted in part as funding for development.
(8) Management — What personal aspects led to success/failure?
Did any 1 (or more) people play a significant role in outcome?
- Elon Musk, CEO
- Gwynne Shotwell, COO
What skill sets/talents were needed in development & distribution?
- Assembling a team of talented aerospace engineering, mechanical engineering, astronautics, and materials science professionals
- Strong project management skills to organize everyone and keep the ball rolling
- Experience working with large government contracts
(9) What ultimately were the 1-3 things that made it a success/failure?
- Strong vision and leadership from the top, given long timeline and difficulty of project
- First principles rethinking of rocket design & assembly