Product Study: Falcon 9

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.

(4) Technology

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.

(5) Design

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

(7) Distribution

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?

• Press
• 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