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.