The Space Reviewin association with SpaceNews
 

 
X-Rocket takeoff
Space entrepreneurs need a passion, and an understanding of their customers’ needs, if their ventures are to succeed. (credit: J. Foust)

According to plan

You’re in the tent sweating details like specific impulse and mass fraction. Outside, the business wolves are howling, demanding to know when you’re going make money. You will have to feed these critters some red meat one day, but first, a look at history, and then some questions to answer.

Imagine all the world’s libraries and museums. Vast archives containing millions of documents recording human progress over the millennia. But in this treasure trove there’s one document you won’t find: a business plan! That is a modern development in the human quest to foretell the future and is less effective than reading either Nostradamus or a goat’s entrails (in these gentler times we use spreadsheets instead).

Innovators have rarely started out with business plans. They had to calculate costs and set prices and hoped to make money, but couldn’t be sure where, when, or how. They persevered anyway.

When you do face the financiers, what are you going to say? Will you drone on about the concept-to-cash cycle? Or will you speak with passion and conviction about your idea to open up space to all and the myriad benefits that will bring?

I’m not against business plans. On the contrary, I love ’em. I have lectured on the subject in training programs for new entrepreneurs. However, I am realistic. Any plan is a work of fiction because the future is unknowable and plans, like military strategies, never survive first contact with the enemy. That said, an entrepreneur planning to enter an existing market with a me-too product will find a lot of useful market data. However, when entering, or creating, a new-to-the-world market, there is scant data available on which to base a plan. At least, those pioneers with plans have something tangible to tear up when they discover how the market actually develops. Edison did that when his office dictating machine became the musical phonograph in penny arcades; he started selling records and found himself in the entertainment industry. Are you as flexible as Edison if a new direction presents itself?

Despite the unknowns, a lot of MBA-speak is going on with talk of cash flow and return on capital. The time will come for discussions with real analytical types, but note the words of General Georges Doriot, founder, in 1947, of the first venture capital company: “I have never yet met an MBA who cannot analyze a company to the point where it’s clearly not worth investing in.” Doriot was a patient investor who was prepared for the long haul; the kind of backer space entrepreneurs need. So, interview the investors as rigorously as they will grill you. If they need a payback after three suborbital hops, will they stay with you to the moon and Mars?

When you do face the financiers, what are you going to say? Will you drone on about the concept-to-cash cycle? Or will you speak with passion and conviction about your idea to open up space to all and the myriad benefits that will bring? I’ve seen the power of passion when serving as a mentor for the Prince’s Trust, founded by Prince Charles to help disadvantaged young people start their own businesses. In the funding committee, we interviewed people about their business plans before deciding whether we should back them. Once in a while, an applicant would speak with such a visceral belief that even the number-crunchers were carried away. It didn’t matter that the plan was full of holes; we knew that this applicant would make it, if not with today’s idea, then the next one.

You’ve found the right investors and your passion has blown them away. Still, you need some substance. You’ll have to talk about markets. Commentators are lining up to tell you there isn’t one in space, other than tourism. This view comes from looking at what exists now rather than what might happen in future as space access becomes reliable and cheap. Railroads were not built just to please Sears, Roebuck or Montgomery Ward. However, those firms were among the first to seize the opportunity for nationwide distribution enabled by the railroads; they spotted what we now call a “strategic inflection” when business takes off in a new and unforeseen direction. There are also tipping points to consider. The classic example is Ford’s $500 automobile. He believed that price would trigger a mass market. What are the strategic inflections and tipping points that will introduce new space-related business opportunities and mass markets?

The future may be unknowable, but a way forward is to go back to Marketing 101 and ask: “What do customers want?” Usually, they want solutions to their problems or something that enhances their lives. Once problems have been identified, products can be created to solve them. The danger for innovators is to fall in love with the product they first thought of without understanding how it might be used by the people who buy it. The Virgin Galactic team are contributing those insights as they work with Scaled Composites on the design of SpaceShipTwo. Together, they want to ensure the craft will give customers a rich in-flight experience so they’ll come back again and rave about it to others.

Levitt highlighted another danger: the business a company is in depends on how it defines its business.

Professor Theodore Levitt of the Harvard Business School changed the world of marketing when he said: “Customers do not want a quarter-inch drill; they need a quarter-inch hole.” Now, marketing gurus talk of people “hiring” products and services to satisfy more fundamental needs. Fred Smith recognized those deeper motivations when he founded Federal Express. He offered guaranteed delivery times whereas the Post Office could only predict deliveries—not much use when it “absolutely, positively, has to get there.” What are the unspoken and unserved needs that will drive people to demand access to space?

Levitt highlighted another danger: the business a company is in depends on how it defines its business. He described how the railroad companies saw themselves as train operators rather than as transportation companies. Thus, they never built cars, trucks, airplanes, or formed airlines to keep the business that migrated to these forms of transport, and they suffered as a result. Will you always see yourself solely as a builder and launcher of rockets, or will you develop a wider picture that encompasses alternative means of going into space and a broader range of activities once you get there?

Defining who your customers are is important, too. Selling direct to end-users is one thing, but if your prime customer is a government agency or a company you will have to think of the final consumer—your customer’s customer. The implications are important since you may adopt the wrong strategy if you overlook the final users’ needs.

Consider the strategy battle being played out today between Airbus and Boeing. Airbus designed the A380 to meet the needs of its prime customers, the major long-haul airlines, which have long been dedicated to hub-and-spoke operations. The A380 plays perfectly to that strategy. Boeing, on the other hand, believes that its customers’ customers—passengers—would prefer to fly point-to-point and has designed the 787 Dreamliner to serve their desire to avoid hubs. Time will tell which the winning strategy is. However, remember the old joke: “When I die, I may go to Heaven or Hell—either way there’ll be a four-hour layover in Atlanta.” Perhaps many will choose to bypass that. Assuming they do, then there’s a lesson here: actively listening to, and learning from, your customers’ customers can stop you creating a product fuelled by hubris that, commercially, is a turkey. Unlike Airbus, space entrepreneurs won’t be bailed out by taxpayers.

Successful innovators solve Big Problems for a large audience. Sometimes those problems are obvious but others are latent until a solution appears: think of the cell phone. What is the Big Problem that low-cost, reliable space access will solve? Asking the few customers who already send gear up there may not help much. Space innovators need some out-of-the-box thinking to discover a problem that will catch the imagination of a wider public.

Big ideas don’t come from market research: nobody was demanding a cell phone. For the new space industry, entrepreneurs must believe that if they build it, customers will come.

Here’s an example (usual rules of brainstorming—no critiquing, just write it on the wall!). There’s a growing, if reluctant, acceptance that nuclear power plants are the way forward since they are the surest way of securing the base load and eliminating the burning of fossil fuels, which pollute the atmosphere and have to be obtained from some fairly unfriendly places. The Big Problem is what to do with the radioactive waste. It can be buried in caves, but that puts spelunking off-limits for 10,000 years. Yet we have a truly massive incinerator in our neighbourhood that will destroy anything: the Sun. The Big Solution is to launch the nuclear waste straight at it (including existing stockpiles). (See “Nuclear waste in space?”, The Space Review, August 22, 2005.) It will be years before new plants are built and begin producing waste. In fact, plenty of time to develop launch systems that operate as safely as today’s airliners. Why not talk to utility companies: see if you can solve their Big Problem and enhance all our lives?

Big ideas don’t come from market research: nobody was demanding a cell phone. For the new space industry, entrepreneurs must believe that if they build it, customers will come. Walt Disney ran out of money while struggling to build Disneyland. He cashed in his insurance and kept going. He had no research data on theme parks—he was creating that market on his own.

Now, it’s time to make history. Finish building that dream machine and launch it to prove your capability. Talk to your customers and their customers. Don’t get lost in the spreadsheets. A hundred years on, historians will talk of your achievement and admire your hardware in the Smithsonian. I’ll bet none of them will be digging in the archives to find your business plan!


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