Blog, Pricing

Lessons in Commercial Excellence from SpaceX, Launch America

By David Anderson
June 1, 2020

Along with many others, I huddled with my family this past weekend to watch the Launch America broadcast of the Crew Dragon manned space capsule on a mission to the International Space Station. It was an amazing accomplishment and we should all be inspired that for the first time in almost a decade, the US has its own capabilities to deliver its astronauts into space.

NASA in this case has done so with the help of SpaceX, a private business who has fundamentally rethought space flight, as part of the government agency’s “Commercial Crew Program” intended to deploy public-private partnership between NASA and SpaceX / Boeing to develop and operate next-generation spacecraft & launch systems for the US.

As I watched the launch, I was struck by how far spaceflight recently has advanced as teams have re-thought the entire process. There are a lot of lessons to be learned in this process for businesses that are going through their own business transformation and especially those business focused on commercial excellence.

A comparison of crew cabins Las Gen Space Shuttle (left) and Next Gen SpaceX Crew Dragon (right).

Firstly it has to be said, everything about this launch looks amazingly awesome. The differences between this and every manned space flight to this point are both striking and amazing. The space suits look awesome and slick, the crew capsule is not a roomful of buttons and knobs but rather a simple cabin with a few flat screens, and the rockets that deliver Americans to space self-land and are re-usable. Machine automation and computing power are evident at every stage of mission. 

It’s interesting to consider exactly how we find ourselves here in a public-private partnership, with this reinvented approach to space flight technologies and process. How exactly did SpaceX do it?  What lessons does this hold for your business?

SpaceX is essentially a company founded on the concept of reinventing space flight from First Principles. That is, they abandoned conventional thinking and have re-thought the process from the ground up. The company’s founding questions were essentially:

  • Can we build a business that can compete in space flight?
    • For SpaceX, it was competing on the cost of delivering cargo to space
  • What are the most basic, fundamental requirements to do this, and what conventional wisdom should be revisited?
    • For SpaceX, the notion that rockets are disposable
  • What innovation & experimentation needs to happen to prove our beliefs (and prove conventional wisdom wrong)?
    • For SpaceX it was constant experimentation (and failures) to perfect simplicity and automation in rocket design / re-use, and more automation than ever in space flight to drive costs down

At its founding, SpaceX didn’t benchmark existing rockets or their cost, but rather started their process by evaluating the raw costs for critical parts of rocket to get the job done, and found, surprisingly, that they could build a rocket for about 2% of the typical cost.  As well they have re-thought the notion of expendable hardware.  Who would have thought you could return a rocket booster from near orbit to a 20 square yard floating landing site? 

The amazing innovations that SpaceX is bringing to bear for spaceflight have pushed its competitors to improve in ways they otherwise would not have and drastically reduced the cost of delivering payload into space. Compared with the Space Shuttle, total costs today are 10% of what they once were, and are even 50% better than any currently available alternative (see illustration below).

With this line of thinking, what conventional wisdom should you revisit in your own business? What first principles should you evaluate as you embark on your commercial excellence transformation?

For B2B companies, I’d suggest a few of these conventional “truths” as good places to start re-visiting first principles & experimenting:

  • High pricing / margin results lower sales
  • Price is the primary lever in negotiations
  • Excel is sufficient for managing pricing
  • Automation in price administration & process is not worth the investment

Vendavo is a company focused on helping businesses achieve commercial excellence.  If you need help thinking through transformational improvements in your commercial and pricing processes, let us help you revisit and re-invent your business.

Learn more about the race to value through intelligent pricing in the infographic, Value Outcomes in Manufacturing

 

  • business transformation , commercial excellence , Launch America , pricing , SpaceX

    David Anderson

    David Anderson is a Boston-based Business Consultant with Vendavo. Since 2001 he has led and consulted on pricing & commercial process transformation at some of the world’s largest companies. After joining Vendavo in 2016, he has specialized on driving value & outcomes with Vendavo’s high tech, medical device, and process industry customers. Dave is a manufacturing process engineer by training (BS, MSE from Kettering, Purdue), and received his MBA from Harvard Business School.