How space became the latest business sector

04 June 2018

By Loizos Heracleous, Louis Brennan and Alessandra Vecchi

The launch of the MIR space station in February 1986 played a major role in the transformation of the space industry. It was a transformation characterised by a shift from fierce rivalry to global collaboration as seen today in many areas such as the Galileo Positioning System project 1 along with NASA’s goal to put astronauts on Mars by 2030.

The former rivalry between the US and the Soviet Union was replaced by cooperation. In 1991 Cosmonaut Sergei Krikalev became the first Russian to fly aboard a US space shuttle.

The following year, after travelling aboard a Russian Soyuz, US astronaut Norman Thagard along with Cosmonauts Vladimir Dezhurov and Gennady Strekalov spent 115 days on MIR. These events laid the foundations for future collaboration among nations, the most obvious manifestation of such collaboration occurred later in the 1990s when the first stage of the International Space Station was launched. 

Global investment in satellite navigation systems has also been extensive in the 2000s. The US with the GPS system, Russia with its redevelopment of GLONASS (with the help of India), China developing Beidou and the European Space Agency with the earlier mentioned Galileo Positioning System, have all emerged as players in this sector of the industry.

Today, the space industry is still largely dominated by states. However, the US and Russia are no longer the only “super-powers” in the industry; Europe, India, China, Japan, Brazil and Iran and other states have joined the Space Race. During the 1990s, the commercial space industry started to flourish and ties to the military lessened. 

In particular, the space market has expanded into new niche sectors: space tourism and travel, mining of resources, manufacturing opportunities, satellite technology, representing a shift towards privatisation of the sphere. This new millennium is an important time in the history of space, not just for science, but also in the opportunities for business enterprise and commercialisation.

States are still the major players and continue to co-operate in the field. The most prominent example of co-operation is the International Space Station (ISS). The United States, Russia, Canada, Japan and the European Space Agency (ESA) have all contributed to the station’s construction.

The number of countries involved in space exploration is growing steadily and we are entering a new era of historic significance, in which we will extend human presence beyond earth’s orbit, both physically and culturally.

Space exploration scores high on national players’ agendas. The Obama Administration in the US envisioned extending the operation of the ISS beyond 2020, transferring the development of launch vehicles for human crews from NASA to the private sector and developing technology to enable missions to beyond Low Earth Orbit (LEO).

Similarly, ESA’s exploration strategy in 2015 set the implementation of the Space Station programme and the Exo-Mars missions as the main focus for investments up to 2020. These programmes, together with investments in the development of lunar exploration products and the Mars Robotic Exploration Preparatory Programme (MREP), prepare for an international engagement in the space exploration endeavour for the post-2020 era, strongly leveraging on international cooperation opportunities.

In September 2010, it was announced that China is also planning to carry out explorations in deep space by sending a man to the moon by 2025. China also hopes to bring a moon rock sample back to earth in 2017, and subsequently build an observatory on the moon’s surface. On December 14 2013 China’s Chang’e 3 became the first object to soft-land on the moon since Luna 24 in 1976, with the ultimate goal of the programme is to establish a permanent human presence on the earth’s natural satellite.

Who will win the new space race?  

The Indian Space Research Organisation (ISRO) also launched its Mars Orbiter Mission on November 5 2013 which successfully entered into orbit around Mars. India is the first in Asia and fourth in the world to perform a successful Mars mission. It is also the only one to do so on the first attempt and at a record low cost of $74 million. ISRO has so far launched 74 foreign satellites belonging to global customers gaining significant expertise in space technologies. In June 2016, India set a record by launching 20 satellites simultaneously. Recent reports indicate that human spaceflight will occur after 2017, on a GSLV-Mk III, as the mission is not included in the government’s five-year plan.

The past decade has seen another transformation of the space industry with the entry of private sector players. There is a shift emerging, from completely government funded projects, to privately funded projects.

Private actors are beginning to invest in space and wealthy individuals are paying for their tickets to space, while national governments face severe constraints on their spending policy.

On one hand, the globalisation of financial markets, the introduction of the single currency in Europe and neoliberal market-oriented policies have imposed a very narrow choice of policies on governments wanting to play with their budget. On the other hand, it is no longer necessary for a person with a dream of going to space to be a 'national' astronaut; rather, s/he needs to be a millionaire.

Also, private actors are investing in satellite systems through Public–Private Partnership (PPP) schemes in Europe, and in the transportation system through the Commercial Orbital Transportation System (COTS) framework in the US. 

Space activities need to adjust to the values of the 21st century, including “value for money”. Those who are keen to go into space and believe in “progress” cannot depend on state-sponsored space activity. After all, many of the latest technologies and progressive ideas have been realized through market interactions. Space is becoming one of them.

As a result of this remarkable shift, some private enterprises have also ventured into the sector including SpaceX, Blue Origin, Virgin Galactic and Sierra Nevada. Amongst the most prominent companies is Space Exploration Technologies Corporation, better known as SpaceX, the aerospace company started by the founder of Tesla Motors Elon Musk in 2002.

It has been the first privately funded company to successfully launch, orbit and recover a rocket. With its reuse for future missions, this technology can greatly reduce the cost of space missions thus encouraging the development of commercial space transport services.

How billionaires took over the new space race

Also, SpaceX has been the first private firm to send a spacecraft to the ISS. This accomplishment stemmed from a collaboration with NASA under a COTS contract award and Cargo Resupply Services (CRS) contract award to co-ordinate the delivery of crew and cargo to the ISS.

The frontrunner amongst the private entrepreneurs was Burt Rutan, who has designed innovative aircraft since the 1960s. On June 21 2004, his SpaceShipOne became the first privately funded craft to enter space (which starts at an altitude of 100km, according to the internationally accepted definition).

Scaled Composites, Rutan’s company, is building the fleet that Sir Richard Branson’s commercial space venture Virgin Galactic will use to carry people into space for about five minutes at a cost of $200,000 each.

Many space entrepreneurs grew up at a time when it seemed reasonable for boys to assume that manned flights to the moon and beyond would be routine by the 21st century. They feel cheated by the way things turned out. Now they wish to use their wealth to make space tourism viable while they are around to enjoy it. As Rutan says private enterprise, not government funding, will conquer the final frontier. 

Musk, Branson’s Virgin Galactic, Amazon CEO Jeff Bezos’ Blue Origin, another space-oriented firm, all offer a fascinating glimpse of a new entrepreneurial fabric which is fostering a radically new business culture in the space sector. Entrepreneurs are thus embodying great pioneers enabling humankind to advance.

Many of them are persuaded by Rutan’s words. They fund prizes to stimulate research. The Ansari XPRIZE was a space competition in which the XPRIZE Foundation offered a $10 million prize for the first non-government organisation to launch a reusable manned spacecraft into space twice within two weeks. The prize was won on October 4 2004, the 47th anniversary of the Sputnik 1 launch, by the Tier One project designed by Rutan and financed by Microsoft co-founder Paul Allen, using the experimental space plane SpaceShipOne.

More than $100 million was invested in new technologies in pursuit of the prize. As Rutan said: "Entrepreneurs have always driven our technical progress – and, as a result, our economy.

"They tend to be more innovative, more willing to take risks, and more excited about solving difficult problems. They seek breakthroughs, they have the courage to fly them, and they know how to market them. They will now provide the solutions and the hardware needed to enable human spaceflight with an acceptable risk – at least as safe as the early airliners." 

This is an exclusive extract from Above and Beyond - Exploring the business of space by Loizos Heracleous, Louis Brennan and Alessandra Vecchi and published by Routledge.

The book is being launched at WBS London at The Shard on June 6, click here to attend.

Loizos Heracleous, Professor of Strategy, lectures on Strategic Management on the DBA and Strategy and Practice on the Executive MBA and Executive MBA (London). He also teaches Strategy in Practice on the MSc Marketing & Strategy.

Follow Loizos Heracleous on Twitter @Strategizing.

Louis Brennan is Professor in Business Studies at Trinity Business School, Trinity Colleg, Dublin, Ireland.

Alessandra Vecchi is an Assistant Professor in the Department of Management at the University of Bologna in Italy 
and works as a Senior Research Fellow at London College of Fashion at the University of London Arts in the UK.

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