More RTM Stuff: In-Space Business Models
Well, I've probably gotten about as much readership as I'm going to get out of my RTM coverage, but there were a few more interesting parts and ideas that haven't been discussed much that are worth one or two more posts to wrap up with. Since I'm home with a stomach flu today, may as well make lemonade out of those lemons.
The next panel, discussing in-space business models was one of the more important panels at the conference. David Gump of t/Space led off with an interesting discussion of what he saw as the four basic categories of space company:
The big differences between the three for-profit types of companies were source/method of funding, and who their customers are. Classic contractors are usually government funded, with the government as their main "customer", and they tend to prefer cost-plus contracting. Innovative customers still get most of their funding from the government, and have government as a major customer, but prefer to work through fixed-price schemes like Space Act Agreements and Other Transaction Authority type pay-on-milestone type arrangements. True Commercial companies are those that are primarily privately funded, and typically have government only as a minor customer if at all. Dave said that t/Space is pursuing the "innovative contractor" model with their CXV project. His opinion was that government was going to be the primary customer for most near-term lunar projects.
He made a few other intersting points, like that NASA scientists typically only trust data generated by their own instruments, and that they'd rather try and fly their instrument on your vehicle (like they are with the Indian lunar probe) than try to buy data from your instruments. He pointed out a few potential lunar markets, many of which have already been touched on elsewhere in the conference, including tourism, communications, PGM mining, He-3 mining, telepresence rovers, lunar map making, energy (fuel/momentum) storage in LEO/LUNO, and a few others.
The next talk was a rather interesting one by Michael Mealling, our VP of Business Development (and the owner of RocketForge.org). He discussed a concept he's been working on for a while called "Space Value Networks". His site gives some further details, but the basic gist of the idea is that all companies operate within a value network. This network includes customers, suppliers, regulators, etc. The example he gives is an auto manufacturer. Their value network includes groups as disparate as transportation regulators, auto dealers, parts suppliers, customers, the highway system, etc. Without all these pieces in their value network, these firms would have a hard time existing. This kind of relates to a point I was making several years back about industrial parks. Nobody could afford to have a factory if they had to also design the trucks and machinery to get the materials there and build it, if they had to make the roads, build the power plant, put in the electrical system, the sewer system, etc.
One of the big problems facing commercial lunar developers is that these value networks don't yet exist, and Michael's goal is to find a way to create and engineers these networks. The basic plan he wants to pursue has three steps:
One of Michael's favorite statements is that "It is much easier to teach space to a business person than to teach business to a space person". This project hopes to pull some of the entrepreneurial talent that is out there and channel it into helping open the frontier.
The next speaker, Rex Ridenoure of Ecliptic was one of my favorites from the conference. As Rex put it, Ecliptic is a purely commercial entity. They don't do cost plus or even SBIRs. He gave a little obligatory explanation about what Ecliptic does, but that wasn't the really valuable part of his talk. First off, he gave a primer that he called Business Plan 101. His main points were pretty simple:
Rex gave a few other good pieces of advice. He mentioned that many good companies don't talk a bunch about what they're doing. He also brought up the fact that the right idea, the right team, and adequate money only gives a chance for success. Without all of those, there isn't much of a chance, but even with all of them, success is never assured.
My favorite part of his talk though was the proverbial gauntlet he threw down to the crowd. He reminded us of the schedule that Chris Shank showed earlier in the day. NASA plans its first lunar probe in 2009, it's first lander probably around 2011 or so, and its first manned landing by 2018. Rex suggested that the best way to set the mood for the next several decades of space development was for the commercial space industry to try and find a way to beat NASA back to the moon. If commercial space leads the way, it sets a completely different mood than if NASA ends leading the way.
I think this is an excellent challenge, and hope that others will step up to the plate.
The last talk was by Charles Miller of CSI. He made a very important point about government developed infrastructure like the Space Shuttle and the ISS. He mentioned how the Shuttle had been supposedly "privatized" by the creation of the United Space Alliance. However, due to the design choices made, the Shuttle could never be truly commercialized. It costs way too much to operate, and is way to inefficient to ever become profitable on its own. Even if all the shuttles were given away for free! The ISS is the same way. Many have talked about commercializing the ISS, but the realities of its design preclude it from being easily modifiable for commercial use. Some people had been suggesting that the lunar architecture NASA is putting together for VSE could be privatized, but many of the same systematic flaws exist--the systems aren't designed from the ground up to meet customers needs for the most reasonable price possible. As I've pointed out elsewhere on this blog, it appears that much of the decision-making about the VSE architecture is driven less by physics, economics, or safety, and more by where the work is done and how much pork can be provided in the process.
Charles made the suggestion that a separate "port authority"-like Lunar Base Development Authority might be an answer to the problem. The LBDA would in his plan design, build, and operate the lunar port, with NASA only as an anchor tenet. While several other people, like Tom Matula have also suggested such an idea, I'm skeptical how well it would turn out. There are succesful examples of port authorities in the world, but a good economist could probably point out dozens of counterexamples.
But the most important part of his talk was his comment that in order to gain credibility, the alt.space movement has to "execute" over the next several years. He reminded us that NASA is probably coming out with a "non-traditional" ISS crew/cargo BAA sometime this fall, and that some alt.space firm is going to win it. He suggested that whoever wins, we need to support them, and help them execute succesfully, otherwise commercial space will come off looking like the light-weights they think we are. This idea of the importance of "execution" or "delivering" ties in very well with Rex's challenge. If the commercial space industry can prove its competence, and can prove even more competent then NASA, over the next several years, that will completely change the mood in which space development is discussed.
The next panel, discussing in-space business models was one of the more important panels at the conference. David Gump of t/Space led off with an interesting discussion of what he saw as the four basic categories of space company:
- Classic Contractor
- Innovative Contractor
- True Commercial
- Non-Profit Organization
The big differences between the three for-profit types of companies were source/method of funding, and who their customers are. Classic contractors are usually government funded, with the government as their main "customer", and they tend to prefer cost-plus contracting. Innovative customers still get most of their funding from the government, and have government as a major customer, but prefer to work through fixed-price schemes like Space Act Agreements and Other Transaction Authority type pay-on-milestone type arrangements. True Commercial companies are those that are primarily privately funded, and typically have government only as a minor customer if at all. Dave said that t/Space is pursuing the "innovative contractor" model with their CXV project. His opinion was that government was going to be the primary customer for most near-term lunar projects.
He made a few other intersting points, like that NASA scientists typically only trust data generated by their own instruments, and that they'd rather try and fly their instrument on your vehicle (like they are with the Indian lunar probe) than try to buy data from your instruments. He pointed out a few potential lunar markets, many of which have already been touched on elsewhere in the conference, including tourism, communications, PGM mining, He-3 mining, telepresence rovers, lunar map making, energy (fuel/momentum) storage in LEO/LUNO, and a few others.
The next talk was a rather interesting one by Michael Mealling, our VP of Business Development (and the owner of RocketForge.org). He discussed a concept he's been working on for a while called "Space Value Networks". His site gives some further details, but the basic gist of the idea is that all companies operate within a value network. This network includes customers, suppliers, regulators, etc. The example he gives is an auto manufacturer. Their value network includes groups as disparate as transportation regulators, auto dealers, parts suppliers, customers, the highway system, etc. Without all these pieces in their value network, these firms would have a hard time existing. This kind of relates to a point I was making several years back about industrial parks. Nobody could afford to have a factory if they had to also design the trucks and machinery to get the materials there and build it, if they had to make the roads, build the power plant, put in the electrical system, the sewer system, etc.
One of the big problems facing commercial lunar developers is that these value networks don't yet exist, and Michael's goal is to find a way to create and engineers these networks. The basic plan he wants to pursue has three steps:
- Step One: Pick a long term market (such as PGM mining or lunar tourism) and try to figure out what the value network would need to look like for that market to function.
- Step Two: Create Business Plans for the various nodes in the network. If at all possible finding intermediate markets that can help those nodes develop even before the whole network is up to speed.
- Step Three: Bring in money and entrepreneurial talent to reduce those business plans to practice.
One of Michael's favorite statements is that "It is much easier to teach space to a business person than to teach business to a space person". This project hopes to pull some of the entrepreneurial talent that is out there and channel it into helping open the frontier.
The next speaker, Rex Ridenoure of Ecliptic was one of my favorites from the conference. As Rex put it, Ecliptic is a purely commercial entity. They don't do cost plus or even SBIRs. He gave a little obligatory explanation about what Ecliptic does, but that wasn't the really valuable part of his talk. First off, he gave a primer that he called Business Plan 101. His main points were pretty simple:
- Be able to say in one sentance what you will sell for $X, that costs $Y, where $X > $Y.
- Describe what you will sell first
- Show compelling evidence of who the first customer will be
- Provide evidence that you have the team needed to pull off the venture
Rex gave a few other good pieces of advice. He mentioned that many good companies don't talk a bunch about what they're doing. He also brought up the fact that the right idea, the right team, and adequate money only gives a chance for success. Without all of those, there isn't much of a chance, but even with all of them, success is never assured.
My favorite part of his talk though was the proverbial gauntlet he threw down to the crowd. He reminded us of the schedule that Chris Shank showed earlier in the day. NASA plans its first lunar probe in 2009, it's first lander probably around 2011 or so, and its first manned landing by 2018. Rex suggested that the best way to set the mood for the next several decades of space development was for the commercial space industry to try and find a way to beat NASA back to the moon. If commercial space leads the way, it sets a completely different mood than if NASA ends leading the way.
I think this is an excellent challenge, and hope that others will step up to the plate.
The last talk was by Charles Miller of CSI. He made a very important point about government developed infrastructure like the Space Shuttle and the ISS. He mentioned how the Shuttle had been supposedly "privatized" by the creation of the United Space Alliance. However, due to the design choices made, the Shuttle could never be truly commercialized. It costs way too much to operate, and is way to inefficient to ever become profitable on its own. Even if all the shuttles were given away for free! The ISS is the same way. Many have talked about commercializing the ISS, but the realities of its design preclude it from being easily modifiable for commercial use. Some people had been suggesting that the lunar architecture NASA is putting together for VSE could be privatized, but many of the same systematic flaws exist--the systems aren't designed from the ground up to meet customers needs for the most reasonable price possible. As I've pointed out elsewhere on this blog, it appears that much of the decision-making about the VSE architecture is driven less by physics, economics, or safety, and more by where the work is done and how much pork can be provided in the process.
Charles made the suggestion that a separate "port authority"-like Lunar Base Development Authority might be an answer to the problem. The LBDA would in his plan design, build, and operate the lunar port, with NASA only as an anchor tenet. While several other people, like Tom Matula have also suggested such an idea, I'm skeptical how well it would turn out. There are succesful examples of port authorities in the world, but a good economist could probably point out dozens of counterexamples.
But the most important part of his talk was his comment that in order to gain credibility, the alt.space movement has to "execute" over the next several years. He reminded us that NASA is probably coming out with a "non-traditional" ISS crew/cargo BAA sometime this fall, and that some alt.space firm is going to win it. He suggested that whoever wins, we need to support them, and help them execute succesfully, otherwise commercial space will come off looking like the light-weights they think we are. This idea of the importance of "execution" or "delivering" ties in very well with Rex's challenge. If the commercial space industry can prove its competence, and can prove even more competent then NASA, over the next several years, that will completely change the mood in which space development is discussed.
posted by Jon Goff at 5:14 PM
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