Interconnectivity, disruption, and the Event Horizon Studyby Aaron Oesterle
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| There is the traditionalist viewpoint, one that is built around the historical slow growth, infrequent transportation coupled with high costs, and only minor experimentation for new business activities.Then there is the super-growth viewpoint, built around the sheer potential of space and assumption that far more robust and cost-effective technology will be implemented. |
But, as has become quite clear, the space development ecosystem is an incredibly connected and interdependent structure. Transportation prices, which are currently substantial now, directly impact which markets space companies can pursue (right now those markets are very limited), which then dictates how frequently we travel to those destinations in space (right now infrequently), which then brings us back to transportation prices. And this isn’t just limited to transportation: the amount of capital required to finance new space businesses dictates the level of risk companies are willing to take, which in turn requires a certain level of payoff and likelihood of success, which in turn dictates how much capital is available to finance new business activity. This interconnectivity is driven by a combination of technology, business practices, policy, historical precedents, and other similar things.
These two facts have for many years driven a competing view of space business. On one hand, the resource potential of space is huge, as stated above. This means that the people and organizations who are able to tap into these new resources and new markets can create not just new markets, but also new industries, while overturning existing business plans that have existed for decades. It’s the vision of a robust space future. This has resulted in many market studies that assume huge growth potential, and lead to speculation that we are just around the corner from a major change in space business, and that by this time next year, we’ll have settlements on the Moon.
On the other hand is the fact that we don’t have settlements on the Moon. The interconnected nature of space has made it more difficult for new ideas and products to be fully developed, embraced, and brought to market. Some have argued that many of these activities have been overpromised and are unlikely to produce value for investors, not because of problems with the individual business but rather fundamental market problems. They usually suggest that either radical new technologies are needed that are decades or even centuries away, or that the visions of extensive space activity are merely delusions.
These viewpoints have resulted in a clear divergent view for market analysis. There is the traditionalist viewpoint, one that is built around the historical slow growth, infrequent transportation coupled with high costs, and only minor experimentation for new business activities. Then there is the super-growth viewpoint, built around the sheer potential of space and assumption that far more robust and cost-effective technology will be implemented. And this divergent view is not new: the traditional-versus-radical view towards space has been around for many years.
It is into this environment that several new activities have been attempted, from Scaled Composites’ SpaceShipOne suborbital vehicle to SpaceX’s Falcon 9 rocket and Dragon spacecraft. These activities are clearly pushing us towards the more radical notion, yet many of these activities have yet to be successful, and even those that have found some degree of success have not met the full potential of what some hope for them. These new activities are proving disruptive enough that people are noticing them and taking them into consideration, but it has not (to date) fundamentally changed the game such that new industries are becoming successful overnight.
| How much disruption is coming, and how close does it put us to revolution? |
This split is a classic example of disruption versus revolution. Disruptive activities tend to result in businesses and organizations becoming more efficient, increase their market, and allow newer companies to replace older ones. The development of the graphical user interface for computers can best be thought of as a disruptive innovation, and within the space domain SpaceX’s activities demonstrate this beautifully. Their push towards lower cost and implementing reusability has pushed competitor United Launch Alliance to look at how it can lower costs and become more efficient. At the same time, for all of its success, SpaceX rockets are not currently inexpensive enough to dramatically increase the space user community.
To achieve the broader vision, we need to move beyond disruption, and to revolution. Revolutionary innovation results in a broader change, one that creates new markets and new industries. The clear recent examples of revolution are the Internet and the development of social media. These items didn’t just change business but also the broader society. And the goals of the more radical vision of space is clearly revolutionary, not just disruptive.
Which raises a very important question: how much disruption is coming, and how close does it put us to revolution? And what does the world look like, after revolution happens?
That is the goal of the new Event Horizon Study, a joint project of Deloitte and the Space Frontier Foundation. With all of the potential disruptive activities going on, how close are we to seeing the world change? What if we fundamentally change the transportation structure, either through cost or frequency of flights? How much is national policy affecting the situation, and how would national policy react if changes happen? What is the timeframe for these activities? How do the various markets break out? In short, how close are we to the vision of “space trillionaires” and major space development, and what is the level of disruption needed to see that happen?
| In short, how close are we to the vision of “space trillionaires” and major space development, and what is the level of disruption needed to see that happen? |
However, to answer these questions, we must make sure that our analysis is robust and replicable. That is why we are partnering with Deloitte—they are market leaders in doing this kind of analysis. With their help, we’ll make this an open and transparent process. Additionally, we want everyone’s involvement. This kind of study needs broad input, and we are encouraging everyone to join us in this study.
Our first workshop is coming up soon. It is being held on Monday, June 25, in Seattle, Washington, in conjunction with the NewSpace Conference. Some parts of the workshop are closed-door, but others are not. But we are encouraging everyone to try and participate. If you would like to join us, I hope to see you at the NewSpace conference. And if you want to be part of the closed-door session, please reach out to Jeff Matthews (jematthews@deloitte.com) at Deloitte.
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