  {"id":2346,"date":"2015-12-07T17:13:13","date_gmt":"2015-12-07T22:13:13","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/spacex-lowering-the-cost-of-access-to-space\/"},"modified":"2015-12-07T17:19:51","modified_gmt":"2015-12-07T22:19:51","slug":"spacex-lowering-the-cost-of-access-to-space","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/spacex-lowering-the-cost-of-access-to-space\/","title":{"rendered":"SpaceX \u2013 Lowering the Cost of Access to Space"},"content":{"rendered":"<p>NASA and government-funded companies such as Boeing and Lockheed Martin were the only players in the space transport industry for decades. These organizations received tons of \u201ccost-plus\u201d contracts from the US government (1). What incentives did they have to be more efficient? None. They would reduce their revenues by lowering their costs. As a result, private satellite operators had to pay very high prices to put their satellites into orbit.<\/p>\n<p><strong>Business Model<\/strong><\/p>\n<p>Elon Musk founded SpaceX to disrupt the industry by offering low-cost access to space. And he\u00a0certainly did.<\/p>\n<p><iframe loading=\"lazy\" title=\"This is SpaceX\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/ujX6CuRELFE?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>This is SpaceX. Source: SpaceX<\/p>\n<p>In 2012 SpaceX became the first privately-funded company to send supplies to the astronauts in the International Space Station (2). The contract with NASA for this service is valued at $1.6 billion (3).\u00a0But sending cargo to the International Space Station is just one piece of business for SpaceX. The company also launches satellites to orbit at a ridiculously low price. SpaceX charges $61.2 million to launch a telecommunications satellite to orbit, which results in $4,653 per kilogram of satellite. United Launch Alliance \u2013 a joint venture of Lockheed Martin and Boeing \u2013 charges between $14,000 and $39,000 per kilogram (4). Launching a satellite with SpaceX is even cheaper than doing so with Long March, the Chinese rocket. That is why Space has won $7 billion in contracts with customers such as Orbcomm, AsiaSat, and the US Air Force (5).<\/p>\n<p><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/654263main_spacexmissionoverviewpic.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-2318\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/654263main_spacexmissionoverviewpic-1024x680.jpg\" alt=\"654263main_spacexmissionoverviewpic\" width=\"761\" height=\"505\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/654263main_spacexmissionoverviewpic-1024x680.jpg 1024w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/654263main_spacexmissionoverviewpic-300x199.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/654263main_spacexmissionoverviewpic-600x399.jpg 600w\" sizes=\"auto, (max-width: 761px) 100vw, 761px\" \/><\/a><\/p>\n<p>SpaceX Dragon capsule docking\u00a0to\u00a0the International Space Station. Source: NASA<\/p>\n<p><strong>Operating Model<\/strong><\/p>\n<p>How can SpaceX offer such low prices?<\/p>\n<p><strong>People.<\/strong> SpaceX is the first venture of Elon Musk in the space industry. Not having preconceived ideas has allowed him to come up with innovate solutions to reduce costs in his rockets. The same is true for his more than 4,000 young employees, with an average age of 30 (6). It is not just a coincidence that the age of the majority of the employees in NASA working in the Apollo 11 program was between 20 and 30 (7). Today, it is around 47\u00a0(8). Young people are\u00a0more likely to innovate!<\/p>\n<p><strong>Processes.<\/strong> SpaceX has a very short supply chain. The company is vertically integrated and 70% of its rockets are manufactured in-house (9). It is much cheaper than buying space components from traditional vendors thanks to new techniques such as 3D printing. And what if they are not able to produce some parts at SpaceX? It is easy. They will buy from companies that have never worked for the space industry and will do some testing to make sure that these parts will work in space, thus lowering costs of purchase. This vertically integrated supply chain allows SpaceX to have huge control of costs.<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/dragons2013_spacex_stack1.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2306\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/dragons2013_spacex_stack1.jpg\" alt=\"dragons2013_spacex_stack\" width=\"749\" height=\"600\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/dragons2013_spacex_stack1.jpg 749w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/dragons2013_spacex_stack1-300x240.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/dragons2013_spacex_stack1-600x481.jpg 600w\" sizes=\"auto, (max-width: 749px) 100vw, 749px\" \/><\/a><\/p>\n<p>In-house manufacture of the\u00a0Dragon capsule. Source: SpaceX<\/p>\n<p><strong>Products.<\/strong> The Atlas V \u2013 one of the most successful rockets of United Launch Alliance \u2013 has three different engines. To produce these engines, they need three different lines, thus multiplying the cost by three. SpaceX designed its Falcon 9 rocket maximizing commonalities. The engines of the Falcon 9 are almost identical, as well as the fuel tanks.<\/p>\n<p><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/img_2181_01.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-2304\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/img_2181_01.jpg\" alt=\"img_2181_0\" width=\"970\" height=\"647\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/img_2181_01.jpg 970w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/img_2181_01-300x200.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/img_2181_01-600x400.jpg 600w\" sizes=\"auto, (max-width: 970px) 100vw, 970px\" \/><\/a><\/p>\n<p>Falcon 9 engines showing commonality in the rocket design. Source: SpaceX<\/p>\n<p>The \u201cold\u201d space industry had to rely on four different players to launch a satellite to orbit: the satellite manufacturer, a launch operations\u00a0provider, the rocket manufacturer, and the supplier of engines for the rocket. For instance, NASA would provide launch services (launch pad\u2026) for the Atlas V rocket of United Launch Alliance \u2013 which has an engine produced by NPO Energomash, a Russian company! (10) \u2013 to put a satellite of the US Navy into orbit. SpaceX already integrates three of these four roles and is already working on\u00a0its own satellites to provide the whole world with Internet.<\/p>\n<p><strong>Sustainability of the Business and Operating Models<\/strong><\/p>\n<p>SpaceX is in a virtuous circle. The more flights the company sells, the more resources it has to invest in the development of more efficient space vehicles. The objective of SpaceX is the reusability of its\u00a0rockets \u2013 today they are expendable. If the company\u00a0could reuse its Falcon 9 for several launches, the cost could\u00a0be reduced\u00a0to &#8220;$200,000 to $300,000 per flight in fuel and oxygen versus a $60 million rocket&#8221;, Elon Musk said (11). SpaceX is already working on Falcon 9 Reusable rocket.<\/p>\n<p><iframe loading=\"lazy\" title=\"F9R First Flight Test | 250m\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/0UjWqQPWmsY?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>Flight test of the Falcon 9 Reusable. Source: Space X<\/p>\n<p>Today, American astronauts have to travel to Baikonur, Kazakhstan to fly to the International Space Station in a Russian rocket. SpaceX is working on the Dragon V2 \u2013 thanks to funding from the NASA Commercial Crew Development program \u2013 to provide the US with its own launch vehicle after the retirement of the Space Shuttle in 2011 (12). Boeing is also developing its human-rated space capsule, the CST-100. Which company will win this new space race? Only time will tell.<\/p>\n<p>&nbsp;<\/p>\n<p><em>Sources<\/em><\/p>\n<p><em>(1) Is SpaceX Changing the Rocket Equation, Andrew Chaikin, Air &amp; Space Magazine, January 2012,\u00a0http:\/\/www.airspacemag.com\/space\/is-spacex-changing-the-rocket-equation-132285884\/?no-ist<\/em><\/p>\n<p><em>(2)\u00a0http:\/\/www.spacex.com\/about<\/em><\/p>\n<p><em>(3)\u00a0First Contracted SpaceX Resupply Mission Launches with NASA Cargo to Space Station, NASA,\u00a0October 2012,\u00a0http:\/\/www.nasa.gov\/home\/hqnews\/2012\/oct\/HQ_12-355_SpaceX_CRS-1_Launch.html<\/em><\/p>\n<p><em>(4)\u00a0What it took for Elon Musk\u2019s SpaceX to disrupt Boeing, leapfrog NASA, and become a serious space company, Tim Fernholz, Quartz, October 2014,\u00a0http:\/\/qz.com\/281619\/what-it-took-for-elon-musks-spacex-to-disrupt-boeing-leapfrog-nasa-and-become-a-serious-space-company\/<\/em><\/p>\n<p><em>(5) SpaceX Signs New Commercial Launch Contracts, Press release, September 2015,\u00a0http:\/\/www.spacex.com\/press\/2015\/09\/14\/spacex-signs-new-commercial-launch-contracts<\/em><\/p>\n<p><em>(6) NASA, SpaceX Aim To Launch Private Era In Orbit, Nell Greenfieldboyce, NPR, May 2012,\u00a0http:\/\/www.npr.org\/2012\/05\/18\/152953776\/nasa-spacex-aim-to-launch-private-era-in-orbit<\/em><\/p>\n<p><em>(7)\u00a0The Giant Leaps Symposium,\u00a0Dick Dahl,\u00a0AeroAstro Magazine Highlight, MIT,\u00a0http:\/\/web.mit.edu\/aeroastro\/news\/magazine\/aeroastro6\/apollosymposium.html<\/em><\/p>\n<p><em>(8)\u00a0NASA Looks to Rebalance Aging Workforce, Nancy Atkinson, Universe Today, April 2009,\u00a0http:\/\/www.universetoday.com\/28471\/nasa-looks-to-rebalance-aging-workforce\/<\/em><\/p>\n<p><em>(9) Production at SpaceX, SpaceX, September 2013,\u00a0http:\/\/www.spacex.com\/news\/2013\/09\/24\/production-spacex<\/em><\/p>\n<p><em>(10) RD-180 Engine, ULA,\u00a0http:\/\/www.ulalaunch.com\/faqs-rd-180.aspx<\/em><\/p>\n<p><em>(11)\u00a0<span class=\"lede-headline__highlighted\">SpaceX Profitable as Musk Pulls In NASA Contracts, Google Cash,\u00a0John Lippert, Bloomberg Business, March 2015,\u00a0<\/span>http:\/\/www.bloomberg.com\/news\/articles\/2015-03-04\/spacex-profitable-as-musk-pulls-in-nasa-contracts-google-cash<\/em><\/p>\n<p><em>(12) SpaceX Wins NASA Contract to Complete Development of Successor to the Space Shuttle,\u00a0Press release, April 2011,\u00a0http:\/\/www.spacex.com\/press\/2012\/12\/19\/spacex-wins-nasa-contract-complete-development-successor-space-shuttle<\/em><\/p>\n<div class=\"bioImageWrap\"><\/div>\n<div class=\"rightContainer\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>SpaceX is offering the lowest cost to orbit by turning traditional operations of the space industry upside down<\/p>\n","protected":false},"author":1310,"featured_media":2355,"comment_status":"open","ping_status":"closed","template":"","categories":[285,132,96,453,450,449,451,452,284,286,336,127],"class_list":["post-2346","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-aerospace","category-business-model","category-elon-musk","category-international-space-station","category-nasa","category-operating-model","category-rockets","category-satellites","category-space","category-spacex","category-tom-winners","category-winners"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - 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