Identifying Space Industry Opportunities

Credit: Relativity Space

There's so much ongoing space industry hype it can be challenging to figure out opportunities ripe for exploitation. 

For example, much excitement surrounds suborbital human spaceflight, a service Blue Origin and Virgin Galactic offer.

Sometimes exuberance reintroduces asteroid mining, the space industry's latest flavor of the day again.

And there surely must be opportunities for a smallsat launch service since many smallsats are deployed in orbit each year.

But how does one identify opportunities in the global space industry?

Inarguably, there are opportunities present in each space industry segment. However, they are hyped so much that the opportunities, profit-making potential, and market importance are often exaggerated.

At the same time, it's understandable why an entrepreneur might decide to cater to those established markets—the companies already in them have proven a product or service need. 

The following highlights a few ways to determine where and whether an opportunity exists.

No Adequate Service = Opportunity for Creative Imitators

The entrepreneurs and their startups use a creative imitation strategy. That strategy has a greater chance of success if that market grows rapidly. Management consultant Peter Drucker observed that creative imitators:

"…do not succeed by taking away customers from the pioneers who have first introduced a new product or service; they serve markets the pioneers have created but do not adequately service."

Smallsat launch providers, for example, weren't stealing smallsat operators from companies such as the United Launch Alliance or Arianespace. They manufactured and launched smallsat-dedicated rockets because those legacy companies didn't adequately service smallsat operators' needs.

Orbital Sciences Corporation launched rockets focused on lifting smaller satellite payloads (such as Pegasus and the Minotaur family). But its rockets were expensive (tens of millions of dollars), and it generally courted government missions.

Instead, smallsat operators on a budget and looking for a launch turned to India's Polar Satellite Launch Vehicle (PSLV). However, they had to share the rocket with a primary satellite payload, which meant that their satellites would be deployed in orbits that, while usable, weren't necessarily ideal for their businesses.

That was a primary strategy of up-and-coming smallsat-dedicated launch companies such as Rocket Lab: the company supplied rockets that could be dedicated to a smallsat operator's business needs.

They would generally be more expensive to launch with, but the company's rockets are: 

1) available,

2) reliable, and

3) dedicated to the smallsat operator.

While the larger rocket operators could only fulfill the second criterion—reliability—smallsat launch operators offered more.

SpaceX eventually offered its Smallsat Rideshare Program because it could offer availability, reliability, and an alternative third criterion: low cost per kilogram.

Rocket Lab had demonstrated a market of smallsat operators interested in availability, reliability, and dedicated launch; however, it left out a price-conscious subset of those operators where ridesharing with other operators was acceptable. SpaceX stepped in to service those price-conscious operators.

In both instances, an established market was dominated by the likes of Arianespace, ULA, and ILS. Rocket Lab exploited the need for a dedicated smallsat rocket launch provider.

SpaceX subsequently exploited the desire for lower smallsat launch costs (probably an overriding concern for startups on a tight budget). They established strategies, such as creative imitation, and pounced on market opportunities as they appeared.

There is room for creative imitators to service smallsat operators, but they must search and understand less obvious and inadequately-serviced market niches.

Other Opportunities

However, there are other ways to identify sources of opportunity in the space industry.

Drucker helpfully provides a list of innovation opportunity sources for those willing to learn and adapt. He notes that individuals and companies that exploit the following sources seemingly consistently have developed a systematic way to identify and exploit opportunities:

• The unexpected success/failure…whatever—it's an opportunity! 

This is a case in which a product works or fails—but is unexpectedly successful. Ukraine's use of SpaceX's Starlink on the battlefield exemplifies an unexpected success. 

Incredibly, SpaceX didn't expect Ukraine's military to leverage its system as much as it has—and succeed. Weirdly, the company is pushing back against Ukraine's leveraging of its system. 

If SpaceX doesn't embrace Starlink's unexpected success, competitors will surely exploit that weakness as other customers/countries come forward to use it.

• The incongruity—the difference between reality and assumed reality

Drucker observed several types of incongruity (read his book to see them all). He describes incongruities as a "symptom of change." 

Because they are within a market or industry, the stakeholders within it can usually readily identify incongruities. Unless those stakeholders put on blinders by making statements such as "it's always been that way" or take the incongruity for granted. 

One example of an incongruity might be how legacy launch companies perceived smallsats versus how customers actually value and use them. That gap between perception and reality allowed smallsat launch companies to develop the capability to service smallsat operators.

• A process need

This opportunity answers very concrete and specific industry needs.

For example, what is required to operate satellites safely in orbit? What allows humans to survive in space? Is there a way to manufacture rockets faster?

Those are questions containing specific space industry needs. Sometimes answering those needs results in more questions. 

For example, does a satellite require a higher-bandwidth network to communicate with other satellites to coordinate collision avoidance maneuvers automatically? Does it need artificial intelligence to make those decisions?

• Industry/market structure changes

There already are a few ignored space industry changes, primarily by companies who are satisfied with business as usual. 

The current industry structure change for the space industry might be rocket reusability and a company's ability to nearly "launch at will" resulting from that reusability. 

However, according to Drucker, companies experiencing a market/industry structure change must act quickly and differently than before. The "what is our business?" answer should differ significantly from the company's original answer. If it doesn't, other companies will eat its lunch.

Those sources are industry-related, with some companies tapping into them repeatedly. However, Drucker also mentions three sources of innovative opportunity that are external to the industry:

• Demographics (population changes)

Drucker notes that changing demographics are usually clear and have the most predictable consequences. Increases in population size and composition result in changing needs and mores. 

Companies such as Coca-Cola, Disney, and Hershey have successfully identified and exploited demographic changes.

• Changes in perception, mood, and meaning

"Changes in ###" is something most people can relate to as they survived the global health crisis. While responding to the crisis, some people evaluated their work/life balance after months or years of working from home. Most of them decided the balance needed to be tilted to favor their personal life. 

Working remotely is just one of those changes. In addition, laws will change to address the new demographics' needs. These types of changes impact the space industry, which represents opportunities for the vigilant. Some are already seizing these opportunities.

• New knowledge, both scientific and non-scientific

Opportunities arising from new knowledge eventually inspire new technologies that come to fruition at the end of a few decades. 

The space industry is experiencing this with reusability, a concept that has existed for decades. It's also undergoing the maturity of knowledge to develop LEO broadband constellations. 

And still, there are opportunities within each of those concepts as companies implement the technology that makes them a reality and others learn from their attempts.

To reiterate: Drucker made his observations as sources for innovation opportunities. His sources are helpful for people interested in decrypting how innovative an entrepreneur's or startup's business/technology is. If either reference one or more sources of innovation opportunities, then they are exploiting a genuinely innovative opportunity.

Relativity Space: Where is the Innovation Opportunity?

Relativity Space helps demonstrate how, using Drucker’s list, one might identify the opportunities the company appears to be addressing. The company touts that it's disrupting "60 years of aerospace" because of how it's manufacturing rockets: Relativity Space uses additive manufacturing technology (3D printing), fusing layers of metal to create a component, such as a rocket body. 

The company advertises that the technology is disrupting the industry, but what is the innovative opportunity it is exploiting? Relativity Space has yet to demonstrate that its 3D printing technology can enable faster and higher launch rates for a low cost. In addition, the company has yet to demonstrate its process manufactures reliable rockets.

It's not clear that 3D printing, as a manufacturing process, is the only, nor best, way to achieve Relativity's stated ambitions. For example, the strengths of manufacturing vacuum-formed or injection molded plastic toys should be considered when compared with the line-by-line output of the fastest 3D printer. 

Both are faster than 3D printing and work well for mass production, bringing down the costs per toy and producing an extremely durable product. On the other hand, 3D-printed toys take tens of minutes to hours to complete, are less durable, and sometimes more expensive.

Where 3D printers excel is in printing complex shapes impossible to achieve with vacuum-forming and injection molding techniques, with a precision and speed that manual labor cannot match. In addition, they allow rapid changes in a part's design, printing it out relatively quickly. 

Such characteristics work well for customers looking for a high fps (feet per second) 3D-printed lever-action dart blaster that toy companies such as Hasbro or Buzz Bee don't offer. However, such products are expensive (sometimes hundreds of dollars) and are less durable than the cheapest mass-manufactured plastic blasters (under $5).

Since 3D printing is over 40 years old, it's doubtful that Relativity Space is exploiting new knowledge as an opportunity. However, its use of 3D printing for manufacturing rockets speaks to some process needs within the space industry. 

It may be that the opportunity brought forward by the process needs only appeals to a small niche—rocket manufacturers—and may prove tricky for Relativity Space to recover capital costs. 

The company sketches out the opportunity impacts of its technology on its website:

"Our proprietary process optimizes every aspect of aerospace development and enables faster, more frequent, and lower cost access to space."

That statement points to the company's technology as a key to accelerating rocket manufacturing. Through its statements, Relativity Space assumes its 3D printing process is addressing a spacecraft operator market need. 

Realistically, that process aligns with rocket manufacturer needs, but some don't appear interested. The upcoming rockets from ULA and Arianespace make it clear that they aren't looking to build rockets faster, fly them more frequently, and for less cost. 

It's also not clear commercial customers desire all three of those traits, either, based on government contracts and the smallsat launch needs creative imitators are serving. It doesn't appear that a process need is an opportunity source that can be applied to Relativity Space's business strategy.

Instead, Relativity Space is exploiting a different opportunity source that was opened by the market/structure changes that the legacy rocket companies are undergoing. They have "mass manufactured" and launched rockets for decades but haven't offered the corresponding cost savings that should result from mass production (probably because there weren't many customers). 

Relativity Space can seize that innovation opportunity—changing the industry and market structure even more by manufacturing rockets approaching Vulcan's or Ariane 6's performance while lowering launch costs. 

The company plans to build a larger rocket, Terran R, to compete with both. It will harness the opportunity available in the changing industry and market structures if it succeeds. Again, it should be noted that Relativity Space has yet to demonstrate it can manufacture and launch a rocket successfully to orbit.

While Relativity Space's rocket development activities demonstrate some of the possible opportunity sources it's exploiting, there are other opportunity sources to watch for, which Drucker doesn't address in his book. 

Some stem from new regulatory requirements, such as space traffic management regulations some governments are considering. Those would lead to a variety of opportunities even as the industry matures.

In truth, more opportunities exist in the space industry than can be listed in this article—but the ability to recognize and exploit the sources of innovation opportunities is not to be underestimated.

John Holst is the Editor/Analyst of Ill-Defined Space, dedicated to analysis of activities, policies, and businesses in the space sector.

Astralytical congratulates Relativity Space on their recent Terran 1 test launch. Contact Astralytical for your space industry analysis and insight needs, including identifying space industry opportunities.