Why SpaceX’s Recent Competitive Blunder Is Good for Everyone, Including SpaceX
In mid-October 2019, SpaceX suffered a surprising defeat. Elon Musk’s aerospace giant, which only a few years prior seemed an unstoppable and revolutionary force within the space industry, lost a crucial competition to an up-and-coming rival. Arianespace, a European aerospace firm with just 321 employees, managed to snatch a $90 million contract right out from under SpaceX. How, you may ask, did Arianespace succeed in such a coup? The company beat SpaceX at its own game—it offered an all-around better deal.
When SpaceX initially burst onto the aerospace scene, it was rightly viewed as a positive force for change within the industry. Musk’s firm pioneered a lower-cost business model for space traversal, shaking up the status quo and forcing preexisting companies to adapt. Competition bred innovation, and the entire aerospace industry was all the better for it. Now, in 2019, the shoe is on the other foot, and SpaceX is the company being pushed to change.
But here’s the thing: that’s great news for everyone involved, even SpaceX. It means the market is working just as it is supposed to—rewarding efficiency and punishing complacency. And don’t be fooled; over the past year or so, SpaceX has indeed become complacent.
Skyrocketing to the top of the incredibly insular and competitive landscape, Musk has managed to turn his niche rocket-making company into a dominant industry leader. SpaceX has consistently been awarded lucrative government contracts—so many, in fact, that the Musk’s once-scrappy aerospace upstart seems to have become accustomed to winning. It even announced in 2018 that it would be hiking its prices on ISS cargo missions by 50 percent—despite delivering less cargo overall and offering the highest prices among the contractors selected. SpaceX’s previously high standards, it would seem, have become rather lax.
Lately, Musk’s aerospace company has developed a nasty habit of missing deadlines. SpaceX’s Crew Dragon initiative is already three years behind schedule. For those years, NASA placed its faith in Musk to deliver a quality, timely product. And so far, SpaceX has nothing to show for it. This problem, though, isn’t specific to SpaceX.
As the Washington Post points out, Elon Musk has been missing deadlines since he was a child—and that fact is reflected in his other business ventures as well. Tesla, too, has an unfortunate tendency to miss the mark, with the release of the company’s Model 3 hindered by lapsed deadlines and poor time management. So, while a lack of punctuality isn’t uniquely a SpaceX problem, the company does bear responsibility for how it handles adversity.
When SpaceX fails to land a contract, it doesn’t retool its efforts, find inefficiencies, and correct them. Instead, it pouts. When the Air Force decided not to select SpaceX to develop plans for new rocket launch vehicles, Musk’s company sued, claiming that the U.S. government had “wrongly awarded” its contracts. But in reality, SpaceX isn't unfairly discriminated against, it’s just struggled to deliver on its promises.
Ultimately, SpaceX’s problem seems to be one of entitlement. The aerospace juggernaut no doubt expected to win Ovzon’s $90 million launch contract, which was precisely why it needed to lose. Luckily, SpaceX’s recent competitive blunder presents the company with an opportunity. It now has the chance to recognize the error of its ways, reevaluate its strategic approach, adapt, and overcome.
That’s the beauty of the market: just as SpaceX initially revolutionized the aerospace industry, now other firms are stepping up to the plate and doing the same. SpaceX cannot afford to remain complacent. It’s government contracts—the foundation of its business model—are at stake. Arianespace and various other aerospace firms are hungry for change. And if Musk’s SpaceX isn’t careful, it will be left behind by the space industry it helped forge through competition.
Lt Gen McInerney is a freelance author, the former Asst. Vice Chief of Staff at the United States Air Force, and a career fighter pilot. He is now the Chairman of YottaStor, an Edge Cloud Computing Company, ingesting and analyzing data at the forward edge of the battle for space.