Business in space: The new frontier?

Business"i n Space The New Frontier? Jonathan N. Goodrich, Gary H. Kitmacher, and Sharad R. Amtey /D Formerly at Indiana University and the Universi'ty of Houston's Clear Lake campus, Jonathan N. Goodrich is ct, rrently associate }lO[essor o1 marketing on tim Tamiami campt,s ot Florida International University. His "Warehot,se Retailing: The Trend of the Futt, re?'" appeared in Busim'ss H o r i z o , s in April 1979. Gary H. Kitmacher is an aerospace llight systems engineer Ira" NASA at Ioh'nso,1 Space (;t~lter, Houston. He wm'l~.sin the area of sl)ace .station crew. COlllI}artnlent desigrll. Sharad R. Amtey IS an expert systems engineer lot Abact, s Programming Corporation/Rockwell Space O 9erations Companv in HoustotL His resea,ch interest is the 'marketing of high technology in tim health care a~ld space industries.' Space exploration and development may be for the twenty-first century what aviation, electronics, and computers, taken together, represent for the century nearing comple"tion. What are the opportunities and obstacles in space commercialization? And what are the marketing implications of this new frontier? ack in the 1960s, in the early days of space exploration, m a n y scientists and visionaries saw a bonanza in the commercial d e v e l o p m e n t of o u t e r space. But 25 years latex" tim bonanza still has not m a t e r i a l i z e d I e x c e p t for a handful o f well-known c o r p o r a t i o n s that h a v e space-related g o v e r n m e n t contracts (for example, IBM, General D y n a m ics, Rockwell International, and Martin Marietta). F u r t h e r m o r e , unforeseen problems now plague the space industry. T h e y have r e t a r d e d progress in tim commercialization o f o u t e r space and may do so for years to come. T h e p u r p o s e o f this article is twofold: • T o provide a brief overview o f what m o d e r n space commercialization is really all about; and • T o shed some light on why the commercial development of outer space has been retarded. O p p o r t u n i t i e s in space business are also explored, and the m a r k e t i n g implications o f the obstacles and o p p o r - B tunities are examined. We also look into o u r crystal ball to see possibilities tot future research. O V E R V I E W OF S P A C E COMMERCIALIZATION n October 1957, the USSR successfully launched Sputnik 1, the first artificial satellite of the earth. T h e space age was born. Since then, outer space---generally regarded as 50 miles above earth and b e y o n d - - h a s been explored, primarily by the U.S. and USSR. In the 1981)s, however, m o r e and m o r e countries are engaging in space research and exploration: F r a n c e , West G e r m a n y , the United Kingdom, o t h e r m e m b e r s o f the E u r o p e a n Space Agency (ESA),' Japan, India, China, Canada, and Brazil. I I. ESA, Iorlued ill 1975. consists o1"1I nwmher countries: Belgium, Demnark. ~v~,'eSl(;er-, many, France. hel:md, hair. the Nctherl:mds. Spain. Sweden. Switzerland, and the Ltnilcd Kiugdom. Business Horizons/.]ammry-lrel)ruary 1987 "Companies are experimenting with ways to make better and less expensive products (some in the microgravity environment of space) for sale on earth as well as for use in space." 76 Many firms are involved in space research. In the U.S., for example, an estimated 350 firms--aerospace as well as non-aerospace--have invested money in space research, and some 50 companies are negotiating space research joint ventures with the National Aeronautics and Space Administration (NASA).'-' Ventures involve metal formation, glass alloys, electroplating, catalysts, c o m p u t e r chips, long-term storage of blood, manufacture of pharmaceuticals in space, commercially operated launch systems, and military and scientific experiments. Some of" these companies (and their space research efforts) include: • AI.L;OA (aluminum); • Eastman Kodak (films, glass alloys); • John Deere & Co. (metal alloys); • Bethlehem Steel (metal alloys); • Rockwell International (materials processing); • General Dynamics (satellite launch systems); • Ball Aerospace (remote-sensing satellites); and • Honeywell (computer parts, remote sensing). These companies are experimenting with ways to make better and less expensive products (some in the nilcrogravity environment of space) for sale on earth as well as for use in space. In terms of revenues generated, Jerry Grey, the publisher of the magazine AerospaceAmerica, states that the space industry in the U.S. is today a $22-$23 billion industry. :~ The satellite-communications business, for instance, takes in $3 billion a year, NASA spends $7.5 billion, the military spends more than $10 billion annually, and another billion or two comes each year fi-om peripheral businesses such as remote sensing, publishing, groundbased support, and so on. Grey foresees a $100 billion to $200 billion space industry by the year 2000:$40 billion to $100 billion in annual gross revenues for the satellite-communications industry; $10 billion to $20 billion in materials processing; $5 billion in launch services; $8 billion for NASA; and perhaps $25 billion for the military, unless there is a major arms treaty limiting space weapons. Is Grey overly optinaistic? As points of reference, the aviation industry, which includes aircraft construction, airline revenues, and airport operations, is a $100 billion business today, and electronics naanu facturers took in $125 billion in 1982. Space commercialization can be divided into seven major components: 1. Transportation and launch services; 2. Communications satellites; 3. Remote-sensing satellites; 4. M a n u f a c t u r i n g and materials processing in space; 5. Proposed space stations and space platforms; 6. Defense; and 7. Ground-based support. 2. Lad Kuzela, "Who Will Win the Race fi)r I)rolit-s in Space?" IndlL~try Week, August 6, 19~4: 28-3 I. The Atlantic, May 1985: 51. This is the source 1. Transportation and Launch Services Transportation is the most capital-intensive and politically visible category of space commercialization. It is also the most mature o1"space ventures. It consists of t r a n s p o r t i n g payload (cargo) into space for telecommunications, meteorology and earth observations, and space experimentation. NASA's space shuttles (Challenger, Discovery, Columbia, Atlantis) have been in the forefront o[ transporting and launching payloads into space. ESA's space efforts (Spacelab, Ariane) are similarly engaged. In October 1985, for example, the West German government chartered NASA's space shuttle, Challenger, for a space journey at a cost of $65 million. Challenger carried a crew of eight people, the largest crew so tar to fly in space, and a $1 billion laboratory buih by ESA. The scientists aboard, from the U.S., Holland, and West Germany, ran several experiments. These included studies of space sickness, growth of crystals, and materials processing in the microgravity of space. But on Challenger's next mission, on January 28, 1986, disaster struck, killing all seven members aboard and "interrupting for a time one of the most productive engineering, scientific, and exploratory programs in history.'"' Space manufacturing in the Western world was set back perhaps five years. The next shuttle will not 3. See David t)sborne, "Business in Space," liw the ligures in this and the following paragraph. 4. Report of tile Presidential Commission on the Space Shuttle Challenger. Business in Space: The New Frontier? t payand orbit ~ILIUVE' LIIC {.7.~IILII, ?.11113 IL [S~l.II ~it~:ly i I I space be launched until design changes are for about a week and a half. Huncomplete, probably not before Feb- dreds of companies, including aeroruary of 1988. space giants McDonnell Douglas, Coming as it did during a phase- Rockwell International, Morton out of unmanned expendable booster -Thiokol, and Martin Marietta, prorockets in the U.S., the accident caused vide parts, engineering analysis, and a major upheaval in the space launch integration services for the space industry as well. The nation's space sh u tries. program has been redirected toward On an international scale, space less reliance on the shuttle and a rein- transportation and utilization will soon statement of the expendable rocket enjoy a resurgence in activity. In its indnstry. most recent Soviet Military Power re. . . . . . De- fense reported that the Soviet Union soon will have a launch vehicle capable of placing as much as 300,000 pounds of payload into a low-earth orbit, as well as a space shuttle with capabilities equivalent to that of the U.S. Japan, the People's Republic of China, India, and Brazil are all developing commercial satellite launch capabilities. The British are developing an advanced rocket plane called Hotol, an acronym for "horizontal take-offand landing." The French, in conjunction with ESA, are developing a minishuttle called Hermes, which could be operational in the mid-1990s. Funding for the initial phases of development of a U.S. aerospaceplane has been approved. By early in the next century, it could be flying cargo and passengers from runways directly into earth orbit. The international space station, led by the U.S. and funded by the U.S., ESA, Japan, and Canada, will become operational in the mid-1990s and is expected to develop 77 Business Horizons l.]anuary-February 1987 "The environment of space the absence of vibration, the near-perfect vacuum, the sterile environment, unfiltered sunlight, and microgravity provides a potentially valuable laboratory for the manufacture of certain chemicals, pharmaceuticals, and alloys that may be produced more efficiently and in higher quality in space than on earth." 78 more fully in the course of tile |ollowing three decades. Today, communications satellites are the most lucrative commercial cargo being transported into space-for countries (for example, West Germany, Australia, Mexico), for commercial firms (for example, Ht, ghes and RCA), and for the U.S. government (for example, the DOD's Fitsamcom or NASA's Advanced Communications Technology Satellite). Such satellites are typically worth anywhere from $50 million to $150 million each, depending on size, use of advanced technology, and tile number of communications channels provided. NASA typically charges a r o u n d $I00 million (about half the actual cost) for transporting a full cargo-bay (equivalent to four communications satellites on average) of payloads into space. This charge is roughly equal to the cost of a launch o11 ESA's tinmanned Ariane rocket, which is also subsidized by the European nations. The subsidies for the shuttle and Ariane have prevented true competition in the space launch market until now. International discussions in the wake of the Challenger accident may bring an end--or at least a serious reduct i o n - t o subsidies in the future. 2. Communications Satellites Communications satellites are probably the most mature of the industries currently involved in space commercialization. Since the Soviet launch of Sputnik in 1957, about 3,000 satellites have been orbited by various coun- tries and firms. Ninety percent of these satellites belong to the U.S. and the USSR. Two-thirds of them are for military communication purposes, and the other third primarily transmit television and radio broadcasts, telephone conversations, electronic mail, and other data. Annual gross revenues for tile commtmications satellites segment could be as high as $40 billion to $100 billion by the year 2000? Leading competitors in tile field (manufactttring, servicing) include AT&T, RCA, Hughes Aircraft, Western Union and Telegraph Co., G'FE, MCI, and Satellite Business Systems (SBS). RCA (Satcom series), Western Union (Westar series), and SBS, for example, have already launched domestic commercial communications satellites. So have Australia, Great Britian, Canada, France, India, Indonesia, Japan, the U.S., the USSR, a group of Arab nations, and a group of ESA nations. ditions (for weather forecasting and airline flights). Remote-sensing satellites have also been used to spot forest fires, monitor changes in the polar ice caps, track oil spills, study migrating deserts in North and South America, Afi'ica, and Asia, map routes for railroads and pipelines, reveal unknown lakes, and detect air pollution and natural resources. "File data fi'om remote-sensing satellites are processed at ground stations, stored on tape, and sold to (and by) governments and ill'IllS. Annual gross revenues from the sale of remotely sensed data could reach $2 billion by the year 2000: Hughes Aircraft, RCA, and Ford Aerospace & Communications Corporation are major manufacturers of remote-sensing satellites. The French, Japanese, and Russians also have sophisticated remote-sensing satellites. 4. Manufacturing and Materials Processing 3. Remote-Sensing Satellites Remote-sensing satellites are often called "spies in the sky" because they are used extensively by the military. However, these satellites also have many civilian applications. For example, they photograph areas of the earth and transmit data used to evaluate geological formations (for oil and gas exploration), oceans (for currents, fish movement, and maritime activities), land (for earthquake and volcanic activity), crop conditions (for yield forecast), and weather con5. See Osborne (note 3). Manufacturing and materials processing is the fourth component of space commercialization. Most flights of the U.S. space shuttles, for example, have had on board some experiments in m a n u f a c t u r i n g and materials processing in space. The environment of Space--the absence of vibration, the near-perfect vacuum, the sterile environment, unfiltered sunlight, and microgravity-provides a potentially valuable labo6. "Space f2ommercialization (;roup Includes Non-AerospaceFirms,"Aviation Week & Space Technolo,o,, March 4, 1985: 20. Business in Space: The New Frontier? ratory tor the manufacture of certain chemicals, pharmaceuticals, and alloys that may be produced more efficiently and in higher quality in space than on earth. For example, John Deere is studying zero-g iron processing; ~ 3M is studying organic and polymer chemistry ill zero-g to improve its plastics and adhesive products; and McDonnell Douglas Corporation is experimenting with the production in space of erythropoietin, a medicine for stimulating red blood cell production. McDonnell Douglas hopes to produce this product in space. Deere expects that its space experimentation will serve as a model for terrestrial process improvements. 3M is engaged in a basic research program due to continue well into the next decade. The Center for Space Policy, a colasuiting firm in Cambridge, Massachusetts, forecasts that, if given a suitable environment for development, by the year 2000 space industries could be producing $27 billion annually in pharmaceuticals to battle cancer and The U.S./international space station now being developed and its component modules are potential products for space commercialization. NASA, ESA, Canada, and the Japanese are collaborating in the develo p m e n t of a large orbiting space station the size of a football field. It is being designed as a permanent re- 7. (;ravity on earth pulls sediment a n d other materials to thc bottom during materials processing. The microgravity of outer space allows Ior more unilorm manufacture of products, often with increased strength and pu,'ity. 8. As cited by Gary H. Kitmachcr, "Space Commercialization: Its Development," Working Paper, NASA/.lohnson Space C e n t e r , Houston, Texas, May Iq85. See especially p. 17. empllysenaa, $3.1 billion in gallium arsenide semiconductors for electronics, and $11.5 billion of pure optical glass. ~ Scientists loresee the manufacture of these products on space stations and on free-flying plattorms with compartments leased by industry. Manufacturing would be done by robots. Basic research would be performed by scientists who would work on the international space station for months at a time. Shuttles could then pick up both the scientists and the processed products and return them to earth. 5. Space Stations and Space Platforms I search, manufacturing/processing, satellite-repair, and spacecraft refueling facility ill low-earth orbit (around 250 miles above earth). The space station will have various modules for power, living quarters, and work areas interconnected through tunnels. Initially, it will have living quarters for six to eight persons. On earth, the structure would weigh around 4(1 tons. By tile time the station is built in earth orbit (about 1995), the cost of the structure is projected at $8 billion." The foreign partners are expectecl to contribute $3 billion of this amount. Since 1971, the Soviets have had rudimentary space stations (Salyut 1 through 7) in orbit. R. Z. Sagdeyev, the director of the Soviet Space Research Institute, is coorc[inating the development of a complex Soviet space station. Its core may be the modified Salyut, renamed Mir (Peace), which was launched in February 1986. The station is expected to be a center of industrial activity in space, housing as many as 12 cosmonauts. Other unmanned and man-tended space platforms are being developed by various firms and countries. They include the European Retrievable Carrier (EURECA), the Shuttle Pallet Satellites (SPAS, built ill Germany), Fairchild Industries' Leasecraft (U.S.), and Space 1ndustry's Industrial Space Facility (U.S.). These space plattbrms will be used in a variety of microgravity manufacturing, space science, technology, astronomy, physics, and earth observation experiments. Some visionaries see space stations in tile twenty-first century as: • Industrial plants in space; • Intermediate stopover points tor passengers on their way to the moon, IVlars, or other planets; and • Possible strategic defense posts in space. 6. Defense Defense weaponry and surveillance systems in space represent the most potentially lucrative of all the components of space commercialization. 9. This cost estimate does not include lautlt'h. Ill~lilltCn~lllC¢2,and opcralillg COSlS. 79 Bt,siness Hu,'izons/.lanuary-February1987 "Space R&D imposes burdensome costs on a corporation. On earth, a few million dollars will get you started; for space exploration, this paltry sum doesn't get you anywhere." 80 Several nations spend billions of dollars each year on a variety of defense systems in space. In 1985 space weaponry received an additional shot in the arm with Presiktent Reagan's "Star Wars" Strategic Defense Initiative (SDI). The defense component of space commercialization is here to stay. The United States and Soviet governments and their allies represent a ready market for space weaponry. Billions of dollars worth of defense contracts are awarded each year to General Dynamics (the largest defense contractor in the U.S.), Martin Marietta, Hughes Aircraft, and Rockwell International. 7. Ground-Based Support Ground-based support includes the preparation and processing of payloads for flight, such as that done by Astrotech International (Cape Canaveral,. Florida); the manufacture of components for the space shuttle (by Rockwell International, for example), space suits, j'' and other products; and providers of space insurance. OBSTACLES TO SPACE COMMERCIALIZATION bstacles have plagued and Iwill continue to plague the commercial development of outer space. Among the major obstacles are costs, profit squeeze, technology, markets, competition, O insurance, safety, and earthbound inertia. ness. Payback periods generally extend to eight years and beyond, with uncertainty about future profit levels. 1. Costs 3. Technology Space R&D imposes burdensome costs on a corporation. On earth, a few million dollars will get you started; for space exploration, this paltry sum doesn't get you anywhere. Costs include plant and equipment, salaries for high-tech scientists and engineers, interest expense on huge sums of borrowed capital, transportation into space, and so on. ~ It is estimated, for instance, that space transportation costs are about $10,000 per kilogram, while costs of manufacturing items in space are between $100,000 and $1 million per kilogram. v-' As long as these costs remain high, space business will grow very slowly. 2. Profit Squeeze Given the huge capital outlay required in many space businesses (for example, communications satellites), profits are generally small or nonexistent for several years after initial investments. With the American business culture emphasizing early profits, most corporations will not invest in space busi- I I. See Carole A. Shifrin,"InvestorsTaking Cautious View of Private Programs,"Aviation Week & Space Technology, .June 25, 1985: 78-80, 83. 12. "Factoriesin Space?"The Econom;~t, August 4, 1984: 16; and "NASA Looksfor Ways I0. Accurdingto NASA,each spacesuit worn of BoostingBusinessinto Orbit," Tke Economist, hy a U.S. astronaut costs al)out $2 million. " August 4, 1984: 73, 76. Some of the foremost barriers in the commercial development of space are technological. Generally these are caused more by unfamiliarity with hardware design for aerospace use than by the difficulty in designing the actual hardware. These technological barriers will retard development of space industry, including manufacturing and materials processing in space, space transportation, and other orbital operations. 4. Markets The absence of already developed markets--or at least the uncertainty about future markets---is probably the biggest obstacle to space business. For example, even if some pharmaceuticals can be made purer and better in the microgravity of space, will the added cost of making them in space increase their price to such an extent that they are priced out of the market? Will pharmaceuticals capable of being effectively produced in space find a large market on earth? Or can e a r t h b o u n d biotechnology techniques perform just as well? Markets are likely to exist for products with a high value-to-weight ratio---|br example, electronic devices, specialty glasses, alloys, and space weaponry. Space weaponry has a ready market. Many corporations Busiqess in Space: The New Frontier? value their contracts with g o v e r n m e n t anti private industry for" the construction o f space-related products or the provision o f services. O t h e r corporations, who hope to c o m p e t e in existing markets or to open new markets, are on a slippery and expensive highway. 5. Competition Business in space is very competitive. T h e combatants in the areas o f space commercialization tend to be large, well known, weahhy, anti international in scope. T h e y include IBM, RCA, General Dynamics, and 3M, to name a few. T h e y have staying power. T h e y also have the inside track because of their track r'ecord, reputation, and contacts in the f e d e r a l government. Small firms, which generally fall short on these attributes, are likely to be outflanked by the giants. satellite was repaired in space and later successfully d e p l o y e d anti transferred to geosynchronous orbit. These and other missions will give birth to salvage clauses in future insurance policies, giving full ownership rights to the underwriters. As the c o m m e r cialization o f o u t e r space develops, new kinds o f insurance problems will e m e r g e and will have to be addressed. 7. Safety Safety c o n c e r n s r e p r e s e n t a n o t h e r obstacle to business in space. Safety o f the flight and g r o u n d crew, workers in space, anti passengers will always be critical to the success o f space business. So long as there are people and machines, there will be a potential for serious accidents--as seen in the explosion o f the Challenger'. Besides their toll in h u m a n life, such accidents will retard space exploration. pose challenges. T h e y are the catalysts tbr technological progress. OPPORTUNITIES IN SPACE he areas o f space c o m m e r cialization o f f e r a weahh o f business opportunities. New technologies are on the horizon, and others we haven't even d r e a m t about. T h e new technologies have the potential to r e v o l u t i o n i z e m e d i c i n e , management methods and styles (how will space stations be managed from e a r t h ? In space?), labor r e l a t i o n s (strikes in space? union activities?), tourism (space travel and adventure), global marketing, and life on planet earth. T o e f f e c t the new t e c h n o l o g i e s , education will perhaps be most important. Scientists, researchers, and engineers will have to be trained in the utilization o f a new operating environment-space. T 8. Earthbound Inertia Past and Present 6. Insurance Obtaining insurance coverage for space business has proven very difficult because o f the failure o f several Shuttle and Ariane-launched satellites. T h e situation has worsened in the last year with two failures o f the Ariane, the loss o f a U.S. Delta rocket, and the d e s t r u c t i o n o f the Challenger. T h e insurance industry has temporarily stopped issuing new policies. This has posed a n o t h e r major obstacle to the commercial development o f space. In 1984, three satellites were lost due to failure o f the rocket motors designed to place the satellites in geosynchronous orbit (22,300 miles above the earth). T h e failures resulted in a $282 million loss to the insurance intlustry. ~:~Losses o f similar m a g n i t u d e occurred in 1985 and 1986. Because insurance companies were unable to recoup their losses, the insurance indttstry and NASA pushed for a satellite retrieval mission in 1985. 'The shuttle mission resulted in two satellites being rescued and r e t u r n e d to earth for refurbishment. During a second shuttle rescue mission, a failed 13. See Kitmacher (note 8), pp. 44-47. Inertia represents still a n o t h e r obstacle to corporate involvement in space research and exploration. Many corporate CEOs and shareholders will ask, "Why get involved in space business when there is so much on earth to research and explore?" 9. Other Obstacles T h e r e are other obstacles to space commercialization. They include complex g o v e r n m e n t regulations, resultant time delays, inadequate patent protection, and the complex political, social, military, monetary, and legal challenges that must be dealt with on a national a n d i n t e r n a t i o n a l scale. Many m a n u f a c t u r i n g firms fear that investments in space R&D may be wasted if their competitors can achieve similar advances faster and less expensively using e a r t h b o u n d techniques. T h e r e are serious obstacles to the commercialization o f space. T o o often visionaries have neglected or downplayed the hurdles that must be overcome b~fore we can begin to think o f outer space as a new business frontier. But these obstacles do not suggest that we abandon the commercialization o f space. Instead, the obstacles Let us look at some past and present business opportunities that have resuited from space-related technology, r e s e a r c h , and business. A l t h o u g h business did not develop them with the goal of commercialization, these "spin-offs" from space-developed technologies have found their way into the marketplace. Spin-offs inadvertently tie space business to earth business. T h e y have c r e a t e d m a r k e t opportunities and bonanzas on earth. What are some o f these spin-offs o f space-age t e c h n o l o g i e s that have found their way into the marketplace and affect o u r lives? • T h e X-ray inspection systems that examine luggage at airports were first developed for astronomical satellites studying celestial X-ray sources. American Science and Engineering o f Cambridge, Massachusetts, the company that developed the highly sensitive X-ray detectors for NASA, now makes the airport detectors. • NASA asked Black & Decker to make a rechargeable, cordless drill that astronauts could use to drill moon core samples. T h e company thought, it was such a good idea that it utilized this new technology to develop an entire line o f cordless power tools. 81 Business Horizons /January-Febrt, ary 1987 "Whole new industries including computer science, solid-state electronics, and communication satellites were advanced as a result of NASA's research and development in collaboration with some U.S. industrial giants. New jobs and economic growth have resulted from space business. Space business has created new frontiers in business on earth." 82 These tools are now popular anaong home builders, construction workers, and home handymen. • The technology for quick freezing and keeping ice at a constant temperature, even outdoors in the summer, was developed for rocket fuel tank insulation. It came out of technology developed at NASA's Marshall Space Flight Center in Huntsville, Alabama. • Sports fans at the Silver Dome in Pontiac, Michigan, and other facilities with similar fabric domes owe their comfort to technology used to make astronaut space suits. These domes are made of Teflon-coated fiberglass fabric, which was developed by OwensCornirrg Fiberglas Corporation to protect astronauts from the hostile environment of space. • Rechargeable cardiac pacemakers, which extended the life of these devices from about two to twenty years, are an offshoot of satellite solar cell technology. • One of the newest medical wonders that has resulted from space-derived miniaturization technology is an automated implantable defibrillator. A microcomputer in the device senses when a heart is about to stop beating and sends out commands for small electrical charges to shock it back into activity,just as paramedics do with big electric paddles. Surgeons at Johns Hopkins University have implanted several of these devices in patients who had a high risk of heart attacks from abnormal rhythms. Many heart attacks have thereby been prevented. • Advanced computer hardware and computer programs, which IBM developed for NASA to monitor and control spacecraft, are now being used in industrial manufacturing for controlling and monitoring machines and robots. • Car fenders, bumpers, and many other products are being made of a new class of composite materials that are stronger but lighter than metal. These composites, made of fiber-reinforced plastics, originally were developed for spacecraft construction. • New meteorological forecasting techniques, developed jointly by NASA and the U.S. Air Force, are useful in predicting weather conditions. In addition to these spin-offs, whole new industries~including computer science, solid-state electronics, and communication satellites--were advanced as a result of NASA's research and development in collaboration with some U.S. industrial giants. New jobs and economic growth have resulted from space business. Space business has created new frontiers in business on earth. The Future But what about new business frontiers in space? There are many. They include defense, launch vehicles and transportation systems, communications satellites, and remote-sensing satellites, all of which have been commercially active for several years. The U.S.-led international space station is now being developed and will be operational in less than a decade. In m a n u f a c t u r i n g and materials processing, the environment of space offers promise for making lighter and stronger alloys in space and purer and more potent drugs. For example, tu'okinase, an enzyme that dissolves blood clots, is used to treat victims of ptdmonary embolism and heart attacks caused by blood clots. On earth, urokinase can be produced only in minute qt, antities, and at great expense (about $1,000 a close). Urokinase is manufactured by one particular kind of cell in the kidneys. Tests in the space shuttle have shown that electrophoresis can separate the productive cell from the other cells, improving the yield of urokinase. Culturing the high-producing cell, either in space or on the ground, could reduce the cost of urokinase by a factor of ten or more. Thus, the drug could become much more affordable ($100 or less per close) to people-more than 500,000 in the U.S. alone-who either die or suffer from bloodclotting disorders every year. Its manufacture in space could save hundreds of millions of dollars over present e a r t h b o u n d techniques of manufacturing.~4 Still another rare and expensive medicine suitable for space manufacture is "factor 8." Used in treating hemophiliacs, it is currently priced at $3,000 a dose. ~'~ The beta cell is yet another; it is a special type of cell (located in the pancreas) that produces insulin. Beta cells are a good prospect for application of the electrophoretic 14. See Robert .lastrow, "Why We Need a Manned Space Station," Schmce Digest, May 1984: 92. 15. Jastrmv (note 14). Business in Space: The New Fr, mtier? "As humankind exploits space, new products will be spawned and new life-styles will emerge. Space colonies may become a reality. Companies must be poised to take advantage of these situations by keeping abreast of NASA, the space commercialization literature, and government patents that are spin-offs of space R&D." 83 separation process ah'eady developecl suits more quickly and inexpensively. for use aboard the shuttle. Large-scale Almost immediately afterwards, 3M's production in space and the resulting Riker Laboratories began negotiaprice reductions could help many of tions with McDonnell Douglas for a joint venture agreement. the world's diabetics. Other products may be made purer NASA has some 50 Joint Endeavor in space and hence be more effective Agreements (JEAs) with U.S. comon earth. They include crystals for use panies. NASA provides payload prepin computer components, fiber optic aration and transportation into space glass, and steel, m at no cost to the client in return for the knowledge and research gained by the client in space experimentaMARKETING IMPLICATIONS tion. OF C O M M E R C I A L I Z A T I O N I N Antitrust Laws. The emergence of SPACE joint ventures and collaborative marhat are some of the mar- keting will require modification of anketing implications of the titrust laws in the U.S., and perhaps obstacles and opportuni- in other parts of the world. These laws ties that relate to business in space? affect the marketing of goods and serThese implications are both micro and vices internationally and, perhaps in the near future, extraterrestrially. macro in nature. Space Law. National and internaJoint Ventures. Large companies in the space industry will enter into tional space law will affect marketing. joint ventures with other firms or with Presently, space law is in its infancy. the government in order to defray the However, it will evolve as have the heavy capital outlay that space ven- laws of the sea: slowly, tediously, and tures entail. These joint efforts will by trial and error. Space laws--patent spawn new marketing efforts hitherto rights, space rights, labor/manageunheard of among large firms. For ment relations--will fashion the marexample, McDonnell Douglas and keting of products and services for Johnson & Johnson were collaborat- space use. N e w Markets. The growth of aviaing on the production of erythropoietin (for the stimulation of red tion technology in the twentieth cenblood cells) and other medicines in tury opened new markets in tourism space. In mid-1985,Johnson &John- and travel and in international trade son pulled out of the ef|ort because all over the world. These markets were of a belief that earthbound processing brought closer together by faster, techniques could provide similar re- cheaper, and more convenient travel. Similarly, the twenty-first century may witness new travel markets as 16. For more fascinating details on product space transportation becomes more manufacture in space, see .lastrow (note 14), especially pp. 41-42, 92, and 94, and Osborne commonplace and less expensive, es(note 3). pecially if the technology being de- W veloped for the aerospaceplane proves viable. Initially, the travel market may be limited to the wealthy because of the expense of space travel, which could be as high as $50,000 per person for a twelve-hour low-earth-orbit trip. ~7However, the space travel market will open up to the masses as the price of space travel falls and/or is subsidized by governments. The aviation industry evolved in just such a manner. Other components of the space industry will also flourish, with more routine manufacture and marketing of spacecrafts, space foods, space suits, and so on. Because of the tremendous obstacles to space commercialization, however, the majority of companies in the U.S. probably will forget about space business. They will, instead, concentrate on earth business. But this means that the few "true believers" today can become the industry giants of the future. M u l t i n a t i o n a l Cooperation and Marketing. In order to meet the complexities of space commercialization-legal, economic, political, and social--multinational collaboration and marketing will grow in importance. The collaboration between West Germany and the U.S. in the chartering of the space shuttle Challenger in October 1985 is a case in point. The collaboration between the U.S., the U.K., and other countries in Presi- 17. See "Lmncher ConqxnW. Tnwel Ageucy Reach SpaceT o u r Pact," Avialion Week ~ space TechnoloL% Sel)tember 30, 1985: 24. Business Horizons / January-February 1987 84 dent Reagan's "Star Wars" strategic defense research is another example. New Products. As humankind exploits space, new products will be spawned and new life-styles will emerge. Space colonies may become a reality. Companies must be poised to take advantage of these situations by keeping abreast of NASA, the space commercialization literature, and government patents that are spin-offs of space R&D. Pollution and Disease. Hand in hand with the increasing development of the space e n v i r o n m e n t through satellites and space weaponry goes the increased probability that pollution and disease will inadvertently be spread .in space. New markets for space medicine and antipollution equipment will thus arise. Advertising. To attract customers of space products, space businesses will increase their advertisements in technical journals, such as Space Commerce, Commercial Space, and Space Business News. They will also advertise industrial and c o n s u m e r goods in more traditional media. The New Risk Takers. Many large, wealthy corporations will take hitherto unheard of financial and marketing risks. For example, three communications satellites were successfully launched from the space shuttle Atlantis in late November 1985, one each for Australia, Mexico, and RCA. RCA elected to launch its $45 million satellite without insurance, saying the price was too high. Insurance companies wanted a premium of 30 percent, or $15 million. RCA" won its gamble. On the other hand, risk takers can lose substantial amounts of money. Fairchild Industries, for example, was unable to find insurance or even a single customer for its Leasecraft space platform after several years of marketing effort. The program, therefore, was halted in November 1985. NASA. NASA is increasing its market orientation. In 1985 an Office of Space Commercialization was estalglished at NASA h e a d q u a r t e r s in Washington, D.C., an office that was reorganized in the wake of Challenger. More Joint Endeavor Agreements (.IEAs) between NASA and private corporations are being made, and more "seed money" is going fi'om NASA to universities and private industry to help them fund space R&D. Other government departments, such as T r a n s p o r t a t i o n and Commerce, are becoming more involved in space legislation and law en[brcement as well. Space Management. Finally--and this is at least tangentially related to marketing management--space commercialization will spawn new management techniques, st~les, and theories. For example, how can a space station be managed from earth? How can it be protected against terrorist attacks? How are hostage crises in or from space to be handled? These and other questions indicate that space commercialization is fraught with risks and uncertainties. RESEARCH POSSIBILITIES iven the fertility of the com.mercial development of outer space and its untbreseen risks and challenges, much research concerning space commercialization remains to be done. Such research covers many fields, including management of space "factories," labor costs for space work, safety, robots in space, space medicine, outer-space travel markets, burial in space, UFOs, sabotage of (and antisabotage systems for) business operations physically located in space, and new technologies that overnight may render obsolete some of our present awe-inspiring technologies. G T h e conlmercialization of o u t e r space is big business, involving billions of dollars annually. Countries such as the U.S., the USSR, West Germany, France, and J a p a n are involved. Well-known international corporate giants such as IBM, Rockwell International, McDonnell Douglas, Lockheed, 3M, and Eastman Kodak are spending billions of dollars annually on space R&D. T o u r i s m companies, such as Society Expeditions, are beginning to explore space travel markets. Obstacles or barriers to entry for industry include technology requirements and costs, the profit squeeze and long payback periods, the large capital outlays required, the perceived risks and uncertain markets, competition, and safety insurance concerns. On the other hand, lucrative opportunities in the commercial development of outer space include defense, remote sensing, conamunications satellites, and ground-based support. But these opportunities exist mainly for powerful, wealthy, and well-known corporations with proven track records. iven the t r e m e n d o u s expenses involved in space exploration, the full commercial exploitation of space is several decades away. Governments must play a central role in the economic development of outer space, just as they did in the development of the aviation, shipping, and railroad industries. Space business is long-term, risky, expensive, and not for the [hint of heart. Space exploration and development in the twenty-first century may be, however, what aviation, electronics, and computers together are in this century. Space represents a new business frontier, several decades away fl'om maturity. [] G