SpaceX Case Study No.3

With reference to an organization of your choice, discuss the ways in which innovation can
influence organizational change
What is SpaceX?
- SpaceX is a private limited company
- Founder: Elon Musk in May of 2002
- When PayPal was bought by eBay, Elon Musk was left with a 11.7% share of the
company which translates to $165M
- Musk had a great interest in space exploration even though the public interest in
space has gone down since the Apollo-era
- Musk wanted to send a greenhouse to mars to terraform and colonize it, the only
problem was that launching payloads to space, and especially mars was very
expensive (around $400M per satellite launch, by the United Launch Alliance (ULA))
- Musk wanted to disrupt the market by finding a way to reduce the launch prices by
1/10th of what the market offers
- One of the reason why launch prices are expensive is because the space exploration
is an oligopoly market, meaning that there are a few big firms with a big market
share making it very difficult for smaller companies to enter the market without
being ambitious or game changing
- Musk does not want to make SpaceX a public company because he does not want to
profit out of it
Problems
- The problem in doing this is that by looking at the market, it could be considered
niche due to the fact that individuals do not purchase rocket launches, but
governments do.
- This results in a price inelastic market meaning that even though the price of the
rockets is going down, consumers aren’t consuming more rocket launches rather,
governments purchase rocket launches and they don’t really care about the costs of
each launch
Innovation
- Wants to terraform and colonize mars
- SpaceX is currently using reusable rockets, so once the solid rocket booster (SRB) has
reached a certain height they will break off the main stages of the rocket and guide
themselves back to the launch pad. After they have touched down SpaceX will then
refurbish the used boosters to be used in the next launch. This saves time and
money since refurbishing an SRB is much cheaper and time efficient compared to
constructing another set of SRB
- SpaceX’s competitors (i.e. NASA, ULA, etc.) are aggregators, meaning that they
purchase individual parts from different manufacturers and build it up and piece it
together to make a single rocket. This means that NASA and ULA has a long supply
chain with other B2B firms, leading to an increase of price because of every
manufacturer having to sell the product with a slight markup of value to make a
profit. SpaceX produces 85% of their rocket components in-house meaning that they
could send rockets up to space with a much cheaper launch price.
o A radio sourced from another manufacturer may cost upwards of US$50,000-
US$100,000
o SpaceX’s in-house radio costs $5,000 due to no other supply chain
o By having no other supply chain, Space X can monitor their own quality
control to make sure that the components they use are guaranteed to work
well with the spacecraft
- Currently with SpaceX’s Falcon Heavy rocket they are able to send 63 tonnes to the
geostationary transfer orbit (GTO) for $90M, more than 1/4th the
- SpaceX’s other revenue stream is by sending internet satellites to space and
providing users with high speed internet
o If they are able to get 50 million people to use the service it could bring in
$30 Billion for SpaceX that will be reinvested in R&D-ing for the rockets
Organizational Change
- Because of this innovation that SpaceX has made to disrupt the market they had to
cope with some organizational changes
- One of those changes is having its production plant still in the US, while most
companies are producing their products abroad in cheaper labor markets, SpaceX
keeps producing rockets in California because of the ease of communication
between the production area and the engineers
o Speaking of ease of communication, SpaceX has its production facility and
R&D facility all in one roof. This is to make communication much easier and
faster
- SpaceX doesn’t want to become a public limited company, Elon Musk is afraid that if
he does make SpaceX go public it, he will have to fill the needs of other stakeholders
& shareholders instead of focusing on what his final goals are.

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With reference to an organization of your choice, discuss the ways in which innovation can

influence organizational change

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