When have you last walked into a supermarket and declared that for you to buy anything here they will have to accept your terms? “Never” is likely the answer. However, why is space dominated by customers who feel any business should strictly be done by their rules alone? Lets have a look!
When to negotiate, when to dictate and when to accept terms.
In theory equal partners both negotiate the terms of business. However, in reality one partner usually has bigger power than the other. In my example with the supermarket, there is a significant disparity – one big seller, many small buyers. They big seller is kept in check ideally by several other sellers (i.e. other supermarkets) offering similar products so that the buyers can collectively or individually bring their business to the competition.
l’etat c’est moi
In the space industry however you usually have one big buyer (space agency or a system prime) that makes all the rules and the seller either accepts them or will have no business.
This strategy works well as long you see space products as pieces of art that are commissioned by a benevolent ruler. Unfortunately if the space industry is to mature we need to move away from this concept.
By setting the rules the buyer is like a sun that all the little suppliers rotate around.
By abandoning the idea of space being a piece of art and rather being a tool to do a task it becomes obvious that there is innovation possible by producing similar products in larger quantities at lower costs.
To achieve this a seller needs to be able to comoditize their product. Meaning instead building something for one customer it needs to be usefull across all (or at least a large fraction of all) users.
You can have this satellite in any color. As long as its black.
In the industry I am infamous for to sell commercial of the shelf products only according to my own terms and conditions. If asked to accept yours I usually give the Hobson choice. This is not to bully you but to protect the business.
A price for a COTS product has been calculated under certain assumptions.
Even small changes may make business unviable for all parties.
If you doubt me remember that the car industry only really took off once a guy decided to severly limit the (colour) choices of his customers.
You cannot have everything
A few years back I was sitting in a panel discussion with colleagues from OHB and Airbus who argued that their companies pride themselves to serve any customer. This is not true to my experience. Sometimes your best strategy may be to send away a customer that is not fitting your business. In other words: a company like Aston Martin will serve a certain kind of customer which Toyota is not likely to satisfy (and vice versa).
One common example of a customer that I usually send away is one that is shows interest in COTS products but then sends over a list of requirements that costs more money to read than the equipment sales price.
Wanting to buy a low cost product but giving your supplier a 100 page compliance document does not work.
Another customer you want to avoid is those who by buying your product is making you sign on to their terms of conditions, which consist of an already beefy main document with hundreds of pages of reference documents.
ESA, I am looking at you!
What can we do to improve the situation?
I think we are on a good way. Almost all players have accepted that there is a need to adapt to the changing times. The challenge is we are still stuck in between chairs. Unlike the supermarket who will laugh off any attempt to force the terms of the buyer there is still tremendous momentum to make you bend to the ways of old.
Recommendations to fellow new space companies
The space agencies still wield plenty of (purchase) power and often have some kind of monopoly in their national marets. I certainly have not heard that one space agency has to compete with another for tax payer money when implementing a mission. Therefore, at some point you may find yourself wondering what could be wrong to bend to their will in a bid to gain business?
The industry is full with once hopeful innovators that under customer pressure transformed into just more of the same.
My recommendation is however that if you want stay a new and innovative company, it may not be the wisest choice to look for business from the big guys.
Recommendations to Space Agencies and Large System Integrators
You are the gatekeepers and rulemakers in the business. At the moment nobody will be able to go around you. That said, don’t overreach. If you keep molding everyone into perfect little copies of yourself you are losing out on the potential of change. At some time you might find yourself swept away by the tide – that is once the tax payer decides that the times of the 200 Million EUR satellites are over.
How can you help:
This text is part of a series of articles in which the author sets the framework to start a discussion about the wrongs of the space industry. If you have experienced similar things, leave a comment. Other views and opinions are very welcome, too, as they may present a way forward. Please be kind to each other.
Disclaimer
The author’s views are his own do not represent the views of his company Berlin Space Technologies.
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