How New Entrants Are Changing the Rules in Aerospace

With recent advances in technology, more players are looking into innovations that are literally out of this world. On this episode of Mastering Innovation on Sirius XM Channel 111, Business Radio Powered by The Wharton School, guest Ellen Chang (C’88, WG’98), co-founder of LightSpeed Innovations, explained the changes occurring within the aerospace sector as new entrants become increasingly influential.

Chang discussed major aerospace developments such as small satellites, in-orbit services, and space tourism. As these continue to develop, we see greater collaboration across domains in the surrounding ecosystem, which includes artificial intelligence, biology, and private investment. Innovation in aerospace can look quite different than other industries, with greater risks due to longer time lags in feedback and physical dangers of failure. In such a dynamic environment, Chang believes that non-traditional entrepreneurs from the outside will lead business model innovation for aerospace through advantages like increased appetite for risk.

An excerpt of the interview is transcribed below. Listen to more episodes here.

Transcript

Ellen Chang (C’88, WG’98, Co-Founder of LightSpeed Innovations)

Nicolaj Siggelkow: As technologies are maturing, we are seeing an increase in activity. What are some of the technologies involved? Why do we see all this activity now and not 10 years ago?

Ellen Chang: You’re starting to see computing resources drop drastically in price, and then this sector picks it up, takes the plunge, and innovates around that. The CubeSat standard, which is a specific form factor for a small satellite, was actually accepted several decades ago – I think in the ’60s. But there has been, over the years, an adaption to the point where there’s a large enough group that knows how to design and build around CubeSats. The computing power, the chips that power these types of CubeSats, even the power battery capacity, all of these different components have gotten to the point where it’s fairly cost-effective to build these satellites. You can build them. High schoolers now are building them.

From a perspective of an aerospace manager, we can hire aerospace engineers that have actually flown a satellite now, which was never heard of before. You used to have to go and work. But long story short, coming back to your question, all of these come together and now some satellites are as low as $100,000, and they’re fairly computationally powerful. One of the requirements that has been relaxed was the expectation that these things had to last 20 years. Most of the folks innovating or using these know that they will burn up or get de-orbited in two years or so.

Sigglekow: Interesting.

Chang: They’re okay with that because the technology improvement is that fast, and so they think, “Well, fine. We’ll launch another one.” Two years later, technology has moved forward.

Siggelkow: You’ve mentioned already a whole set of companies that are playing in this field. There’s always the question: Is it the small guys who are innovating? Is it the new guys who have some other ideas? Elon Musk seems to have lots of ideas, and Jeff Bezos has some ideas. Then, we have existing firms in that space like your former employer [Northrop Grumman]. What roles do these different players play in this space?

Chang: I still see some of the folks outside of the traditional aerospace government-contracting group as more – maybe I’ll use the word – innovative from a business model perspective. They’re not afraid of managing that cost and taking risk because they own that whole value chain, whereas when you’re at a government contractor, oftentimes, your behavior is doing costless contracting or contracting with the government to find some of the requirements. Some of the large companies – Lockheed, Northrup, Daprime, Boeing – can push the government somewhat, but they also have that old business model. It’s taking them some time to shift around to think, “Hey, we want to take that risk. We want to go in and actually define some of the next generation products,” whereas you’ll have these entrepreneurs like Jeff Bezos, Richard Branson, and Elon Musk pushing forward possibly by their own personal challenges. Those are the two groups. What I can say is it has certainly inspired a lot of startups to come with different ideas. The challenge is the capital. With the space industry, in order to incept a new company, the capital is a lot lower, but it’s still not like a software company.

Siggelkow: Not an app.

Chang: These app companies, $25,000, if you want something, you get a lot of feedback on the web. It’s not quite there. There are a lot of entrepreneurs.

Siggelkow: Feedback is pretty expensive here, right? The thing blows up.

Chang: It still is. Yes, or it doesn’t launch. Right now, everyone is waiting for a launch opportunity, and the next one is 18 months from now, so it can be a challenge.

Siggelkow: Well, it’s exciting because it’s an industry that seems to be at its early phases with lots of entry and lots of reshuffling. Now, we’ve seen in a number of industries here on terra firma having winner-take-all dynamics: Amazon, Facebook, Google. Do you think this will eventually become a winner-take-all, or do you think this is an industry that inherently has to have number of people in it?

Chang: If the government will be involved, I have a feeling that it’ll continue to possibly play out in a “competimate,” or “frenemy” fashion. I think you’ll see them trying to do winner-take-all, but it’ll be a challenge. National security will continue to play, at least for the United States, so there’s going to be government management of that. In fact, regardless of all this activity, the government still is the largest buyer of Earth’s observation. They are a large buyer of communications capacity as well. They can influence the market, at least in the U.S., and that’s good.

On the other hand, the cost in innovation has come down, the innovation based on commercial technology. Everyone can now have access to a commercial technology, so you find our near peer competitors actually innovating around launch. India can launch. China can launch. Russia has always had launch, and that is causing the United States to react in an interesting way, trying to figure out how to stay ahead because our lead is eroding. Europe is definitely very strong: the U.K. and the European Space Agency. They’re very, very excited in investing, and the dollars are going farther because the innovation is cheaper now.

About Our Guest

Ellen Chang brings over 25 years of experience in strategy, business and product development in the technology and aerospace industries. Her career spans from the U.S. Navy as an intelligence officer to JP Morgan where she focused on exploring and facilitating investing in startups. She later founded her own start-up in the aviation industry where the team focused on building a B2B aviation part sourcing and brokerage focused on business jets. During her 12 years at Northrop Grumman, she held positions as a systems engineer and program manager, working in design and development of autonomous systems ranging from the Global Hawk to the Unmanned Carrier based unmanned aerial system.

As a co-president of the Wharton Aerospace Community and chair of the Wharton Angel Network SoCal Steering Committee, Chang frequently engages with investors, universities and industry on innovation strategy and market dynamics. Chang holds a bachelor’s degree in history (historiography) from the University of Pennsylvania, a MS in systems engineering from the Naval Postgraduate School, and an MBA from The Wharton School. More information can be found on the LightSpeed Innovations website or at her email, ellen@lightspeedic.com.

Mastering Innovation is live on Thursdays at 4:00 p.m. ET. Listen to more episodes here.

Somina Lee is a Production Assistant for the Mack Institute’s radio show, Mastering Innovation. She is a senior in the Huntsman Program, concentrating in Finance and Marketing & Operations Management at the Wharton School and majoring in International Studies in the College of Arts & Sciences.

Leave a Reply

Your email address will not be published. Required fields are marked *