Case Study: How This Company Reduced Costs by Over 90%

By Sarah Morrison

Sarah Morrison is an entrepreneur, chemical engineer and former strategy executive with over 10 years experience in banking, insurance, management consulting, oil and gas, and capital intensive industries. She is an experienced leader known for building high-performing teams and driving growth and innovation.

I recently came back from a trip to California in November. While I was there I witnessed a rocket launch. It was Space X’s Falcon 9 that delivered 20 Starlink satellites to orbit in that single launch.

While I was standing there and witnessing the launch, I couldn’t help but think — what a time to be alive! 

I did a quick search on some SpaceX data:

• 118 total launches in 2024, breaking the previous record of 98 in 2023.
• 111 reused booster missions in 2024, showcasing rocket reusability.
• ~7,000 Starlink satellites launched to date, enabling global internet coverage.
• 418 full mission successes to date, demonstrating its significant role in space exploration.

It reminded me of how the story behind SpaceX is a remarkable example of innovation in action.

What if all boards were the catalyst and enabler for this type of thinking for their organizations? In fact, with management often heavily focused on operating the business, shouldn’t this be one of the primary purposes of the board?

The Story

Until recently, space exploration was limited to the government domain, and the cost of space exploration was astronomical.

For decades, NASA was the leader in space innovation, however its approach to rocket design and manufacturing often relied on legacy systems and high-cost suppliers. NASA’s space missions were few and far between — sometimes nearly a decade in between.

Until SpaceX came along and radically transformed the industry. The comparison of SpaceX versus NASA can be summarized in the table below.

Data: SpaceX vs. NASA

SpaceX Enters the Arena

When Elon Musk founded SpaceX, his mission was clear: reduce the cost of space exploration to make life multiplanetary. Using the first principles approach, Musk and his team started with the most fundamental aspects of rocket engineering and rethought every component. Rather than accept industry standards, SpaceX innovated from the ground up.

The First Principles Approach

First principles involve breaking a problem down to its fundamental truths and reasoning up from there. In SpaceX's case, this meant:

1. Reusability: Traditional rockets were discarded after a single use, a wasteful and costly practice. Musk argued that reusing rockets, much like airplanes, could slash costs.
2. Vertical Integration: Instead of relying on expensive suppliers, SpaceX manufactured 85% of its rocket components in-house, cutting costs significantly.
3. Material Cost Analysis: By analyzing the raw materials for rocket construction (aluminum, titanium, carbon fiber), SpaceX discovered it could build rockets for a fraction of the traditional cost.

How SpaceX Solved the Cost Problem

1. Reusability Revolution

SpaceX’s most notable innovation is the Falcon 9, a rocket designed for reuse. The first stage of Falcon 9 can land back on Earth and be reused for multiple missions. To date:

• A single Falcon 9 booster (B1062) has flown 22 missions, becoming the first to do so and proving the economic feasibility of reusability.
• Each reused booster saves $46.5 million per launch, drastically reducing the cost of access to space.

2. Low-Cost Manufacturing

• The cost of manufacturing a Falcon 9 rocket is approximately $62 million, compared to NASA's $450 million per launch for the Space Shuttle.
• By using in-house production and simplified designs, SpaceX cut costs while maintaining high performance.

3. High Launch Cadence

• So far in 2024, SpaceX achieved 118 orbital launches, a record-breaking cadence made possible by the company's efficiency and reusability.
• Comparatively, NASA's peak annual launch rate was 9 launches in 1985 during the Space Shuttle era. 

Impact on the Space Industry

SpaceX’s innovations have reshaped the space industry:

1. Commercial Spaceflight: By reducing costs, SpaceX made space exploration accessible to private companies and startups.
2. Starlink Constellation: SpaceX has deployed ~7,000 Starlink satellites, providing global internet access at a fraction of traditional satellite costs.
3. Government Partnerships: SpaceX has secured billions in government contracts, reinforcing its role as a strategic partner for NASA and the Department of Defense.

The Challenge to Boards

SpaceX’s ability to reduce rocket launch costs by over 90% is a testament to the power of first principles thinking and innovation. By focusing on reusability, vertical integration, and efficient manufacturing, SpaceX not only solved the cost problem of space exploration but also revitalized space exploration for humanity. 

How many businesses today could be described with the same challenges — high operating costs due to legacy systems and high-cost supply? The lesson in using first principles could be invaluable to resolving these problems.

Most boards live in the domain of oversight with some time allocated to strategy and risk. With global competition and the fast changing business models arising with advanced technologies, it has never been more important for boards, as servant leaders, to help our organizations challenge business models and paradigms.

A great challenge for boards is to create time and space to critically reflect on the strength of their business model, the competitive landscape, and future possibilities.

What if boards were the best they could possibly be and were catalysts in helping organizations transform into the SpaceX of their industry? Shouldn’t this be the ultimate board motivation?

Please note: the data presented in this article is based on publicly available information at the time of writing. Statistics will change over time due to ongoing developments in the aerospace industry.