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The final frontier: A leader’s guide to the space economy

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ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

Brought to you by Liz Hilton Segel, chief client officer and managing partner, global industry practices, & Homayoun Hatami, managing partner, global client capabilities

Few areas of the economy are as dynamic or pervasive in our day-to-day lives as outer space. Space-based technology is improving at a breakneck pace, supporting an ever-growing number of applications that we use here on Earth. And like the universe itself, the business potential seems limitless. McKinsey research suggests that the space economy is at an inflection point: it’s poised to nearly triple in size by 2035, and many industries have something to gain from the connectivity, mobility, and data capabilities that outer space offers. This week, we consider space’s strategic future and how the cosmos could help us solve some of our greatest challenges at home.

AN IDEA

An image linking to the web page “The case for space” on McKinsey.com.

Set a space strategy

There’s a certain romance about space. But its practical applications have made it more accessible and connected to our daily lives than ever—from how we watch movies and stream content to how we track packages to how we grow crops. In a recent episode of The McKinsey Podcast, senior partner Ryan Brukardt explains the ins and outs of the fast-growing space economy and its implications for business and society. “Everybody needs to have [space] in their strategy,” Brukardt says. As space-based innovations grow apace, so does the number of companies that can benefit from them. According to McKinsey global managing partner Bob Sternfels , Brukardt, and colleagues, it’s important for leaders in all industries to bridge the gap between the space community and their customers. They can do so by setting a vision for capturing value from space-related advances, even if it means disrupting their own business; by investing in space through new partnerships or a space-dedicated business line; and by joining the broader dialogue about the space economy’s future to ensure that its benefits are as far-reaching as possible.

A BIG NUMBER

>1,000

That’s how many times the cost performance of satellites has improved in the past five to ten years. According to McKinsey’s Daniel Pacthod and colleagues, such rapid progress has enabled a proliferation of satellite-based use cases, including the ability to observe the effects of climate change on every corner of the planet. And there’s even more that satellites can do to advance sustainability here on Earth . The space sector can do the same, the authors say: for example, by tracking emissions, rating the sustainability of satellite missions, and setting targets for net-zero debris in orbit .

A QUOTE

“Don’t get excited about a new technology; instead, get excited if your particular technology addresses customer problems better than any other solution.”

That’s Peter Platzer, CEO of Spire Global, dispensing advice to other space start-ups. In an interview with McKinsey, Platzer explains that a space-based business is like any other: focus on meeting customers’ needs in a way that only your company, or your technology, can. But space’s potential reach goes far beyond the sector itself, similar to the computer industry’s rise to ubiquity. “We have a few dominant internet players today, but there are almost no companies that don’t use the internet and computers,” Platzer says. “Today, the concept that even large companies would have a private satellite constellation is pretty absurd. I think in 15 years, it will be commonplace.”

A SPOTLIGHT INTERVIEW

An image linking to the web page “Making aerospace ‘diverse and dynamic’: An interview with Airbus U.S.’s Debra Facktor” on McKinsey.com.

While the space economy’s future is far from certain, one outcome seems probable: the legion of space-focused stakeholders will grow. For Debra Facktor, head of U.S. Space Systems for Airbus U.S. Space & Defense, this cohort should include women and other groups who are historically underrepresented in aerospace, as well as those outside STEM. “People who know how to communicate, people who can draw up contracts, experts in political science, experts in the arts—these are all important parts of our space ecosystem,” Facktor says in an interview about the future of aerospace and its workforce. Facktor also notes that the long-standing dynamic between private and public sector players is already evolving. “Commercial companies will start challenging the assumptions that the government makes and investing a lot more in rapid-cycle R&D. The government might then take those commercial investments to a new level. We’re already seeing a few examples of that.”

SPACE CASE

An image linking to the web page “Can better governance help space lift off?” on McKinsey.com.

What goes up must come down, at least when you’re in Earth’s gravitational pull. But after an object from the International Space Station crashed into a family’s home in the United States, the lack of a legal framework relating to space junk —and who’s responsible when it falls on personal property—has raised a few eyebrows. Indeed, as space gets increasingly crowded, the need for good governance is greater than ever. A more structured approach to managing the space economy’s risks to infrastructure, data, and people (whether they’re on, or orbiting, the Earth) is key to ensuring its future growth.

Lead by shooting for the moon.

— Edited by Daniella Seiler, executive editor, Washington, DC

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by "McKinsey Leading Off" <publishing@email.mckinsey.com> - 04:42 - 17 Jun 2024

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The final frontier: A leader’s guide to the space economy

Set a space strategy

“Don’t get excited about a new technology; instead, get excited if your particular technology addresses customer problems better than any other solution.”

Introducing “The McKinsey Publishing Guide to managing yourself and others”