Strategizing for NASA, Part 1: The United States Postal Service and the Porter Five Forces

In June 2014, the National Research Council (NRC) released its report on the future of human spaceflight, “Pathways to Exploration: Rationales and Approaches for a U.S. Program of Human Space Exploration.”  At its heart is a question of strategy – what should it be to move forward with a meaningful and successful path?  In contemplating the way forward, some very basic elements of strategy need to be brought to the forefront and discussed.  Over the next few postings, I’ll share some of the elements of strategy that caught my eye in recent studies, and how they might apply to NASA.  Most of these elements arise from case studies of other entities in the public and private sectors that faced questions of strategy.  Some were successful – others not.  There is something to learn in each case, and it is my goal to show how these lessons apply to NASA.

First of all, I’ll start with the United States Postal Service (USPS), which is an independent agency of the United States federal government that provides postal service.  The USPS once had a monopoly by law for the delivery of parcels and packages within the United States.  An analysis of the USPS situation via the Porter Five Forces shows the erosion of competitive advantage that can occur even for government monopolies that ignore the landscape of change around them.  Similar to the USPS situation, NASA had a “competitive advantage” as a United States government monopolist, and with time that competitive advantage eroded.  The morphing of the human spaceflight industry from government-dominated in the twentieth century into a commercial industry for the twenty-first century can be analyzed using the same Porter Five Forces analysis:

  1. Historically, internal rivalry in human spaceflight has been within the domain of governments competing for “soft power” advantages.  With the emergence of multiple commercial firms, this rivalry will shift from soft power to economic rivalry.  Both lead to a high degree of rivalry and an unfavorable force to the industry.
  2. For human spaceflight, barriers to entry that were once sky high (forgive the pun) are slowly coming down. Although capital requirements remain high, the advancement of technology, and various state and federal government policies to license and invest in the commercial space industry, are helping to drive down the barriers for new entrants. This poses an unfavorable force to incumbents within the industry.
  3. Consolidations in the aerospace industry, a major supplier, have shifted power slightly from the human spaceflight industry to suppliers over the last fifty years.  The emerging nature of the commercial side of the industry, driving new kinds of relationships with new suppliers, counteracts the consolidation trend somewhat.  Therefore, the industry is probably in a neutral position today regarding supplier power.
  4. Similarly, buyer power for human spaceflight capabilities has shifted slightly away from the industry.  In the past, governments were self-serviced buyers based on national policies with essentially no price sensitivity.  Today, governments remain as potential customers with some degree of price sensitivity due to budget constraints, although governments are not as price sensitive as non-government buyers.  Hence, this is probably a neutral position for the industry today.
  5. The threat of substitutes is high.  From a government standpoint, it can choose to develop its own human spaceflight services if commercial ventures fail. Likewise, commercial firms threaten government-provided capabilities.

The lesson from the USPS case is that monopolies within the government can lose their competitive edge if they attempt to coast on the momentum of the past, while the landscape of the industry changes underneath them.  That happened in package delivery for USPS, and is happening today in human spaceflight for NASA.  I also offer from the Porter Five Forces analysis that human spaceflight as an industry is unfavorable, indicating the tremendous strategic challenge for anyone wishing to compete in that space.

Next time: Disney and the Resources Based View

Strategizing for NASA, Part 1: The United States Postal Service and the Porter Five Forces