Two Views on NASA Restructuring

Culberson-300x223

In space policy circles, the House Space Subcommittee held a hearing this month on the restructuring of NASA. I found two different perspectives on this hearing, one normative and one descriptive. (On perspectives, descriptive is “the way things are”, and normative is “the way things ought to be.” Neither is wrong; they are simply two different perspectives.)

The descriptive view is from the ever excellent Marcia Smith, who describes details from the hearing in “Witnesses Support Goal of NASA Restructuring Legislation, But Not Specifics”.

The normative view is from Paul Spudis, who always tells you what he is thinking; his account in “Stability and Instability in Space” is no different.

Some tidbits from the hearing:

Former NASA Administrator Mike Griffin testified that “our space policy is bankrupt” and that the current space policy implementation offers “no dream, no vision, no plan, no budget, and no remorse.” Mike is always good for a quote or two. One of my favorites from my brief time in Washington during his tenure as NASA Administrator was “I can explain it to you, but I can’t understand it for you.”

Discussions addressed three provisions for legislation, with my comments afterwards:

  • Create a Board of Directors to govern NASA and submit its own budget request directly to Congress without going through OMB. Did you know that a GS-12 at OMB is in charge of establishing NASA’s budget? (Well, that is stretching the truth a little bit, but not by much!) I’ll go out on a limb and put my stock on the NASA budget created by the proposed Board of Directors, rather than the one established currently by a GS-12 at OMB.
  • Appoint the NASA Administrator for a fixed term of 10 years. This is similar to what is done for the FBI Director, who is appointed for a 10-year term. Other executives appointed in a similar manner but for different lengths are the NSF Director and FAA Administrator, who are appointed for six and five years, respectively.
  • Use “long term” contracting to permit NASA to contract for certain space acquisition needs at the outset. With today’s procurement restrictions, even though NASA authorizes the execution of the entire scope of a contract at the outset, the contract is still funded and budgeted on an annual basis. Using “long term” contracting is a capability similar to one that DoD has in certain areas, such as shipbuilding, and should mitigate somewhat the year-to-year policy and funding fights…and we know those are common occurrences in Congress nowadays.

Dr. Spudis uses the hearing as more evidence that the current space policy is a mess. According to Dr. Spudis, NASA’s space policy implementation has as its centerpiece a “#JourneytoMars” PR campaign, which he likens to “a hodge-podge of real hardware and fake missions, with a thick icing of Hollywood schmaltz…” This is clearly a normative argument.

Dr. Spudis also uses the hearing to support his ongoing narrative that US space policy needs to be adjusted to include a return to the lunar surface for longer-term stays and utilization. On this point we agree. Some of the comments to Dr. Spudis’s article are worth a read, too.   Many are in keeping with the normative tone that Dr. Spudis uses throughout his writings on space policy, but nevertheless raise valid points worth further discussion.

Overall, both articles are good reading about what is happening today in space policy circles. As for the likelihood that we will see any of the provisions incorporated into a bill to be enacted into law, it’s anyone’s guess. As to election politics, I fully expect space policy to play little to no role in the upcoming Presidential elections. I anticipate that it will be at least a year after the election – no sooner than early 2018 – for the new Presidential administration to decide if it is time to change course – yet again. Meanwhile, those of us in the space business will continue working towards the future.

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Two Views on NASA Restructuring

Poking at US Space Policy

Dr. Paul Spudis published two articles in recent days that caught my attention. The first discusses a proposed Chinese mission to the far side of the Moon, and the second discusses the search for life on Mars.

In total, the two are a continuing theme of questioning US space policy, and are a good read. Looking at both in a big-picture sense, one has to wonder why the US is choosing to pass up on developing cislunar space, treating it as nothing more than a proving ground for developing an eventual mission to Mars.

Food for thought.

Poking at US Space Policy

Target Out of Canada

target-canada-office

There is a reason why Canada had long been a popular first step in international expansion of American companies, and for Target it was no different. Numerous restaurant chains, such as Baskin Robbins, Burger King, Dairy Queen, Little Caesars, McDonalds, Popeyes, Quiznos and Wendy’s have been active in Canada for years, some since the 1960s. Retailers were also drawn to Canada: Sears arrived in 1953 through a joint venture, and Costco, Home Depot and Walmart arrived through acquisitions in 1986, 1992, and 1994, respectively.  In 2010, more than ten percent of Canadians had shopped Target stores in the United States, and 70 percent of the population was familiar with the Target brand. Therefore, it made sense that Target would be drawn to Canada for its first foray into international expansion.

Target followed the acquisition model established in Canada by Cosco, Home Depot, and Walmart. It purchased the Canadian discount chain Zellers in 2011, and organized Target Canada with headquarters in Mississauga, Ontario. It planned to convert over a hundred of the former Zellers locations into new Target stores. After two years of planning, Target opened its first three stores in Ontario on March 5, 2013. Target rapidly opened stores across Canada over the next 21 months, eventually growing to 133 stores. Yet on January 15, 2015, Target Canada filed for bankruptcy, citing huge losses of over two billion dollars and its inability to meet payroll.

What happened to Target in Canada?

Some news accounts – especially from Canadian sources – blamed differences between the Canadian consumer and the American consumer for Target’s failure. Others blamed Target’s rapid expansion across Canada coupled with its historical shortcomings in supply chain management, along with marketing problems. The problem is that from a strategy standpoint, these are radically different challenges that require completely different strategic treatments. Was Target’s strategy failure in Canada really more of a cultural problem, or an operations management and marketing failure?

To examine the possibility of the former, I’ll broaden the scope beyond cultural concerns and examine the entire CAGE framework, defined by the distance in cultural, administrative, geographic, and economic factors between two countries. A CAGE analysis will tell us whether Target failed to take into account the differences between Canada and the United States in devising its Canadian strategy.

From a geographic standpoint, Canada and the United States share the largest international border in the world, with a length (excluding the Alaskan border) of nearly 4,000 miles. About 75 percent of Canada’s population lives within 100 miles of the border with the United States. The population distribution across Canada somewhat resembles the United States in an east-west sense, with greater densities on the coasts and more scattered population centers in the middle. Therefore, geographic distance between Canada and the United States in the CAGE framework is about as small as it can get; the challenge is one of managing a supply chain that either must address the east-west population distribution within Canada, or manage customs in crossing the border between Canada and the United States. Neither is an unfamiliar strategic problem for any company with supply chain experience.

From an economic standpoint, the cost of labor is generally higher in Canada than in the United States. Minimum wages are higher in Canadian provinces, and the taxation burden is higher. Previous to Target’s entry, the Canadian dollar was weak relative to the US dollar; however, a stronger Canadian dollar and a robust economy following the financial crisis of 2008-09 made the Canadian market very attractive for entry. Supply of real estate is more limited in Canada versus the United States; the number of lenders for retail development is fewer, so access to capital is harder. (This is a reason why many retailers choose to enter through acquisitions–the path chosen by Target in Canada.) Canada’s economy is comprised of regional commercial centers that are far apart, and to some extent, independent of one another. Yet in 2011 sales per square foot in Canadian malls were nearly 50 percent greater than sales per square foot in American malls. Therefore, despite the higher cost of labor and limited real estate market, other economic conditions such as exchange rates and sales per square foot made an entry into Canada very attractive in the early 2010s. (Foreshadowing hint: how Target managed expectations around price differences relative to the different cost structure is a point I’ll discuss later.)

From an administrative standpoint, there are some differences between Canada and the United States in language, labeling and other regulatory requirements. All mandatory labeling information must be in English and French (the official languages of Canada), and measurements must use the metric system. Provincial franchise disclosure laws have a higher requirement for disclosure that can trip up an American company if it is not well versed in those disclosure requirements. Yet Canada follows rule by law just as the United States does. (One of the quaint differences is that lawyers robe in court in Canada, but at least don’t wear wigs.) Although the differences (robes included) can add to costs, none are considered a major impediment to strategy.

Lastly are the cultural differences. Some of Canada’s population hubs are immensely multi-cultural; others are less so. Consumer differences are sometimes driven by the generally colder weather. However, the population distribution and consumer differences are not markedly different than that obtained by taking a northern slice across the United States, and accounting for this difference strategically should have been straightforward for a company founded and headquartered in Minneapolis with a store presence in a similar variety of settings across the United States. Target’s market research prior to its expansion into Canada indicated that customers wanted the “true U.S. Target.” Based on a smart approach to accounting for regional differences and stated consumer preferences, addressing the above cultural differences should not have been an insurmountable strategic problem.

The above CAGE analysis recognizes that Canada does have uniquely Canadian factors. However, none of the CAGE dimensions – cultural, administrative, geographic, and economic – were the key contributing factor to Target’s downfall in Canada. Instead, its downfall was a problem in executing a manageable strategy in operations management, along with a failure in marketing. The company has admitted it botched management of its supply chain with a rapidly expanding store footprint across Canada, which often led to empty shelves. Marketing, long considered Target’s forte, focused too much on conveying the sheen and trendiness of the Target brand. Target took its same “Expect More. Pay Less” tagline to Canada, and it is reasonable the Canadian consumer took that to mean they would expect more and pay less than they did in the United States, now that Target was in Canada!  Target augmented its slogan with “Target Loves Canada”, yet failed to set consumer expectations that because the cost structure is slightly higher in Canada, prices would be, too. These are a failing of operations management and marketing strategies that have nothing to do with the CAGE differences between Canada and the United States.

The bottom line is that Target’s customers in Canada wanted the exact same Target they experienced in the United States, and they didn’t get that.  Target failed in its operations management and marketing strategies in delivering to its Canadian customers. That is why Target in Canada failed.


References

Austen, I. and Clifford, S. (2012, September 14). American Retailers Face Challenges in Expanding to Canada. Retrieved from http://www.nytimes.com/2012/09/15/business/american-retailers-expanding-to-canada.html?_r=2

Canada Facts. National Geographic. Retrieved March 20, 2015 from http://travel.nationalgeographic.com/travel/countries/canada-facts/

Evans, P. (2015, January 15). Target closes all 133 stores in Canada, gets creditor protection. Retrieved from http://www.cbc.ca/news/business/target-closes-all-133-stores-in-canada-gets-creditor-protection-1.2901618

Hanuka, B. (2014, March 5). The Dangerous Mistake U.S. Retailers make in Canada. Retrieved from http://www.huffingtonpost.ca/ben-hanuka/us-retailers-canada_b_4901030.html

Kopun, F. (2013, November 22). Cool Canadian welcome hurts Target’s profits. Retrieved from http://www.thestar.com/business/2013/11/22/cool_canadian_welcome_hurts_targets_profits.html

Kopun, F. and Sparks, R. (2015, January 15). Target Canada lessons: Six ways not to expand into Canada. Retrieved from http://www.thestar.com/business/2015/01/15/target-canada-lessons-six-ways-not-to-expand-into-canada.html

Prentice, B. and Dahlhoff, D. (2015, January 23). Why Target’s Big Canadian Expansion Went South. Retrieved from http://knowledge.wharton.upenn.edu/article/why-targets-canadian-exspansion-went-south/

Target Canada. Wikipedia. Retrieved March 20, 2015 from http://en.wikipedia.org/wiki/Target_Canada

Townsend, M. (2015, January 22). Why Target is Raking Up Its Maple Leaves. Retrieved from http://www.bloomberg.com/news/articles/2015-01-22/why-target-is-closing-up-shop-in-canada

Weinberg, L. (2012, August 10). Why Canada is still the best place for U.S. brands to expand. Retrieved from http://business.financialpost.com/2012/08/10/why-canada-is-still-the-best-place-for-u-s-brands-to-expand/

Zimmerman, A. and Talley, K. (2011, January 14). Target is Going Abroad – to Canada. Retrieved from http://www.wsj.com/articles/SB10001424052748703583404576079690417970136

Target Out of Canada

Twenty Years Ago: The STS-63 Mission

STS-63 Plaque Hanging

(Plaque hanging ceremony following the end of Space Shuttle mission STS-63.  That’s me on the left.)

This week marks the 20th anniversary of the launch of Space Shuttle mission STS-63. A few years ago I wrote a retrospective of that mission. It’s worth revisiting in light of the anniversary this week, and the significance of that mission to the short-term evolution of NASA’s human spaceflight endeavors.

With the return to flight in 1988 following the Challenger accident in 1986, NASA’s Space Shuttle missions were focused on the exploration of low Earth orbit. Numerous scientific missions were flown in the following years, consisting of laboratories in the Space Shuttle cargo bay or in satellites that were deployed and retrieved by the Space Shuttle. I cut my teeth in orbital rendezvous during this period, focusing on developing piloting procedures for flying the Space Shuttle and understanding its onboard guidance and navigation systems. During the late 1980’s and early 1990’s we knew that eventually we would start construction of the space station. At the time, we didn’t know when.

The fall of the former Soviet Union played a key role in shifting US space policy and implementation in human spaceflight. The new Russia that emerged and the United States forged a cooperative space policy, one in which the United States would fly Russian cosmonauts onboard the Space Shuttle, and Russia would host US astronauts onboard its second generation space station, Mir. STS-63 marked the first mission of the Space Shuttle to Mir, executing a “dress rehearsal” of the rendezvous and docking of the two spacecraft. Building relationships between former adversaries was a big challenge and a quantum shift in how one viewed the future of human spaceflight. Rather than individual nationalistic efforts, the Shuttle-Mir program demonstrated that long-term international cooperative efforts are possible. Despite the huge CAGE distance between the United States and Russia, the program paved the way for the current International Space Station.

Shuttle-Mir

From a personal standpoint, it is rather remarkable that as an early-career engineer, I would get the opportunity to be in the forefront of overcoming obstacles, forging relationships, and demonstrating the incredible possibilities of international cooperative efforts in space – one that continues to this day. As I look back on this special anniversary of Space Shuttle mission STS-63, I see how far we’ve come. How far we go is up to us.

Twenty Years Ago: The STS-63 Mission

LED Versus Incandescent Bulbs (An Update)

In the post, LED vs. Incandescent Bulbs, I made the following case: that for high-usage incandescent bulbs, it makes sense to replace those bulbs with LED bulbs, because the cost of the bulb (the “fixed cost”) is more than covered by the savings in electricity (the “variable cost”). I also stated my intent to start replacing the BR-30 incandescent bulbs in my kitchen with LED equivalents once they started burning out.

That event happened two weeks ago. I had a BR-30 incandescent bulb burn out in the kitchen.  I also noted as part of Halloween preparation that I had two burned-out BR-30 incandescent bulbs on the front porch. Therefore, I decided to replace all five bulbs in the kitchen with LED bulbs, and use two of the four remaining incandescent bulbs from the kitchen to replace the two burned-out bulbs on the front porch, with two spares. However, when I visited amazon.com to purchase the Philips BR-30 bulbs I found earlier this year for 19.95 each, I couldn’t find them listed. Bummer.

Later that week, on a separate errand to Home Depot, I looked through the lighting section to see what was available. Here is what I found:

Philips SlimStyle 65W-equivalent BR-30 soft white bulb, 9.5 W, 650 lumens, 2700 K

http://www.homedepot.com/p/Philips-SlimStyle-65W-Equivalent-Soft-White-2700K-BR30-Dimmable-LED-Light-Bulb-452383/205337959

It was listed for $14.97 – a better price than the bulb I found earlier this year on amazon.com, and one whose brightness (650 lumens) and color spectrum (2700 K) are even closer to those of the incandescent bulbs I have. Because the fixed price of the Home Depot bulb is $5 less than the earlier LED bulb and the power draw is 1 W less, these shift the economics even more favorably for the LEB bulb versus an incandescent bulb. Here’s how.

At 12 cents per kilowatt-hour, the breakeven for the earlier LED bulb versus an incandescent bulb occurs at 2692 hours of operation, as I mentioned in the earlier post. At the same price for electricity, the breakeven for the LED bulb from Home Depot occurs even sooner – at 1892 hours of operation. Beyond that point, the LED bulb is more cost effective than an incandescent bulb.

LED Update 1

The improvement of the Home Depot LED bulb versus the earlier LED bulb is due to two factors: (1) the lower fixed price – $19.95 for the earlier LED bulb versus $14.95 for the LED bulb from Home Depot, which lowers the “starting point” for the total cost line; and (2) the lower variable cost – the bulb from Home Depot draws 9.5 W versus 10.5 W for the earlier bulb, which lowers the slope slightly versus the equivalent line for the earlier bulb. (The earlier bulb results are not shown, but you can see them in the earlier post.) These two factors combine to reduce the number of hours necessary to reach the breakeven point.

Just as a reminder, the longer-term trend is again in favor of the LED bulb. Something I mentioned in the original post, but failed to highlight sufficiently, is that the longer-term trend of the incandescent bulb is far dominated by the cost of electricity and not in the replacement cost of the bulb. What this means is that in the longer trend it doesn’t matter if you are unlucky and your incandescent bulb burns out after 100 hours, or if you are extremely lucky and your incandescent bulb never burns out – the cost is dominated by the cost of electricity. You can tell this by the plot, where the upward “zag,” indicating a new incandescent bulb purchase, is so small c the upward slope of the line, representing the cost of electricity.

LED Update 2

From an economic standpoint, the fundamental question remains this:  Will I operate my BR30 incandescent bulb long enough to where I’ll exceed 1892 hours of lifetime operation? If the answer is yes, buy an equivalent LED bulb.

If the earlier post caught your interest, hopefully this updated analysis will inspire you even further.

By the way, I replaced the bulbs in the kitchen last week.  After a solid week of operation, I notice no difference in brightness and light quality of the LED bulbs versus the incandescent bulbs they replaced. And I didn’t expect a difference – the color spectrum is the same (2700 K, the soft white lighting I prefer) and the brightness is essentially the same (650 lumens). I’m very pleased, and I’m sure my wallet will be pleased with the decreased cost in electricity I will start seeing.

LED Versus Incandescent Bulbs (An Update)

Strategizing for NASA, Part 8: Conclusion

After reading the National Research Council (NRC) report on the future of human spaceflight, “Pathways to Exploration: Rationales and Approaches for a U.S. Program of Human Space Exploration,” I was motivated to explore key questions about strategy. In writing this series, I introduced a sampling of basic elements of strategy that need to be brought to the forefront and discussed:

  • Competitive advantage can erode, even for government monopolies. In part, this is driven by inertia and in part by the changing competitive landscape of an industry as viewed through competitive forces.
  • Enduring, strategic resources exist. These resources are unique, durable, appropriated, non-substitutable, and clearly superior. The most enduring strategic resources contain more of these characteristics than those that are less enduring.
  • Wiring innovation into an organization also requires fundamental restructuring of the organization. Investing in innovation without leadership support, on the periphery, or hoping for spontaneous innovation that somehow percolates into revolutionary products and services, is not a recipe for a successful strategy.
  • Inertial effects and the sense of loss with strategic change are powerful resistive forces to change. They require a concerted effort by leadership to overcome.
  • Reputation and culture can be valuable strategic resources. Those that contain value do not arrive overnight, but instead are cultivated through time and the deliberate nurturing by its leadership.
  • International distance is more than physical distance. Culture, political/administrative, other geographic and economic differences can drive distance between potential international partnership pairs. One must formulate strategy to counteract and mitigate the distance effect in as many dimensions as possible – the more, the better.
  • Strong leadership is needed to evolve strategy with the waves of technological advance; failure to do so leads the organization to obsolescence.

It is my assertion that any meaningful strategy for human spaceflight must address these issues at a minimum, or else face the consequences addressed in each.

Finally, to tie the above together, I’ll make an analogy between a strategic tool as a melody, and the combination of those tools as an orchestral arrangement. My bookshelf is full of melodies, whether it is Christensen’s Disruptive Innovation, or Collins’s Good to Great, each of which offers an insight into what constitutes a successful strategy for an organization. And yes, I find each of them compelling in a way, whether it is the disruptive forces proposed by Christensen, or the name recognition of successful companies with lasting strategies offered by Collins. Yet my key takeaway from writing this series is that not any one tool is sufficient to explain what makes a strategy successful. Instead, it is the richness of the full orchestral arrangement of tools that brings beauty to strategy. A Porter Five Forces analysis can paint the landscape of an industry. An RBV analysis can give an indication as to why certain strategic resources are enduring. A CAGE analysis can indicate the distance effects that must be addressed. And so on. We need them all, in combination, to make the beautiful music of a successful strategy for human spaceflight.

The entire series:
Part 1: The United States Postal Service and the Porter Five Forces
Part 2: Disney and the Resources Based View
Part 3: DARPA, Kodak, and Wiring Innovation
Part 4: The FBI and Transformational Change
Part 5: Veridian and the Role of Reputation and Culture
Part 6: Walmart in China and CAGE Differences
Part 7: Apple and Counteracting the Forces of Technological Obsolescence

Strategizing for NASA, Part 8: Conclusion

Strategizing for NASA, Part 7: Apple and Counteracting the Forces of Technological Obsolescence

The birth, near-death, and comeback of Apple is a topic of interest for a variety of reasons. Whether it is the leadership style of Steve Jobs, or the development of a lock-in model that increases the willingness to pay on the part of consumers, Apple is a rich, fertile ground for exploring a variety of business case studies. Today’s examination of strategy covers none of these. Instead, today’s focus is on technology, its evolution, and the difficulty of keeping pace in today’s world – with Apple as a key example. This examination of technological obsolescence has a direct implication to a future strategy for human spaceflight.

A 2012 case study1 of Apple examined the waves of technology generation that occur with time, and observed how extremely difficult it is to maintain a strategic advantage from generation to generation. Apple succeeded early with one of the first commercially available computers with a graphical user interface targeted for the consumer in the mid-1980’s, then rapidly lost ground to the highly successful Wintel duopoly of the mid-1990’s through early 2000’s. Today, the Wintel duopoly is struggling with the latest wave in computing – mobile – whereas Apple is succeeding with the iPod, iPhone, and iPad. As for the next wave of technology, is wearable computing next? Who will succeed, and who will fail? The answer to that question is tied strategy; the conclusion drawn from the Apple experience is that those who evolve strategy to ride the next wave are more likely to succeed than those who do not.

In considering waves of technology evolution and human spaceflight, there are numerous examples to explore. One such example is the Mission Control Center complex in Houston. Built in the mid-1960’s, it contained state-of-the-art command, control, and computational capabilities for its time, and remained near the forefront of those capabilities for almost 30 years. That’s how advanced it was for its time. But times have changed. Instead of leading, most of the capabilities available today in it and other similar Government-provided command, control, and computational facilities often lag the current “state-of-the-art.” This is due to a variety of causes: large fixed cost investments constrained by tight budgets, lengthy procurement cycles, and general bureaucracy. (An example of the latter is compliance with Section 516 of the Consolidated and Further Continuing Appropriations Act, 2013, Public Law 113-6, which prohibits the purchase of information technology from any firms with ties to China.) The change of position relative to technology in this example is not due to any fault of the dedicated workers. Instead, it’s a sign that it is extremely difficult to keep pace with the rapid advancement of technology and waves of technological obsolescence under the current strategic framework.

The key point is this: it is critical for an organization to recognize that whatever constitutes strategic advantage will eventually change. Strategy, to remain successful and relevant, must evolve with the waves of technological advance. Applied to human spaceflight at NASA, it is fair to assert that leaders must lead the way for evolving the human spaceflight strategy at NASA to push it to the technological forefront. Failure to develop a strategic direction to counteract the forces of technological obsolescence may lead to obsolescence of the organization itself.

Next Time: Conclusion

Previous entries in this series:
Part 1: The United States Postal Service and the Porter Five Forces
Part 2: Disney and the Resources Based View
Part 3: DARPA, Kodak, and Wiring Innovation
Part 4: The FBI and Transformational Change
Part 5: Veridian and the Role of Reputation and Culture
Part 6: Walmart in China and CAGE Differences

 


1Rossano, P. & Yoffie, D. (August 14, 2012). Apple, Inc. in 2012. HBS 9-712-490. Boston, MA: Harvard Business School.

Strategizing for NASA, Part 7: Apple and Counteracting the Forces of Technological Obsolescence