“I know several thousand things that won’t work.” -Thomas Edison
Last month I participated in a panel at GEOINT 2018 about the future of commercial remote sensing. Moderator of the panel and former DigitalGlobe CEO Jeff Tarr opened the dialogue with a thoughtful question: “What does it take to be successful in this business?” To answer this question completely would be to write a blog post that makes War and Peace look like a pamphlet. So here’s the two-minute version instead.
There are many contributing elements to DigitalGlobe’s success over the past two decades, but these are the four that seem to be essential:
- Purpose. A strong, uniting purpose that consistently drives actions across the company makes it possible to attract the best team. Now a part of Maxar Technologies, our collective purpose is to create the connections and intelligence that build a better world. From donating imagery to support the responses to natural disasters like last year’s California wildfires and hurricanes Harvey, Irma and Maria, to helping The Gates Foundation map rural populations in Africa to distribute polio vaccines, DigitalGlobe’s team members see their impact on the world and feel proud. I view this commitment to purpose as foundational, and it’s much easier said than done. But purpose alone is not enough.
- Product/Market fit. Building and operating highly capable imaging satellites is capital intensive, so it’s important to build assets and deliver products that actually meet customer needs. If you’re off the mark with what you build in this business, it’s nearly impossible to recover because you have sunk a large investment in something that customers don’t want, can’t afford, or can get elsewhere. The original owners of the Iridium satellite communications network discovered this the hard way; after spending $5 billion to deploy a 66-satellite constellation, they couldn’t find enough subscribers willing and able to pay for the expensive hardware and services (particularly given rapidly expanding and far more capital-efficient terrestrial cellular infrastructure) and declared bankruptcy after nine months of operating the service.The infrastructure that supports DigitalGlobe’s operations – including satellites, ground stations, network infrastructure, cloud storage and many other things – was also a large investment. But because these systems were implemented specifically to meet customer needs, the company is able to operate profitably with more than $800 million in annual revenue.
- Customer Trust. DigitalGlobe’s business is about saving lives, resources and time, and its customers make big, long-term commitments on the basis of its products — decisions whose impacts usually far outweigh the cost of those products. If a government is willing to sign up for DigitalGlobe’s service in lieu of buying or building its own satellites, it must be able to rely on us for a long time, as building their own could take years. Customers like the U.S. Government, Google, Amnesty International and hundreds of others have relied on DigitalGlobe for years. For a product to be used by billions of people for military operations planning, commercial mapping apps and self-driving cars, it must be trusted as the “gold standard.”
- Capital Efficiency. Even when you build the right assets and offer the right products, you still need to make more money than you spend, otherwise you won’t be in business for very long! Capital efficiency is a measure of how much revenue an asset or product earns over its lifespan compared to what it costs to build and operate. It is not about which assets cost less, but rather the ratio of revenue generated to capital invested. Bulldozers cost more than hand trowels, but nobody uses the latter for building roads. If two companies introduce the same product or service, the company with greater capital efficiency tends to win, because it can offer better prices (good for customers!) while generating more profit (good for shareowners!). Those profits can then be reinvested to introduce new products and serve more customers in a virtuous cycle.
Maxar’s DigitalGlobe excels in all of these aspects. It has a strong purpose. It has an industry-leading product/market fit. Customers trust DigitalGlobe with their important missions because of its outstanding track record of product quality and delivery. And DigitalGlobe’s assets are by far the most capital efficient in the industry, by typically 10x or more when compared to new entrants.These are a few of the factors that anyone seeking to start a space company, invest in one or rely on one for their critical mission should consider. If a company isn’t able to meet these requirements, its long-term viability is highly questionable.
Header image (left): U.S. National Guard