Bigelow Thinks Big

Brian Shiro
Department of Space Studies, University of North Dakota, Grand Forks, ND 58202, USA

October 31, 2010

Despite its sometimes-secretive posture, Bigelow Aerospace has been increasingly more

open about its plans and progress (Foust 2007). As a privately held company, Bigelow is not

required to release annual reports or strategic plans. The company did not even publicly

announce its business plan until eight years into its existence in 2007 (Coppinger 2007, Covault

2007, Foust 2007). However, many speeches and interviews with company President Robert T.

Bigelow and Corporate Counsel Mike Gold have revealed the firm’s ambitious plans. From

these, we can glean aspects of Bigelow’s corporate strategy.

Strategy involves a firm’s “large-scale, future-oriented plans for interacting with the

competitive environment to achieve organizational objectives” (Pearce & Robinson 2005). It

helps answer questions of purpose, direction, methodology, rationale and value. The first task in

developing a strategy is to define an organization’s vision and unique reason for existence

through the development of a mission statement. The Bigelow Aerospace mission statement

reads (Bigelow Aerospace 2010):

“Since 1999 our mission has been to provide affordable options for spaceflight to
national space agencies and corporate clients. In 2006 and 2007, we launched our
orbiting prototypes Genesis I and Genesis II. Using our patented expandable
habitats, our plan is to greatly exceed the usable space of the International Space
Station at a fraction of the cost by developing our next generation spacecraft.”

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Although the mission statement does not detail the company goals and values in terms of

survival, growth, and profitability, it clearly defines the customer/market (space agencies and

corporate clients), products/services (affordable options for spaceflight), technology (patented

expandable habitats), and philosophy (fraction of the cost … next generation spacecraft).

After being disappointed with the way most private space companies were dependent on

government contracts in the late 1990s, Bigelow set out to found his own company based on his

entrepreneurial experience managing hotels and real estate. His plan is to offer low-cost

commercial volume in space for rent or lease to national space agencies and private sector

interests (David 2010b). The primary driver motivating customers will be microgravity research

and developing international astronaut corps (Klamper 2009). In July 2006 and June 2007, the

company successfully lofted its prototype inflatable Genesis I and Genesis II modules into orbit,

where they still circle today. These are forerunners to the larger, man-rated Sundancer and BA-

330 modules, which will have 180 and 330 cubic meter capacities that can house up to 12 people

(Covault 2007). Bigelow expects to have its three of its larger inflatable habitats in orbit ready

for human occupants by 2015 (Covault 2007, Foust 2010, Klamper 2010), pending launch

availability. He requires seven launches to get all components of the orbiting complex aloft and

one to two dozen per year to support their operation (David 2010b). By building usable real

estate in space, Bigelow wants to “facilitate … national dreams or corporate ambitions.”

Eventually, he sees his modules as having application beyond low-Earth orbit at Lagrange

Points, the Moon and even on Mars (The Economist 2010, Canon 2010).

Before firms can effectively deal with their external environment they must assess their

internal resources and capabilities. In its early years, Bigelow focused on developing its

spacecraft communications, command, and control capabilities, which will be critical for the

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successful, reliable operation of its spacecraft. After the two successful Genesis I and Genesis II

missions, Bigelow gained confidence in his team’s abilities and turned his attention increasingly

outward. Figures 1-6 illustrate the firm’s past, present, and future activities.

Figure 1: Exterior of Genesis I in orbit (2006-present). Figure 2: Interior of Genesis II in orbit (2007-present).

Figure 3: Mockups in Bigelow's Las Vegas facility. Figure 4: Artist's concept of a Bigelow station in orbit.

Figure 5: Cutaway model of the interior of the BA330. Figure 6: Model of Bigelow modules as a Moon base.

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 Although the commercial orbital industry may be immature, Bigelow Aerospace does not

operate within the proverbial vacuum. The company has adopted an approach that leverages

well-established existing technologies as much as possible. Like a real estate developer acting as

a general contractor, the firm subcontracts out 55-60% of all engineering component

development, leaving only 40-45% to be created in-house (Messier 2010). For example,

Bigelow licensed its signature inflatable habitat technology called “Transhab” and a

micrometeoroid shield patent from NASA. Developments of other key technological elements

were outsourced to ORBITEC (environmental control and life support system), Aerojet (aft

propulsion), and Dynetics (forward propulsion and attitude control systems) (David 2010a,

Klamper 2009, ORBITEC 2010). Bigelow’s corporate growth strategy would therefore seem to

be one characterized primarily by an informal type of backward vertical integration. This

increases its purchasing power with suppliers.

Rather than fighting a “two-front war,” as Mr. Bigelow likes to say, his company chose

not to develop its own launch vehicle capability but instead to buy launches from others (Canon

2010). Thus, the firm is constrained by the availability of cargo and crew transportation

provided by others. For example, the Genesis I and II craft were launched on Russian rockets,

which taught the firm to avoid ITAR and export control issues in the future by avoiding foreign

providers (David 2010a, Klamper 2009, Res Communis 2008). Bigelow has signed agreements

to buy flights on the SpaceX Falcon 9 and United Launch Alliance Atlas V launch vehicles

(Bigelow 2009). More recently, he has entered into an agreement with Boeing to collaborate

with developing their CST-100 crew and cargo vehicle (Putrich 2010). All of this points to

Bigelow’s strategy to use its buyer power to influence launch suppliers, but Bigelow is careful to

throttle the pace of their progress so as not to overwhelm the supplier markets (Foust 2006):

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 “We’re a customer for whoever can produce an economical, reliable, safe
transportation system that’s user friendly. It’s the other half of the coin. You have
to have some place to go, but what good is an exotic island if there are no boats to
get you there?”

This “build it and they will come” approach is a risky strategy. The timeline when

Bigelow expects to offer its services to paying customers has already slipped by a few years due

to the lack of any man-rated commercial spaceflight services to low-Earth orbit. Bigelow has

reportedly offered $760 million of his own money to get such a vehicle developed (Shiga 2008),

not to mention the more than $200 million he has already spent on getting his company off the

ground (David 2010c). Chancy as this tactic may be, Mr. Bigelow offered a glimpse into his

rationale with the following statement, “I recognize that everything I have spent so far and what I

might spend in the future could all be for nothing. But that is part of the recipe. If you are not

willing to take on that kind of risk, then don’t be in the game” (Shiga 2008). Bigelow is not

alone with this zeal. He has a fan in fellow entrepreneur Burt Rutan, who said of Bigelow,

“pioneers like this are what it takes to get out of our three-decades-long period of no progress

toward opening the frontier for the people. Go, Bob! Go!” (David 2006).

Bigelow’s clientele could include sovereign clients, individuals, and private corporations

in a range of industries. Bigelow estimates 800 paying crewmembers could fly on their outputs

over the next decade (Covault 2007) and thinks the relative “quantity of tourists is going to be

fairly few” compared with sovereign clients (Foust 2006). To date, Bigelow has focused solely

on reaching out to its foreign government customer base (David 2010b). After all, the U.S. and

Russia control 85% of the International Space Station, so there is not much room left on that

platform for the rest of the world (Canon 2010). He has entered into a number of talks with

countries that have manned space programs but lack the resources to build or launch their own

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spacecraft. Bigelow Aerospace has already signed agreements with Japan, the Netherlands,

Singapore, Sweden, Australia, and the United Kingdom (David 2010c, Klamper 2010). The

company has also been engaging seriously with Egypt, Dubai, and other Arab countries (Canon

2010). According to Mr. Bigelow, “What we see down the road is, if you have affordable and

reliable transportation systems, and if you have affordable and reliable destinations, you’re

probably going to see tremendous growth, maybe 60 or 70 countries, who are really motivated to

have astronaut corps” (Foust 2006). Thus, national prestige, in addition to scientific research,

could be a major motivating factor behind the growth of this market. By catering to the distinct

groups of governments and private interests, Bigelow is serving a diversified set of clients.

Therefore, if something major happens in the external environment, they are unlikely to lose

their entire customer base. Bigelow wants to maximize the number of clients rather than

maximize the dollar per client (David 2010a).

At the National Space Symposium in April 2007, Bigelow unveiled his business plan and

announced prices for stays on his orbital modules: “Sovereign customers” will be charged $14.95

million in 2012 dollars for a four-week stay of “Hang Time” in the BA330, including all pre-

flight training, transportation costs to and from the orbiting habitat, as well as a free EVA

experience for all customers (Coppinger 2007, David 2007, Foust 2007). An extra four weeks

aboard the space station would be an additional $2.95 million in 2012 dollars. By 2010, these

cost estimates had risen to $25 million per person for 30 days, with an additional $3.75 million

for 60 days (Chang 2010). This is still half the $50 million cost NASA pays to fly passengers on

the Russian Soyuz spacecraft. Private “Prime” clients wanting to lease the module for research

would be charged $88 million per year or $7.9 million per month for the BA330 and $54 million

per year or $4.5 million per month for the Sundancer module (Coppinger 2007, Foust 2007).

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More recent cost estimates for private rentals have risen to $395 million per year, inclusive of

transportation for 12 people to the orbiting station (Chang 2010). Bigelow’s pricing plan

illustrates the company’s commitment to serving diverse long- and short-term needs of clients

leasing its space. Such a tactic illustrates a customer-oriented sense of flexibility.

Mr. Bigelow promises another “dramatic” and “exciting” pricing announcement in late

2010 and will begin accepting deposits from customers in preparation for orbital operations in

the 2014-2015 time frame (David 2010c, Klamper 2010). In the meantime, Bigelow has not yet

generated positive revenue. Past campaigns such as the “Fly your Stuff” and the “America’s

Space Prize” were largely unsuccessful in generating significant returns for the company, which

stays afloat thanks to Bigelow’s fortune and revenues generated from his Budget Suites chain of

hotels (Bigelow Aerospace 2007, Little 2008). When asked if he would ever take Bigelow

Aerospace public, Mr. Bigelow said, “we would want to do that when we had some revenue

streams and we were further along with the maturity of our operations” (Foust 2006).

According to the Miles and Snow typology, Bigelow is a Prospector organization because

it is exploiting new market opportunities using an aggressive entrepreneurial approach. With its

broad product and service options ranging from inflatable habitats to training of astronauts, the

Bigelow Aerospace organization promotes creative ways of solving problems in an evolving

business environment. Bigelow constantly scans the market landscape and over time has adapted

his focus more towards serving the needs of foreign government clients rather than space

tourists, for example. This shows the firm’s flexibility and openness to change, which in turn

drives innovation and product leadership. Although few clues to Bigelow Aerospace’s

organizational structure are available, the company likely has few levels of management in order

to support such a model.

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 In terms of Porter generic strategies, Bigelow is pursuing aspects of both the

Differentiated and Cost Leadership strategies. The approach is differentiated because it caters to

an under-served specialized industry by providing unique products and services associated with

orbital space operations. This results in a greater entry barrier to other firms that may try to

compete. A principal generic strategy for Bigelow is concentrated growth on product

development in creating the most innovative habitat with the highest value and lowest cost

possible. The cost leadership aspect of Bigelow’s strategy comes into play when its prices are

compared with its closest competitor NASA. Even recent cost hikes still put Bigelow’s price

about half that of NASA’s, and considering that the Bigelow space stations offer significantly

more volume and flexibility, customers will be more likely to choose flying with Bigelow over

NASA.

They expect loyal customers and few competitors, and the entry barrier for competitors to

enter into the industry is very high. When asked who his competitors are, Bigelow said simply,

“Nobody” (Chang 2010). When asked whether the International Space Station is a competitor,

Mr. Gold said the ISS was more like a complementary pilot program to help demonstrate the

viability of Bigelow’s program (Klamper 2009). Bigelow has a great deal of supplier power

since they are the only serious contender for private space stations at this time (at least until the

Russian one is built). Bigelow also exhibits elements of a Cost Leadership strategy as it strives

for a low-cost advantage compared to any possible competitors.

Mr. Bigelow is a visionary entrepreneur with the financial wherewithal and technical

expertise to potentially re-make the space industry (Figure 7). “Our goal is to be the Hudson’s

Bay Company of commercial space,” he said at the 2007 National Space Symposium (Foust

2007). The next several years will be an exciting time to see if his big strategy will pay off.

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 Figure 7: Robert T. Bigelow

“We think the time will come when orbiting space complexes won’t be
considered a novelty, but a necessity. When the first satellites went up, they were
a novelty too. Now they are a major business with enormous commercial
important. This is a logical next step.” –Robert T. Bigelow (Kaufman 2007)

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