Virgin Galactic’s Disruptive Product Development Strategies

How Virgin Galactic imagined and realized the future of commercial spaceflight

Last week I looked at how a major upgrade or release of an existing product line like the Dreamliner can be a major drain on resources and attention and adversely affect competitive momentum. I warned against “over-innovation” because of the high risk of failures, loss of market share and customer confidence when companies focus on dramatic changes to their product lines.

However, new product development strategies sometimes favor “disruptive” innovation that dramatically alter the market or open up a whole new one. The key differences in the innovations that really disrupt and those that are “wannabe” or failures can be subtle and depend a lot on how the vision for the new product was set and executed upon.

To stay within the same  “kick-ass aircraft” theme of the last few posts, I want to look at Virgin Galactic, the space aviation arm of Sir Richard Branson’s sprawling empire. There are some simple reasons for this selection: I have been a Branson fan for some time (see my article on his leadership lessons). I’m also an admirer of Virgin Atlantic, another high-flying business venture with many similarities, and in recent weeks, Virgin Galactic has made news with the dedication of the first spaceport (aptly named Spaceport America) in Nevada.

To cut the long story short, Virgin Galactic is a front-runner in commercial space tourism and space aviation, offering commercial “sub-orbital” spaceflight in particular. It has made a lot of advances to become the perceived leader of the space tourism industry because:

1. It has access to the most promising and “viable” space aviation technology out there, in the form of SpaceShipTwo.
2. It has benefited from an effective sales and marketing strategy, which saw it acquire an astounding 450 customers who are willing to deposit $200,000 for the flights, even years before the first flight ever takes off.

It is too early to say whether Virgin Galactic is going to be a runaway success, but there is plenty to admire about and learn from the way the company has pioneered and made an almost impossible product commercially viable.

For example:

• Plan to achieve near-impossible goals with long-term road maps: Virgin Galactic set a dramatic goal that is both inspirational and extremely far-fetched (shared by many other competing groups), but then defined a concrete road map to achieve it, even if it would take years. It is ironic that with the reduction in government-sponsored space funding, which resulted in the ending of the space shuttle program, Branson (with others) have gone against the grain and set the goal of making spaceflight available to private citizens.
• Extend the power of the brand in new ways: Branson shrewdly blended the best practices he developed while building Virgin Atlantic (as the “hip” airline) as well as other consumer-oriented ventures to imbue the high-tech, high-cost product with a certain “sexiness” and accessibility. To see how well he does this, you just need to take a look at the the splashy presentation on the Virgin Galactic website, aas well as the recent dedication ceremony for Spaceport America.
• Get the customers to pay for the development: With such a game-changing product offering, Branson took the calculated risk of getting paid before the product even became available. While this is not what conventional product development wisdom suggests, we have to give credit to Virgin Galactic’s ability to correctly gauge the overwhelming demand and make the product available before it actually exists.
• Build powerful coalition to support the product out of the gate: Knowing that such a major product does not exist in a vacuum, Branson built a coalition of partners, ranging from local authorities and travel agencies over the period of several years. These partners are crucial in supporting Virgin Galactic achieve its goals without bankrupting itself.

But of course Richard Branson is not the only business leader with a knack for dramatic product introduction. We have seen many examples in other industries, such as:

• The Apple iPhone and the Mac Book Air were first unveiled as a premium product, with a dramatically improved experience, incredible quality, and that were awash in Apple’s trademark design sexiness. Both products blatantly defied conventional wisdom in both of their respective market segments, and in so doing, redefined what the terms smartphone and laptop really meant.
• Before the Toyota Prius hybrid and Tesla Motors cars came about, others have tried and failed to develop commercially viable electric or hybrid gasoline-electric cars. Most famously, GM scrapped years of research and production when they decided to pull the EV1 cars from the market in the end of the last century.
• In contrast, Toyota mapped out a more realistic but no less ambitious program, by developing increasingly more advanced hybrid cars, starting with the Prius, to reach the same end goal of building a car with zero emissions. While Tesla Motors’ ultimate goal is undoubtedly general commercial availability of electric cars, like Virgin Galactic, it did not try to make the car at the cost affordable by everyone right away. Instead, for its first generation of cars, it offered the “premium” experience with the powerful all electric sport car Roadster, and got early adopters to effectively pay for its further developments.