Introductory Information: The client was a division of Fortune 50 company responsible
for designing and manufacturing high-end, ultra-precise satellite guidance systems. The average sales price of one of
these systems was approximate 3x the next closest competitor, although the significant performance increase in terms of accuracy
and lifespan provided the justification for the higher price. The company also designed and manufactured lower-end guidance
systems targeted at the ICBM and launch vehicle market, based on alternate technologies.
The Challenge: While the company's high-end guidance system was widely recognized as
the best in the industry, the number of satellite applications needing that high level of precision and lifespan was small
and decreasing. The vast majority of satellites being launched over the next few years were designed for terrestrial
communication applications. Due to the characteristics of the satellites' orbit, as well as the overlapping coverage
between the satellites, precise guidance was not as critical. Plus, these new communication satellites were designed
to be replaced every 5 years due to technology advancements, as opposed to 15+ years for military satellites. The company
found itself dominant in a shrinking market.
Recommendations: The
company needed to capture a significant market share of the emerging "disposable satellite" market, while still
focusing on delivering their high-end guidance system to those select applications that needed the highest precision and longest
lifespan possible. The price point for the guidance system targeted at the communication satellite applications needed
to be at least an 8x reduction from their high-end system in order to displace the existing competition. After researching
the various possibilities, we made the recommendation to modify one of their ICBM guidance systems to be more appropriate
for satellite applications (e.g., radiation hardening of select components, etc.). These systems were already being
produced in volume and had been extensively tested and proven in the aerospace industry for many years.
Results: The introduction of this "new" guidance system took the market by storm.
The price was an order of magnitude lower than the company's high-end guidance system, and less than half the price of
the next closest competitor, albeit with slightly lower performance. Even with the lower price, profit margins were healthy
due to leveraging the high-volume ICBM guidance system production line. And the performance was perfectly acceptable
to the target market (communication satellite providers). The company bid for and won the next contract for the guidance
system on the largest satellite constellation to date.
