Opinion | Capturing innovation: What India can learn from SpaceX’s latest triumph

Latest update:November 22, 2024 05:53 PM IST

Take risks, embrace long-term thinking, and create ecosystems that turn ambitious dreams into reality.

A pair of giant robotic arms caught the first stage booster of a SpaceX spacecraft. (Image: X/@elonmusk)

We all watched in amazement as SpaceX “caught” the Starship’s first stage booster using mechanical “chopstick” arms, a feat comparable to catching a falling skyscraper. And the thought must have occurred to all of us: what can India do to achieve such bold innovations, such incredible successes? Of course we have talent and motivation.

It is important to understand that this is not only about technological excellence. It’s as much about the innovation ecosystem as it is about the specific regulatory frameworks and programs that enable this kind of fundamental shift in the way we approach innovation. The Indian Space Research Organization (ISRO) has made commendable strides with its modest innovations, but we need to think about what kind of ecosystem will allow private companies in India to take the huge technological risks that SpaceX regularly takes. And we are talking not only about the space sector, but about innovation in general.

So, although this essay focuses specifically on the space sector, the ideas can be applied to all industries.

First of all, let’s make one thing clear: money is important. There is no doubt about it. Deep capital markets make it possible to take all these risks. Poverty can only dream of such large-scale innovations. But that’s not the only secret sauce ingredient we’re looking for here. This includes an environment in which failure is seen as another stepping stone to success. We explore two broad areas where the Indian government can begin to shape such an environment – regulation and financing.

Regulation – balance of safety and innovation

India has taken some steps in the right direction by implementing reforms in the space sector, increasing the participation of private players. However, much remains to be done. The US government’s approach to the space sector, particularly SpaceX, offers some very valuable lessons.

The Commercial Space Launch Act of 2004 explicitly treats spaceflight differently from traditional aviation. It allows for “informed consent” and experimental trial permissions. The Federal Aviation Administration’s (FAA) Office of Commercial Space Transportation operates on a “default clearance” basis for test flights, requiring companies to demonstrate that public safety is protected, not that every system is perfect.

If we compare this with the Indian regulatory situation, we can see that a lot leaves much to be desired. For example, IN-SPACe still requires multiple approvals from various agencies, although it is intended to be a single regulatory center for space activities. A startup testing a new propulsion system will need permissions from PESO, environmental authorities and several ISRO centers, and possibly a few others. The process of technology transfer from ISRO to private players is also most often a case-by-case negotiation process. The liability structure remains unclear, unlike specific legislation such as the US Commercial Space Launch Act, which limits the liability of private companies and provides government compensation above certain thresholds.

Of course, we cannot discount the fact that management styles influence a company’s success story. But more often than not, Indian regulations make it difficult to adopt the first-principles engineering approach that, say, Elon Musk applies to his companies. SpaceX, for example, built $2 million worth of rockets by buying raw materials instead of going to expensive aerospace suppliers. In India, however, regulations will stifle this approach by insisting on using only approved suppliers or introducing industrial licensing that requires pre-defined processes and supplier relationships.

Modifications to approved designs will have to undergo new regulatory approval cycles in India. Such a culture does not encourage flat hierarchies that lend themselves to innovation. If our rules, such as, say, the Factories Act, require detailed approval of every process change, it is impossible to follow SpaceX’s “test, fail, fix, test again” philosophy. Rapid iteration and testing becomes impossible and everything happens slowly. glacial pace. Labor laws should not make it difficult to conduct testing cycles 24 hours a day, 7 days a week. High-risk testing requires strong, not restrictive, accident liability laws.

For vertical integration to work and pay dividends in innovation, we cannot have rules that require separate organizations for different activities. It is essential to employ a multi-skilled workforce, which can sometimes be complicated by labor laws. Zoning laws separate manufacturing from R&D facilities, but co-locating manufacturing and design teams helps spur innovation. Tax structures may sometimes favor outsourcing over vertical integration.

If we want to encourage rapid decision-making, we cannot afford conservative and risk-averse corporate governance rules. Requirements for board approval of decisions must be viewed from this angle. Large expenditures are necessary for progress, but they cannot always be viewed with suspicion as part of the process. Directors’ liability encourages conservative decision making. So we need engineering freedom reforms, corporate governance reforms, and balanced labor and safety systems.

Tesla’s story offers another important lesson: the power of integrated innovation ecosystems. Making cars wasn’t just what Tesla did; it has created a complete ecosystem, including charging infrastructure, battery technologies and autonomous driving systems. Such integrated ecosystems foster innovation.

For example, the success of UPI demonstrates how creating an open digital infrastructure can drive innovation across all sectors. We need to create innovation zones where companies can operate with greater freedom and have access to world-class infrastructure. SpaceX’s Starbase in Texas shows how dedicated innovation zones can accelerate development.

Government support – positive results

In the US, government contracts start a virtuous cycle that permeates the entire ecosystem. NASA’s Commercial Crew Program secured important early contracts while allowing SpaceX to retain intellectual property rights and pursue commercial opportunities. We need specific programs like NASA’s Commercial Orbital Transportation Service (COTS), which awarded SpaceX $396 million in milestone payments instead of traditional cost-plus contracts. Crucially, COTS also gave SpaceX the same flexibility when it came to intellectual property rights and commercial opportunities. NASA acted as the primary client, guaranteeing a basic revenue stream. This model of government as the primary client in addition to the regulator has proven transformative.

Let’s imagine how this might work in India. Instead of being bound by traditional funding mechanisms and procurement methods, government departments could offer performance-based contracts to startups that are working on critical and emerging technologies, from defense technologies to climate solutions.

The Anusandhan National Research Foundation (ANRF), envisioned as a top-level body providing strategic guidance for research and development in the country, can be thought of as the Indian equivalent of the Defense Advanced Research Projects Agency (DARPA) of the US. providing technology readiness level (TRL) and milestone funding for high-risk, high-reward projects, while allowing companies to own the resulting intellectual property and profit from the commercialization of resulting innovations.

This will require changes to India’s procurement rules – the General Financial Rules (GFR) – to allow different types of procurement contracts. There is also the concept of evaluating the results of projects based on whether good faith efforts have been made and whether clear malfeasance has been identified. This, again, will require changes to our procurement rules, as well as training our judiciary to adjudicate such cases.

SpaceX’s success is based on deep private capital. These venture capitalists are willing to bear the enormous risks associated with space technology because of the stabilizing power of the government as a major client. This is in stark contrast to the Indian government’s demand-driven approach to space missions, where it seeks to invest in space technology based on private sector demand rather than creating demand itself.

The Indian government, in an effort to encourage private space companies, has created a venture capital fund to help finance it, but this approach also has drawbacks. This may discourage private investors and require the government to make difficult investment decisions – a task for which they may not be suited. A better approach would be for the government to use this budget to purchase services directly from these startups. This would simplify the government’s role, direct funds to startups that can deliver results, and attract private investors to successful companies. To effectively implement this, new financing models with different profit sharing and incentive structures need to be developed. This also requires legal justification.

Take risks and think long term

What will Indian SpaceX look like? Perhaps it’s not about space at all, but about renewable energy, biotechnology or quantum computing. The key is that ambitious innovators need an environment where they can take big risks, fail quickly, and continue to push boundaries. This means rethinking everything from bankruptcy laws to our education system. We need to transform India’s innovation ecosystem from a permit-based system to an outcome-based system, and move from subjective approvals to objective criteria, much like how SpaceX operates under explicit FAA guidelines rather than permissions in each specific case.

Take risks, embrace long-term thinking, and create ecosystems that turn ambitious dreams into reality.

Arindam Goswami and Ashwin Prasad Research Analysts from Takshashila Institute, Bangalore. The views expressed in the article above are personal and solely those of the authors. They do not necessarily reflect the views of News18.