THINK of the great centres of the space industry and it might be that Florida, Moscow or even Kazakhstan spring to mind. Less likely, perhaps, would be the Isle of Man, a British dependency in the Irish Sea more famous for its annual motorbike race than for lunar exploration.

Nevertheless the tiny island, with a population of just 80,000, has long-aspired to become a leading space jurisdiction. It has already attracted many players from the industry, including satellite services, space exploration, technology and professional-services firms. Most are lured by the island's investment in infrastructure and tax breaks.

The Manx government also persuaded the International Space University (ISU) to set up a research centre at the island's business school. In December the first cohort of the ISU's Space MBA programme arrived—a response, it says, to a demand for more executives in an industry in which management skills have traditionally been less valued than technical know-how.

Reuters

Level heads required

It is an interesting time for the sector. In space, contracts tend to be long-lived; payments continue to come through on projects started five or ten years previously. Thus, while in most other industries companies are implementing strategies to exit the recession, the space sector is only just bracing itself for the shockwaves. As Walter Peeters, the dean of the ISU, puts it: "We know there is a financial crisis. We know we haven't been hit yet. But we know we will be."

Nevertheless, opinion is divided over what the medium term holds. Government budget cuts are sure to have some effect. Some projects, such as manned space programmes, which are expensive and of dubious scientific benefit, may well be squeezed. Overall, analysts predict that NASA, America's space agency, will be assigned a budget in the region of $19 billion—around $1 billion more than 2009 but still less than many had hoped for. However, for some the most important thing is certainty. “$19 billion is enough for me,” says Jeffrey Manber, a space entrepreneur. “As a business person it is less important what the White House announces than that they stick to it."

It all makes for an interesting management case-study. As the role of government-as-customer changes, and the importance of the private sector increases, entrepreneurialism will be the key to growth. It might seem a strange thing to say about an industry that has helped to stretch the art of the possible, but the space industry has tended not to be very entrepreneurial. It is used to satisfying the demands laid upon it by government; it is not so used to creating demand itself.

Peggy Slye, director of the space and telecommunications division at Futron, a consultancy, says that the early years of the industry were typified by a "build it and they will come" attitude. But, increasingly, executives understand that to increase sales they need to innovate, add value and market aggressively—as would be the norm in any other industry. They also need to learn to anticipate the needs of their customers. Satellites are expensive assets that are built to last for 15 years or more. “So you can't let anyone get ahead of you in creating demand for that asset,” she says.

Searching for stars

Yet as the industry becomes more commercially-minded, it is discovering that it has a shortfall of talented managers. Executives in space companies tend to be physicists and engineers who lack the technical skills of management. That can cause problems. In satellite telecommunications, for example, it used to be that the technology itself was the greatest risk to the business: if the satellites failed then so did the firm. Managers therefore had to understand how the technology worked to guard against the risk. But now the technology is established and reliable; it is a failure to understand and respond to the dynamics of the market that poses the greatest risk.

The nature of raising capital is also changing. Governments account for 32% of overall space spending, according to the Space Foundation, an industry group (see chart). But private projects often have a dual, public-private use. Commercial companies therefore find it hard to get funding without government support. But, until recently, government was viewed as a competitor. NASA, for example, designed, regulated and operated rockets and the like. Now it is, to a large extent, withdrawing from operations and becoming a benevolent customer—albeit one that demands that private ventures have capital at risk, pays only for success and expects to negotiate on price. And for its part, the commercial sector can finally act as one would expect in a free market: by innovating and cutting costs.

Other funding routes are also now open. Venture capitalists, by and large, will not touch the space industry: the money required for investment is too high and the lead times too long. (What's more, VCs tend to be squeamish about seeing their investment strapped to a launch pad and having explosives lit underneath it.) But, increasingly, angel investors are playing a role. These include Elon Musk of Paypal, who is financing Space X, which has won a contract to send cargo to the International Space Station, Richard Branson's Virgin Galactic, which is to conduct sub-orbital research for NASA, and Jeff Bezos of Amazon, who is working on a launch vehicle, the purpose of which remains unclear.

Mergers and acquisitions will also increasingly occupy management. With much horizontal integration having already taken place, this will tend to be of the vertical variety. Customers are now demanding end-to-end service. When Inmarsat acquired Segovia in 2009, the new company gained the capability to offer ground equipment and facilities to go alongside its satellite services. When the United Arab Emirates decided it wanted an independent space capability it sought a one-stop-shop company that could develop satellites, control space stations and find and train the right people.

For students on the Space MBA, then, there are now as many similarities with everyday business as differences. The students themselves have, so far, garnered goodwill from the companies they have come in to contact with. Most are already involved in the space sector—often they have a technical education and are looking to broaden their management skills—and so can speak the language. Michelle Mendes, a student on the programme, says many of the scientists she has encountered are enthusiastic about the prospect of being set free from what they see as the mundane aspects of their job, such as raising finance and negotiating contracts. But, she says, perhaps the most difficult skill she has had to learn is to keep her business head on. It is, after all, easy to get swept away with the glamour.