How have open innovation and 'pirates' transformed NASA?

In its early decades from the 1960s onwards, NASA’s business model was traditional, insular and hierarchical.

There was no dedicated space-venturing expertise available in the commercial sector. The agency worked closely with selected external suppliers who provided hardware to exact specifications and helped to develop the technologies the agency needed.

NASA shared detailed technical requirements of what was needed, and embedded its engineers in its supplier organisations in order to ensure control and precise technical outcomes. NASA owned the intellectual property of the inventions and its suppliers could not use it for any other purpose.

Over time the business model became more collaborative. The agency developed partnering and inter-organisational coordination capabilities as it worked with other national space agencies to design, build and operate the International Space Station that was launched in 1998.

Over the following two decades, as space-related services (the low earth orbit economy) began to take off, the commercial sector stepped up to design and launch nano-satellites, rockets, offer earth and climate observation services, and provide supply chain logistics support, broadband, and other related offerings.

By 2020 the space economy revenues globally rose to US$447 billion. Only US$90 billion - or one fifth of the total - was accounted for by national space agencies; the lion’s share was accounted for by the commercial sector and this proportion will only rise as the space economy expands.

How does NASA work with the commercial sector?

After the inter-organisational phase that gave rise to the International Space Station, NASA further evolved capabilities towards a commercial network model. Here the agency employs a variety of ways to connect with any external parties that may help it address the intractable technological challenges that arise from planning and executing ambitious missions, such as a future human trips to Mars.

The agency seeds investments in new space technologies in the commercial sector and shares its expertise in different ways. The intellectual property of what is invented belongs to both the agency and the inventing organisation; allowing it to utilise the technology it created as it sees fit for other business purposes.

One approach NASA employs in its current commercial network model is announcing tenders, where any organisation can bid for a project. Rather than detailed technical specifications, the agency specifies the capabilities that are needed. For example, the ability to carry and bring back a certain weight of materials and astronauts to the space station and back, within a certain cost, timeframe and frequency. The precise specifications of the technology needed to accomplish that is left to the commercial sector.

An important and indispensable part of the current way of operating is openness, and the agency has been building open innovation capabilities over the last decade.

By now, NASA has run both internal, hybrid and external open innovation competitions where it communicates a challenge it wants to solve and invites inputs from a broad array of stakeholders. Participants range from internal personnel, to external established scientific communities, entrepreneurial organisations, or simply anyone with useful knowledge or insights on the particular challenge.

Themes range from focused questions such as how we can better predict solar flares; to wicked, multi-faceted problems, such as how to deal with the effects of prolonged exposure to space on the human body. There is a range of outcomes from these open innovation processes; from conceptual ideas, to proofs of concept, to functioning hardware and software; as well as related benefits such as public outreach and education and the seeding of entrepreneurship in the space sector.

As part of a larger study, we have been researching the way that open innovation practices can shape ambidexterity at the agency (the ability to both exploit existing competencies and resources efficiently, while at the same time exploring for new ones).

Our findings indicate that some practices can have hybrid effects, simultaneously improving efficiency as well as offering higher operational capabilities via invented technologies. For example this can occur when a supplier such as SpaceX develops a new, re-usable rocket at a fraction of the cost that NASA would develop the same technology, while at the same time meeting all the necessary added-value technical capabilities are required by the agency and the relevant mission.

How did a group of 'pirates' help to transform NASA?

One historical example occurred when a group of young engineers who called themselves the 'pirates' took it upon themselves to develop a new shuttle mission control system that not only offered higher visualisation, analytical, and diagnostic capabilities to the agency, but also was cheaper to operate than the previous system.

The 'pirate' innovation practices (an example of open innovation with unplanned or emergent inputs from within) had hybrid effects on the agency’s exploration and exploitation capabilities.

We also found synergistic effects, such as when improved exploration processes can then increase efficiency. For example, as the agency learns over time how to pursue open innovation processes more effectively and to conceptualise requirements in terms of necessary capabilities rather than technical specifications, this way of thinking can shape other operational areas such as project execution and process refinements in ways that make these operations more efficient.

Finally, we found cumulative learning effects, where the agency improves its capabilities of exploration and exploitation over time based on previous experiences.

When the “pirate” group of young engineers who developed the shuttle mission control were requested by the agency to develop the international space station mission control based on their previous success, their cumulative learning practices were integral to this new focus and led to higher levels of effectiveness at a lower cost than would have been possible without this prior learning.

When the individuals comprising this group spread through the agency, so did their innovative practices and accumulated learning of how to create and implement new technologies to support space missions.

Open innovation processes have now been institutionalised in the agency, with dedicated units being developed to carry them out and to disseminate the inputs where they are needed. This is a far cry from the traditional, insular NASA of the 1960s. It is a new world where commerce and the ingenuity of entrepreneurs and the market will play a fundamental role.

There are bigger lessons for organisations more generally. Any organisation that limits its idea development and innovation to internal inputs without harnessing the genius of the market and broader networks of stakeholders will be at a competitive disadvantage.

To do this well, a mindset shift is often needed; as well as the development of relevant capabilities to invite, evaluate, and employ these broader inputs in strategizing processes. Organisations that do this well will be among the winners of the future.

Research with impact

Loizos Heracleous is Professor of Strategy at Warwick Business School. He has authored six books and his research has been honoured by three noted Best Paper awards from the Academy of Management.

His research with NASA has contributed to its management strategy, helping the space agency to become more adaptive and informing a major change programme at the Johnson Space Centre and NASA headquarters.

He teaches Strategy and Practice on the Full-time MBA, Executive MBA, and Distance Learning MBA.

Further reading:

Heracleous, L., Terrier, D., and Gonzalez, S. (2018) "The reinvention of NASA", Harvard Business Review, 18 April.

Heracleous, L., Wawarta, C., Gonzalez, S. and Paroutis, S. (2019) "How a group of NASA renegades transformed mission control", MIT Sloan Management Review, 5 April

Wawarta, C., Heracleous, L. and Paroutis, S. (2022) NASA’s inter-organizational open innovation practices to tackle the exploration-exploitation paradox. In Taneja, S. (Ed.), Proceedings of the Eighty-second Annual Meeting of the Academy of Management. Online ISSN: 2151-6561.

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