“Off the Dole” and “Out of the Box:”Colorado’s New Space Strategy and Takeaways for

Other States

Aerospace States Association Annual Meeting / April 12, 2013Metropolitan Policy Programat BROOKINGS

Brookings and the state joined forces to develop an action plan to boost the competitiveness of Colorado’s space economy

Brookings provided fresh analytics, a new framing of challenges and opportunities, and private-sector, state, and federal strategies. McKinsey & Co. provided private-sector intelligence

Brookings worked closely with OEDIT, the Metro DenverEDC, and the Colorado Space Coalition to bring increased firepower to the governor’s Aerospace Key Industry Process

All of this fell under Brookings’ national advanced industries (AI) initiative that seeks to highlight the importance of America’s top regional advanced industry clusters and strategies to grow them

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What we developed reflects novel analytics and extensive listening

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What we did: analytics

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✓Classification of establishments into a vetted industry segmentation scheme

✓Global market trends and “forces at work” analysis informed by McKinsey

✓Industry-specific competitiveness assessment and 50-state SWOT analysis

✓Bottom-up identification of business establishments in the space economy

✓Jobs, growth, revenues, wages, and location analyses by industry segment

Local

Global

✓Preliminary listening session with select leaders from industry, workforce training, academia, economic development, and government

What we did: listening

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✓One-on-one interviews with key stakeholders

✓Formal listening sessions held in coordination with the state’s Key Industry Networks Process Steering Committee and Tactical Team meetings

✓Interim webinar with key stakeholders

✓Draft review by an extensive network of experts and stakeholders

1st month

6th month

What we found:

Colorado possesses an exceptionally diversified, multidimensional, and high potential space economy

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However, amidst significant opportunity, disruptive forces have exposed a number of competitive challenges

Given these challenges and its many strengths, Colorado should commit itself to preeminence in space

The space economy is an outsized driver of Colorado’s economy

Private sector space jobs

Average private sector space wage

Private sector space GDP

47,700

$8.7b $92,500

66,900Total space

economy jobs

The private space economy is multidimensional and polycentric

Private

Military: 15,500 jobs

Civil: 3,700 jobs

Space systems manufacturing and operationsSatellite and space vehicle manufacturing

Satellite and space systems operations Launch manufacturing and services

Network ground equipment

Satellite-based servicesConsumer

Navigation and geo-location Remote sensing and earth observation

Telecommunications Consumer ground equipment

Supply and supportIT, engineering, and professional services

Component suppliers

5,800 jobs

5,000 jobs1,000 jobs850 jobs

7,300 jobs

4,000 jobs3,900 jobs

1,600 jobs250 jobs

10,700 jobs

6,100 jobs

7.9 percent CAGR*Satellite-based services

75

100

125

150

175

200

2002 2008 2011

Colorado’s private space economy is increasingly services-oriented

Jobs2002 = 100

20112008

*Compound or average annual growth rates. Job numbers reflect the jobs history of establishments currently in business and do not incorporate job losses from establishments that may have closed before 2011

1.9 percent CAGR

0.2 percent CAGR

Supply and support

Space systems manufacturingand operations

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2002

Colorado’s space economy spans multiple metro areas and rural counties but is heavily clustered along the Front Range

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The geographic concentration of the industry in Colorado signals the presence of a classic industry and innovation cluster

What we found:

Colorado possesses an exceptionally diversified, multidimensional, and high potential space economy

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However, amidst significant opportunity, disruptive forces have exposed a number of competitive challenges

Given these challenges and its many strengths, Colorado should commit itself to preeminence in space

A number of disruptive forces are making this a critical moment for Colorado’s space economy

✓The customer base is changing

✓The industry’s competitive underpinnings are under stress

✓Customers are driving a new industry emphasis on value, service, and capability

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For one, government spending is becoming an ever smaller and more contested portion of the market

For example, government demand for commercial solutions—i.e. fixed-cost, “off-the-shelf” offerings—is giving rise to new lower-cost competitors

Innovation matters more and more and greater collaboration is required to achieve it; at the same time, the aging of the existing innovation workforce threatens to undermine advances

What we found:

Colorado possesses an exceptionally diversified, multidimensional, and high potential space economy

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However, amidst significant opportunity, disruptive forces have exposed a number of competitive challenges

Given these challenges and its many strengths, Colorado should commit itself to preeminence in space

To avoid being left behind at a moment of opportunity, Colorado needs a bold new vision for its space economy

✓Consolidate and maximize position in the space economy even as “government space” shrinks

✓Improve the availability of risk capital

✓Commit to innovation and owning the next great space technologies

✓Intensify cluster dynamics

✓Seize commercial opportunities in emerging new space, adjacent markets, and global markets

✓Bolster the workforce pipeline to secure Colorado’s human capital advantage

Vision:“Colorado becomes

the center of innovation for the

global space economy”

Strategies

The private sector must lead the way in making Colorado the undisputed center of innovation in the global space economy

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Focus on affordability to secure competitive positions in core marketsCONSOLIDATE:position

Increase internal R&D investment in next-generation technologiesSEIZE:opportunities

Reinvigorate corporate venture capitalIMPROVE:access to capital

Engage in state efforts to improve how the space cluster functionsINTENSIFY:cluster dynamics

COMMIT:to innovation

BOLSTER:workforce pipeline

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CONSOLIDATE: Brand and market / Convene delegation; states / Name sector championposition

SEIZE: Position the state to lead on next platforms / Create prize for new spaceopportunities

COMMIT: Create AI commercialization grants / Establish AI innovation hubto innovation

Establish investor’s conference / Improve existing state VC fundIMPROVE:access to capital

The public sector must create a supportive environment in which space firms can innovate, compete, and flourish

BOLSTER:workforce pipeline

cluster dynamicsINTENSIFY:

And the federal government must do its part to support state space economy excellence

Immediately resolve sequestrationCONSOLIDATE:position

Scale up a national network of AI hubsCOMMIT:to innovation

Defend SBIR/STTR program fundingIMPROVE:access to capital

Expand bottom-up grant programsINTENSIFY:cluster dynamics

BOLSTER:workforce pipeline

opportunitiesSEIZE:

Takeaways for states

✓Challenging times require a new look

✓Novel analytics can open up new avenues

✓Convening your industry and resetting strategy can be powerful

For more information

Mark MuroSenior Fellow and Policy Director

Metropolitan Policy Program at Brookingsmmuro@brookings.edu

@markmuro119