Rocket Lab would be nothing without its operating manuals

Rockets are big, loud and very tangible. But every step to the launch pad depends on intangible assets.

Someone who knows the importance of intangible assets in rocket engineering is Sir Peter Beck, founder of Rocket Lab. Based in New Zealand, the company has dominated the small launch market with its “Electron” rockets after SpaceX (Elon Musk’s company) retired its “Falcon 1″ launch vehicle in 2009.

Rocket Lab, like all space businesses, remains far from profitable despite its successes. The cost of putting objects into orbit has significantly dropped due to innovation from Rocket Lab and SpaceX, but it is still prohibitively expensive.

This lack of profitability, coupled with the complexity of rocket engineering, has forced the engineers at Rocket Lab to think differently and invent new ways of building not just better rockets, but a more efficient business. In a recent interview, Sir Peter outlined how his team approaches innovation.

“It is a hard business… You need two things to be successful in this game. You need a steady stream of customers, and you need to build something that can be produced, and then you produce it. Both those things must go hand in hand… It’s often said that the production of rockets is way harder than building the first one, and I think that’s accurate.”

Sir Peter said the first five or ten rockets are “built lovingly” by engineers who have plenty of time to get the design right. As they perfect their processes, these engineers will maintain manuals and write instructions to pass down their lessons.

This recording is critical because by the time the 50^th rocket is ready to launch, those dedicated engineers probably no longer work at the company, and even if they did there isn’t enough time to “lovingly” build each new rocket. To become an efficient business, Rocket Lab needs hundreds of skilled technicians who follow those instructions precisely.

Since Rocket Lab has a normal staff turnover rate, including among its technicians and engineers, each new hire is essentially an apprentice who must learn these unique processes. Building rockets is one thing. But becoming a company that can build rockets on time, reliably and at scale is entirely different. There is no room for error whatsoever.

Put it this way, either its Electron rockets launch successfully every time, or a mistake as simple as a poor weld or loose faring nut will quickly turn it into what Elon Musk refers to as a “rapid unscheduled disassembly” – a scorching fireball.

Rocket Lab relies on the comprehensiveness of those design and engineering manuals to ensure its rockets are created accurately. Those manuals are so important that if you were offered all the rockets, the launch pad, the manufacturing tools and even Sir Peter himself for free – but the gift didn’t come with the manuals – it would be clear that you actually have a set of liabilities, rather than assets.

Without those factory operating manuals, Rocket Lab wouldn’t exist.

At a high level, Rocket Lab is far more than those operating manuals, of course. It has a strong brand, its data about launches is likely to be incredibly robust and its engine innovations are valuable trade secrets.

But if you were to perform a straightforward “with or without” audit on Rocket Lab’s intangible assets (one valuation method used to value an intangible asset category), it would be immediately obvious that the most valuable intangible asset is the ability for its technicians to follow those instructions without mistakes, every day and at speed.

Sir Peter’s final comments in the above interview highlighted why the company needed to focus on building an efficient business first, and good rockets second.

“We have a saying here at Rocket Lab that we have no money, so we have to think.”

This is, of course, a re-stating of a phrase uttered by another New Zealand knight of the realm, Sir Ernest Rutherford, who memorably said “We haven’t got the money, so we’ll have to think.” More than a hundred years after the famous scientist made the statement in the context of nuclear physics that led to incredible insight about the atom, it’s a delight to see that same drive and determination shine through at Rocket Lab.

This approach reinforces the wisdom that a company doesn’t have to be the biggest to be successful. Rocket Lab’s success flows from its focus on creating processes and then ensuring those processes can be replicated by any technician while maintaining the same high quality and standards.

Rocket Lab will launch its 50^th rocket later this year, and more customers are lining up at the door. None of this success would be possible without its most valuable intangible asset – its operating manuals, a very specialised asset category named “content.”