SpaceX's Starship and the Innovator's Overshoot

I was listening to Money Talks, The Economist’s podcast on SpaceX’s forthcoming IPO, when one of the guests said something that made me pause the episode. Starship, they claimed, will increase SpaceX’s capacity to deliver cargo to orbit by a factor of 25,000.

Twenty-five thousand times.

The IPO will be the largest in history, by some margin. The bet is that Starship enables data centres in space and, eventually, a million-person city on Mars. Whether you find that inspiring or delusional depends on your priors about Elon Musk. But there is a second question underneath, one that has nothing to do with Musk: what happens when a company builds far more performance than its market needs?

Clayton Christensen answered that question in 1997.

The overshoot pattern

In The Innovator’s Dilemma, Christensen identified a repeating pattern across industries. Technologies improve along trajectories that consistently outpace what customers actually need. The disk drive industry was his canonical example, but the same dynamics showed up in mechanical excavators, steel minimills, motorcycles, and retail.

His key observation:

“Technologies can progress faster than market demand. In their efforts to provide better products than their competitors and earn higher prices, companies often ‘overshoot’ their market: they give customers something that exceeds the requirements of many of them, at a higher price than they’d like to pay.”

When this overshoot happens, the basis of competition shifts. Customers stop paying premiums for more performance. They start choosing on reliability, then convenience, then price. And the door opens for something simpler, cheaper, and good enough to enter from below.

The excavator precedent

The transition from cable-actuated to hydraulic excavators is one of the clearest cases in the book. Cable shovels could reach farther and lift more. The established manufacturers, companies like Bucyrus-Erie and Northwest, kept making them bigger and more capable. But by the 1950s, the performance of cable excavators had already exceeded what most contractors needed.

Hydraulic machines started small. Tractor-mounted backhoes, initially useful only for residential drainage work and other niche tasks. They were simpler, cheaper, and more convenient. Christensen describes what happened:

“The early users of hydraulic excavators were, in a word, very different from the mainstream customers of the cable shovel manufacturers, in size, in needs, and in the distribution channels through which they bought.”

Once hydraulic technology improved enough to handle mainstream excavation work, the cable shovel industry collapsed. Most of the established firms disappeared entirely. The ones that survived did so by belatedly adopting hydraulics themselves.

The cable excavator companies did nothing wrong in the conventional sense. They listened to their best customers, invested in better products, and improved along the trajectory that had always rewarded them. That is precisely what made them vulnerable.

The buying hierarchy

Christensen, drawing on research by Windermere Associates, described a predictable sequence. When multiple products satisfy the market’s demand for functionality, customers shift their criteria:

1. Functionality: does it do what I need?
2. Reliability: does it do it consistently?
3. Convenience: is it easy to get and use?
4. Price: how cheap can I get it?

Each transition is triggered by performance oversupply. Once the market is swimming in more functionality than it can use, the advantage moves to whoever can make the thing reliable, then convenient, then cheap.

“When two or more products meet the minimum specifications for the functionality of a product, customers begin to look for other deciding factors. The progression usually is from functionality to reliability to convenience to price.”

So, SpaceX

This is where it gets interesting. Is SpaceX overshooting?

The number 25,000x is staggering. If the current launch market is the benchmark, then yes, Starship massively overperforms. By Christensen’s logic, that would make SpaceX vulnerable to a simpler, cheaper entrant that delivers just enough launch capacity at a fraction of the cost.

But there is a counter-argument, and Christensen himself acknowledged it. Disruptive technologies don’t always attack from below into an existing market. Sometimes they create entirely new ones.

“Disruptive technologies bring to a market a very different value proposition than had been available previously. Generally, disruptive technologies underperform established products in mainstream markets. But they have other features that a few fringe (and generally new) customers value. Products based on disruptive technologies are typically cheaper, simpler, smaller, and, frequently, more convenient to use.”

SpaceX is not selling 25,000x capacity to today’s satellite operators. The thesis is that the capacity creates its own demand: orbital data centres, point-to-point Earth cargo, Mars colonisation. Markets that don’t exist yet.

This is where the Christensen framework gets stretched. In every case he studied, the incumbent overshot an existing market, and the disruptor entered from below. SpaceX is trying to overshoot the existing market and build the next one simultaneously. It is both the incumbent and the would-be creator of the new value network.

Two ways this ends

Scenario A: the overshoot plays out classically. Starship works, but the demand for massive orbital capacity doesn’t materialise fast enough. A smaller, cheaper launch provider (Rocket Lab, Relativity, or someone not yet founded) captures the existing market with “good enough” performance at lower cost. SpaceX becomes the Bucyrus-Erie of rocketry: technically dominant, commercially stranded.

Scenario B: the new market materialises. Orbital data centres become economically viable. Starlink-style megaconstellations need Starship-class volume. The 25,000x capacity isn’t overshooting, it’s the enabling condition for markets that couldn’t previously exist. SpaceX becomes what Christensen would call a new value network, and everyone else is playing catch-up.

The honest answer is: we don’t know yet. The podcast guests didn’t know either. What made the episode compelling was the tension between the scale of the ambition and the scale of the risk.

What I keep coming back to

I read The Innovator’s Dilemma a few weeks ago, after coming across mentions of it again and again in The NVIDIA Way. What struck me then, and what struck me again listening to the podcast, is how counterintuitive the overshoot pattern is. The companies that did everything right, that listened to their customers and invested in better products, were the ones that failed. Not because they were incompetent, but because they were competent in the wrong direction.

“The most valuable guidance comes from chapter 9, which indicated that the basis of competition will change over a product’s life cycle and that the cycle of evolution itself is driven by the phenomenon of performance oversupply, that is, the condition in which the performance provided by a technology exceeds the actual needs of the market. Historically, performance oversupply opens the door for simpler, less expensive, and more convenient, and almost always disruptive, technologies to enter.”

SpaceX may prove the exception. Or it may prove the rule. The IPO will be the largest in history either way. Whether it’s the beginning of something new, or the peak of something that was already overshooting, is the most interesting question in technology right now.

Quotes from The Innovator’s Dilemma by Clayton M. Christensen (Harvard Business School Press, 1997, with a new foreword). The podcast episode is “Elon Musk’s astronomical SpaceX bet”, Money Talks, The Economist, 28 May 2026.