Yesterday Burt Rutan and the entire cast and crew of Scaled Composites won the Ansari X Prize. Why them? Do they have better engineers than any other contender? Perhaps, but not likely. More funding? Nope. Better equipment? I doubt they have anything which couldn’t be bought by another contender. More wisdom and tacit knowledge, gained by years of knowing by doing? Check.

If you were to design a venture with sole purpose of winning the X Prize, you couldn’t do much better than Scaled Composites. Looking back on their history of bringing lightweight, high-performance, low-cost solutions to market, you might even think that Rutan had the X Prize in his head all along. He didn’t, of course, but on the other hand, he did.

Scaled Composites is a classic example of creating option value by using iteration to get into the flow of the opportunity stream. By option value, I don’t mean the value of a share of stock. Instead, I mean the value of future opportunities that open up by doing something today – creating options to do the things you want to do in the future. By creating the first VariEze, Scaled Composites opened up the possibility to someday create a round-the-world plane. Why? Because in meeting the challenges of building the VariEze, they forged a culture that values having a 50ft x 20ft x 8ft axis CNC mill on site (that’s it above), whose massive potentiality can’t help but spark the imagination of their staff! And by doing that round-the-world plane, they created the potential to build a space place, and so on and so forth… by actually doing things, you gain deep experience and the kind of tacit organizational knowledge which helps make you a prime contender for things like the X Prize.

Through conscious iteration, the people in a venture can position themselves to take advantage of any opportunity that may come their way, and the sky is the limit.