Reinvesting in the Right Stuff for Aerospace and Defense
Survey: A&D Execs Want Product Innovation — and Lower Costs
Since we first conducted the Aerospace & Defense Market Survey in 2000, the industry has seen some turbulent times: post-September 11, 2001, impacts on both the commercial and defense sectors, the global recession, budget sequestration, and new competitors entering the marketplace. Meanwhile, technology change has been rampant, with the emergence of integrated sensors, unmanned aerial vehicles (UAVs), mobile apps and WiFi — to name just a few.
by Roblyn Theodorou
The most recent survey depicts a tale of two industries. The commercial sector is seeing steady demand for new aircraft, while the government sector is still wracked by uncertainty over defense spending (50 percent of respondents reported that they declined to bid on defense projects).
Growth vs. costs
The survey, sponsored jointly by CSC and the Aerospace Industries Association (AIA), takes the pulse of approximately 100 executives and senior leaders at global aerospace and defense (A&D) companies. This year, the industry’s top business priorities were aimed at growth — improving product innovation and upselling and cross-selling more to the customer base — and expense reduction through improved internal efficiencies and lower costs.
A&D companies have just come through a period of unprecedented cuts, so why are they still focused on costs? How can you invest in research and development (R&D) and innovation while you’re still in cost- containment mode? The answer is twofold.
First, organizations are already making more targeted investments in R&D. The danger is that with fewer new programs coming along and traditional A&D players struggling to replace their graying workforce, the R&D function will erode and create openings for emerging competitors in China, Russia and elsewhere.
Second, these legacy players in A&D are behind the modernization curve. They face fundamental challenges with legacy costs associated with hardware, maintenance and support, as well as a lack of agility that puts a drag on operations.
Building the case for modernization
The good news is that through modernization, companies are seeing significant savings and reinvesting in the business to support innovation.
The first step toward modernization is to address the core applications supporting production, supply chains and product development. Some of our clients have critical pieces of their build process that are written in COBOL from the 1970s. The challenge is building a business case for code refactoring or system replacement. For some production-related applications, it’s akin to changing the wheels on a moving car. The industry has been putting this off for some time, but now companies have to address modernization to keep up with emerging competitors that aren’t saddled with legacy systems.
Shifting from COBOL to Java offers more than just a technological advantage: It frees organizations to run applications on lower-cost platforms or move them to a private cloud or hybrid cloud environment. Suddenly, you’ve shifted your business model to IT as a Service, and your costs are based on demand, rather than on maximum capacity. Need a new environment to support a new program? You can spin it up in a few minutes with appropriate security — compared to weeks or even months in a traditional data center. This year’s survey cited the cloud as a priority for modernization (41%), but nearly one-fourth (24.6%) said there are still too many barriers to cloud adoption.
Predictive and proactive steps
The next big factor affecting both innovation and costs is the data itself. A&D companies collect a huge amount of data about products, production, maintenance, supply chains and more, but they’re really only just now tapping into what that data can do for them. Consider the issue of product quality. Most companies spend a great deal of time on manual inspection and generate large numbers of scrap components, which can be a huge expense if you’re talking about an airfoil or a turbine fan blade. Predictive analytics streamlines the inspection process by using data to identify quality issues and ultimately reduce scrap.
The industry can move to a more proactive model by applying predictive analytics to the data it already has related to production-to-spec measurements, machine tool wear, temperature, humidity, product performance, supplier data and more. Predictive analytics — as well as basic insights and data sharing — can benefit every part of the business, from production to product engineering to aftersales services. Coupled with the Internet of Things and cybersecurity controls, this level of digital transformation can really help A&D companies differentiate themselves in the market.
In many ways, the step-change improvement that big data affords is analogous to the dramatic improvements brought about by the move from manned assembly lines to automated lines staffed by robots. As today’s smart machines near the intelligence of a human operator, they are able to address issues, make decisions and use data in ways that accelerate production as never before. We’re at the early stages, but 10 years from now we’ll ask: How did we do it when machines couldn’t interpret data to accelerate production?
Competing with Google and Facebook
Finally, this year’s survey shows that the industry needs to change its relationship with its employees. A good example is the bring-your-own-device (BYOD) trend. Survey respondents clearly still struggle with balancing BYOD with security, with 41 percent requiring separation between work and personal devices. But to attract and retain a new generation of workers skilled in science, technology, engineering and mathematics (STEM), organizations must find a way to accommodate more flexibility.
College graduates today have lived their adult lives in a connected world. They’re setting their sights on technology firms such as Google, so the byzantine rules in place at many A&D firms are completely foreign to them. Many organizations tend to view security as either black or white. The reality is that there’s a lot of gray out there already, and firms must find a way to balance demands for access and control, to create an environment that enables employees rather than restricts them — while also protecting the enterprise.
Can A&D companies increase innovation and lower costs? We’ve seen the industry overcome incredible challenges before. With the right investments, it can happen again.
ROBLYN THEODOROU is industry general manager for manufacturing in the Americas at CSC.
A version of this article originally appeared in CIOReview magazine, and it is reprinted here with permission.