Aerospace & Defense Industry Searches for Solid Ground

These themes were starkly evident in the 11th annual A&D Market Survey conducted by CSC and Aviation Week & Space Technology magazine. More than 400 respondents were polled from a range of company sizes and functional areas.

Staying Airborne in Aerospace & Defense – Infographic

Last year, 33% of respondents indicated that establishing new relationships with government suppliers and customers was a top strategic objective, but this year that number dropped to 18%. Establishing new relationships with commercial suppliers and customers, however, remained a high priority for 37% of respondents.

Separately, 61% believe that the commercial market is the place to go for growth, while 37% still see growth potential in the governmental/public market.

Another significant change is a focus on the U.S. domestic market for commercial growth opportunities, a change that the report’s authors call a “major shift in thinking,” since growth had previously been perceived to be higher on the international side.

Current products first

The retrenchment is also happening in the products and services that companies are focusing on.

Respondents indicate that they see the highest growth potential in their current products and services — more than in new products or in adjacent products.

In recent years, there has been a push for increased aftermarket support and performance-based logistics (PBL).

In a PBL approach, the customer doesn’t just buy goods and services; instead, the customer contracts for a certain performance level of a product or service over time, measured against predefined metrics.

In the survey, although aftermarket support and PBL are still a source of revenue, these are not viewed as a high-growth area. Almost half of respondents have PBL contracts, up from 37% last year — and 65% of those with PBL business have seen that business grow over the past year. However, the report’s authors note that companies not offering PBL have no plans to get into that business, citing a lack of demand, a lack of knowledge in the area and the perception that PBL is not profitable.

Innovation lives on

While the survey shows that companies are sticking to what they know, it also reveals a dedication to continued innovation. For example, engineering dominated as the functional area with the most potential for adding to the bottom line. Nearly half of respondents identified engineering as either highest or second highest in potential, beating out operations, supply chain collaboration, program management and sales.

In the survey, corporate management views engineering in a positive light — with 44% seeing it as a source of distinctive competitive capability, 6% seeing it as a source of revenue and another 15% seeing it as an investment. About a third view engineering as a cost to be controlled. Most companies expect to increase engineering spending 5% this year.

In fact, 42% of respondents say that any engineering issues at their companies are primarily due to lack of qualified staff, rather than process inefficiencies or other obstacles.

These companies back up their engineering staff with the IT systems they need, with 58% identifying themselves as either leaders or early adopters of technology.

Taken together, all of these factors reveal an industry that is maintaining its edge in development and innovation even while adapting to markets shifting around it.

Jeff Caruso is senior managing editor for CSC’s digital marketing team.