Growth and InnovationIn a fast paced and difficult environment, it is critical to remain competitive. |
Aerospace and Defense (A&D) companies are facing opportunities that will likely change both the structure and dynamics of the industry over the next several years. As in past periods of significant change, companies who adequately prepare for and adapt to trends will likely grow and prosper via market share, new markets, and enhanced financial performance. Those that cannot prepare or adapt will struggle and, in some cases, may disappear.
Sample trends may include:
- Flat or declining defense procurement budgets may require intense focus on product “affordability
- Increased efforts to drive competition into market segments, many of which were previously sole source
- Increasing globalization of some defense product segments
- Expected ramp-up of commercial product demand
- Emergence of new entrants into the commercial supplier base - some from emerging economies, some working to change the business via disruptive technologies and business models
- Continued realization that improved product sustainment presents opportunity for both defense and commercial operators
These trends may have dramatic implications on A&D companies. Sample actions to consider may include:
- Modification of the business model to address the new environment
- Affordability (market-based pricing on defense programs)
- Profitability (dropping improvement to the bottom line, especially in commercial environments and in fixed-price defense environments)
- Business model rationalization (moving functional support to a more “commercial” way of thinking)
- Innovation and expansion beyond the “core”
- Leveraging IP and in-house innovation to access new markets
- Addressing disruptive technologies which threaten traditional businesses
- Using M&A to combine in-house capabilities with outside innovation
- Strategy for expansion outside of the home countries
- International (selling goods and services to foreign customers) vs. global (thinking of several countries as “home”, each with a purpose and strategic role)
- Offset (using a contractual obligation to drive a more strategic agenda)
- Intellectual property strategy (leveraging, and protecting, the company’s most valuable asset)
- Gaining more control over the aftermarket solutions “tail” of our product (e.g. aftermarket solutions will likely continue to offer growth opportunities, but also significant market and financial risks, of the types that most large A&D companies are unprepared to address)
- Expansion beyond spares
- Strategy and offerings
- Supply chain
Of course, there is not one correct generic strategy to respond to these market trends and implications. Each organization or business unit needs to understand its objectives, and work through the leading mix of “lever pulls” to improve the performance of the current product portfolio, as well as to position for future success.
Our approach is to lead client executive teams through a decision process, rather than to develop an answer in a vacuum on their behalf. We understand that each company has a complicated set of issues to consider, and that our role is to help our clients in their efforts to develop a framework to facilitate discussion and decision making. A typical approach includes the following steps:
- Define company objectives, make first cut tradeoff decisions
- Understand the external environment
- Characterize the internal baseline (capabilities, cost structure, gaps, etc.)
- Develop a range of strategic options for management to consider, support decision making
- Outline a roadmap for success
Our teams are supported by senior leaders with many years’ experience helping companies improve performance and achieve growth goals. We have professionals dedicated to the A&D industry, as well as to specific functional areas, who together can deliver a winning solution. We look forward to speaking with you about your goals for your organization.
The Growth & Innovation leadership team
Marty Hartigan, principal, Deloitte Consulting LLC
Harlan Irvine, principal, Deloitte Consulting LLC
Steve Shepley, senior manager, Deloitte Consulting LLP
MaryAnn Zeira, senior manager, Deloitte Consulting LLC
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