For decades, aerospace and defense (A&D) companies have been early, ambitious adopters of advanced technologies such as stealth, composites, and computer-aided design. Much of this innovation occurred in response to customer demand. In recent years, though, A&D companies have been slower to implement analytics, automation, cloud services, the Internet of Things, and other cutting-edge digital technologies than companies in other industries, such as retail banking.
This is not for a lack of interest or awareness. All of the top 10 and two-thirds of the top 50 A&D companies have announced a digital initiative of some kind. And most of the A&D business leaders we have spoken to recognize that digital technologies can make their operations more efficient, boost their revenues, enhance customer experiences, and help them navigate complex risk and regulatory environments. Our experience is consistent with this outlook: we find that digital technologies can boost A&D companies’ revenue by 5 to 15 percent and lower their costs by 5 to 10 percent.
Nevertheless, A&D executives consistently tell us they would like their companies’ digitization efforts to proceed more quickly and produce greater financial and operational benefits. From what we’ve seen, their approaches tend to lag for one, or more, of several reasons: a lack of focus, too little attention to customers’ needs, weak technical capabilities, a shallow talent pool, and rigid organizational structures.
These problems aren’t unfamiliar to companies undergoing digital transformations. Digital frontrunners in the A&D sector and others have shown how to work around them. In this article, we offer a closer look at how addressing these five areas can help A&D companies accelerate their digitization programs and amplify their benefits.
Focus on no more than ten high-value digital initiatives
A&D companies have countless ways to apply digital technologies. The sheer abundance of options has led some businesses to start more digital initiatives than they can effectively manage at once, without concentrating those initiatives on their top business priorities or coordinating their implementation. While individual initiatives can pay off under these circumstances, our experience shows it is much more effective to define the company’s overall priorities for its digitization program, then translate those priorities into a list of no more than ten digital initiatives that cascade from the CEO to the front line.
Companies should start with a long menu of potential initiatives, ranging from those aimed at powering growth with better products, services, and customer experiences, to those seeking greater efficiency in operations such as engineering, supply-chain management, and back-office support (Exhibit 1).