Strategies For M&a Integration In The Aerospace And Defense Industry – The global aerospace and defense industry consistently fails to deliver projects on time, on budget, and in accordance with expected performance, including full operational difficulties. We believe the solution is to focus less on the capabilities and complexity of the technology and more on the speed of the program – set a firm delivery date as a strong proof of entry and design other parameters around that.
The transition to agile program development won’t be easy, but A&D companies that do will see significant financial and operational benefits.
Strategies For M&a Integration In The Aerospace And Defense Industry
Instead of continuing cycles of slow growth and innovation, the industry must change the script and focus on achieving rapid growth in the market.
Master’s Degree In Aviation And Aerospace Sustainability
The global aerospace and defense (A&D) industry may produce incredibly advanced aircraft and other sophisticated equipment, but it often fails to deliver these systems on time, on budget, and with expected performance. The problem is not new, but it has gotten worse and is now a full-blown performance problem. We believe the solution is to focus less on the capabilities and complexity of the technology and more on the speed of the program – lock in the delivery date as a strong proof of entry and design other parameters around that goal.
This approach represents a departure from an industry where companies have a significant institutional status and deep working methods. Success requires companies to rethink core processes and focus more on incremental improvements and sustainable production flows rather than costly and risky innovations. If it can do this, the industry can bring new technologies to market faster and improve its financial performance. Defense contractors see profound additional benefits—more taxpayer dollars, more readiness, and a military better equipped to compete with adversaries.
Over the past 30 years, both the commercial and defense programs have exceeded expected deadlines. Longer-than-expected deliveries led to budget overruns, customer dissatisfaction, and aircraft that were too old to sell and wartime conditions had passed. During the Cold War, defense programs, which included both aircraft and ships, typically lasted five years, but since then the typical program timeline has increased to 20 years. (See Exhibit 1.) The F-35 has been in development since 1995—a child born when work began would have graduated from college by the time the plane was sent into combat.
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The same applies to commercial projects. Boeing 787s took seven years to enter service after the program was announced—twice the original schedule—and the early models were still fat and had performance issues. The problem is not limited to the OEM. The Pratt & Whitney turbofan engine was late to the market, lagging behind the development of the Airbus A320neo. And when it arrived, the turbofan had service issues with seals, turbine blades and fuel (among other things).
Delays in bringing new products to service are the most significant problems affecting the A&D sector, and they are very costly.
These delays in getting new products into service are among the most significant issues affecting the A&D sector, and have significant costs to both financial and operational performance. (See “The Cost of Slow Operations.”) Delays have many root causes.
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The challenges of developing the aerospace and defense industry manifest themselves in many financial and operational problems for both commercial companies and defense contractors:
Projects that rely on imperfect technology. Firms often abandon disruptive and risky innovations based on technologies that are not yet ready for production, and sometimes combine different innovations into a single system. The Boeing 787 features composite materials, an all-electric design, a new propulsion system, and a more comfortable bathroom for passengers, with high pressure and humidity. The Airbus A400M features new engines, more composite materials, and rotating propellers. Each of these emerging technologies adds complexity; combining everything at once reduces performance on time and budget.
This tendency towards imperfect technology is largely due to the fact that great success becomes more difficult to implement. For example, the fuel economy benefits of commercial aircraft slow over time as they approach the environmental limits of current designs. (See Exhibit 2.)
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Software development at a faster pace. Software is central to the modern aerospace and defense fields, but software development is not a core competency for many OEMs. Additionally, companies in other industries can release beta versions of software with known bugs and upgrade over time, but the strict security requirements in the A&D industry require greater initial reliability. Technology companies can shorten product cycles by updating software rather than updating hardware. However, in the space industry, software becomes a key element of the development process and increases the length of the entire system. In addition, as AI and Internet of Things solutions proliferate in both defense and commercial companies, the potential for software problems increases.
Increased outsourcing. The desire for simpler business models has led to further outsourcing among the major A&D players. (See Exhibit 3.) This reduces development costs for OEMs and can spread the financial risk of a new system, but creates friction and complexity, in part because aerospace and defense suppliers often face intense competition. face, but also—and perhaps even more importantly—because it requires strong cooperation in complex topics, since the increase in outsourcing means a greater responsibility for the supplier at the level of integration or structures.
Most components require large non-recurring costs (NRCs) to produce. For example, one-time costs such as tooling, R&D, capital equipment, engineering, and testing can account for a large portion of the cost of manufacturing a particular part, module, or system, limiting the number of potential suppliers that can compete in production. For certain goods, this can create a lack of competition that gives suppliers pricing power in dealing with OEMs and makes them less responsive to meeting schedules and quality targets. Some assets require related relationships and obligations that require more interaction, more information sharing and joint assessment of the impact of exchanges or necessary changes: the so-called “risk sharing model”, which still needs to be fine-tuned. ensuring the coordination and effectiveness of the relationship between the main contractor and the architect and construction vendor with major responsibility.
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In addition, prime contractors sometimes award work to suppliers with poor track records, leading to quality problems that in turn extend deadlines and cause budget overruns. Although the financial risk may be spread throughout the supply chain, the reputational risk of delay is faced by the OEM, and it is the company that must face the customers if it fails.
Legacy project management. Even though other industries have moved on to advanced product development, the A&D industry still relies heavily on traditional methods built around a series of milestones that must be met in order for development to continue. This waterfall system is the result of decisions made early in the development of the system—many of which have an unclear impact on time to market.
Although companies agree with this approach, it takes a long time to plan and set up, and prevents systems from responding to changes in project needs or technology. In addition, waterfall planning falsely reassures project managers: it provides a sense of control by focusing mainly on intermediate milestones and KPIs, rather than real control over the overall project schedule.
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Changes in functional requirements in the design process. A difficult aspect in table management is the struggle to maintain performance requirements, such as maximum speed, height and width of the aircraft. Usually, these requirements are set at the beginning of the project, but they change over time – for example, customers may change their minds, or the communication of different technologies may require that one parameter be chosen over another. The result is a highly inefficient and overly iterative design process.
The A&D industry can no longer accept a conventional approach to project development. Instead, it should evolve to a new approach that begins by setting a timeline – usually three to four years – as a clear plan with subordinates aiming to improve performance as much as possible within a certain time frame. The schedule should be the main performance indicator and safety standards. (To be clear, some cases in the industry still require a traditional system development approach to leverage or demand new skills.)
The A&D industry needs to shift to a new approach that starts with setting timelines as a vague goal.
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Many new market entrants are already using this method. (See “SpaceX: An Example of Speed in Action.”) As Exhibit 4 shows, prioritizing timelines is fundamentally reshaping the way new programs are handled, which has ripple effects across all aspects of the process. In particular, companies that want to focus program development in tight, short-term areas should take the following steps.
Moving to rapid development cycles is a significant change from the status quo in the aerospace and defense industries, but this concept is being used successfully today, especially at SpaceX. The company’s original Falcon 9 rocket first flew in 2010, and improved versions have been released almost every two years since then. Each new version includes continuous improvements
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