CRA publishes Grundman et al. on “Innovation in Aerospace and Defense”
In July 2009, Aviation Week hosted an Executive Summit in Santa Fe, New Mexico, which was attended by leaders from across the aerospace and defense industry. Aviation Week designed this summit to address the issues thought most critical to the industry today. Key among these issues was that of innovation. Specifically, the summit sought to understand the state of the industry’s ability to innovate and how to preserve and foster the industry’s ability to continue innovating into the future. Senior members of the Aerospace & Defense Consulting group at Charles River Associates (CRA) attended the Executive Summit to facilitate these discussions. A few key themes emerged from this exercise. It is the purpose of this White Paper to explore these themes in more detail by way of providing the editors of Aviation Week a foundation for their preparation of a Special Report on innovation in aerospace and defense that was published in the double issue of October 26 / November 2, 2009.
Specifically, the White Paper examines five factors that participants in the Executive Summit thought would determine the aerospace and defense industry’s ability to innovate and foster innovation into the 21st century:
• The flexibility to adapt to changing customer needs,
• The willingness to take risks by undertaking complex projects with uncertain outcomes,
• The provision of adequate resources through the raising of capital and investing in R&D,
• The structuring of organizations to promote the development of new technology, and
• The attraction of top talent who bring a fresh perspective and new ideas.
As depicted in the illustration that appears as an Appendix to this paper, the aerospace and defense industry has long been a source of great innovation and continues today to produce cutting edge technologies that push the envelope of human achievement. However, at present, the indicators of innovation in aerospace and defense are mixed. Some, such as high profile program failures and an aging workforce, would suggest a looming crisis of innovation in the industry. Still others, concerning how innovators secure the necessary financial and human resources and then organize those resources for optimum results, underscore that the rules of the innovation game in aerospace and defense are changing. Together, these indicators are upsetting conventional attitudes toward innovation, and the natural friction and travail associated with the process of adapting to change are stoking anxieties. But upon closer examination one finds that there are at least as many encouraging indicators of risk-taking, innovative achievement, and successful adaptation to cast doubt on the reflexive conclusion that aerospace and defense today is experiencing a crisis in its propensity to innovate. The state of innovation in aerospace and defense is not in crisis; it is being transformed.
To explore the changing nature of innovation from the 20th to 21st centuries, from the Cold- War to a post-9/11 world, Charles River Associates undertook a comprehensive study that assesses the state of innovation in the aerospace and defense industry today. The study analyzes the trends and identifies changes that are fostering the innovations that will become the 21st century icons of progress. This White Paper is the culmination of that study. It draws on expertise from both academia and industry and includes the findings from recent interviews conducted with top executives at more than a dozen top tier firms.
The findings reported in this paper suggest that effective and successful aerospace and defense firms are adapting existing technologies quickly to address new needs and requirements. They are improving the processes by which current products and services are delivered. And they are developing better ways of managing the risks associated with large, complex programs. In addition, these firms take a longer term view of investments and more effectively utilize private sources of investment capital. Moreover, the organizational structures of successful firms balance control, autonomy, and collaboration to foster innovation. Finally, these firms are stepping up to redress the anachronistic aspects of their organizational structures and cultures to better attract bright young talent.
None of these sanguine observations should obscure the fact that in this transformation there will be losers as well as winners. But for every such company struggling to adapt, there are new firms emerging to pilot models of innovation that are achieving success. For the industry as a whole, this pattern of agile firms progressively displacing lumbering ones on innovation’s edge is not so much a crisis as an indicator of healthy renewal.
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