Guest Post: Five Key Trends Impacting the Aerospace and Defense Industry Amid Challenging Economic Times

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By Damien Lasou, Accenture

As this year’s Paris Air Show comes into view, it’s become clear that fundamental change is in the air in aerospace and defense. The industry is shrinking on many different levels. On the decline industry-wide during the past year are a vast number of metrics including the number of airplanes manu­factured, revenues and overall market size. The root cause, of course, is the extraordinarily challenging global economy.

In Paris we will witness a dramatically altered industry with a new set of trends and issues that are rapidly coalescing and will help companies accelerate towards high performance. They include:

Executing a more strategic approach to managing costs: If aerospace and defense companies cut costs broadly and indiscriminately in response to the declining market, they risk a vicious deflationary cycle. Instead, companies should embrace a more strategic approach to managing costs. Rather than solely focusing on lowering costs, companies must cut costs wisely with future plans in mind. The aim should be to free cash and capital for investments that position them to emerge from the downturn in a stronger position.

Embracing a more proactive investment mindset: Aerospace and defense companies should make proactive investments as opposed to postponing investments until the market recovers. Investments in program management, industrialized portfolio management and new innovative platforms are required for companies to have a foot in markets now and in the future. Investments in talent man­age­ment are also key now because they secure future competency in an era of an aging and rapidly retiring elder workforce. And investments in adaptive supply chains are also crucial as the overall industry shifts more to emerging markets and new entrants.
Accenture research has found that long-term “winners” tend to use downturns as opportunities to invest. When the market recovers, these companies pull ahead of their peers in overall performance.

Taking a more strategic approach to systems integration and outsourcing: Large aerospace manufacturers are rapidly transforming themselves into systems integrators that outsource many other aspects of airplane production such as engineering and manufacturing. Such collaborations can allow these companies to tap more industry-specific talent and increase the depth and breadth of their product and business portfolios. This will create successful new business models.

Accelerating the shift to a services business model: Customer service and support are key competitive differenti­ators as companies seek during the downturn to extend the life of their physical and financial assets. Services are one of the most promising areas of untapped growth, particularly as customers defer or cancel put aside purchases during the recession.

Keeping these points top of mind, I’m looking forward to the Paris Air Show as a springboard for great future opportunities and growth. I’m anxious to see which companies will be the trailblazers in transforming their businesses, the ones that will move ahead of the curve and accelerate towards high performance.

Damien Lasou leads the global Accenture Aerospace and Defense business.

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