Aerospace & Defense Radar 2018: disruption as a threat to traditional business models

Aerospace & Defense Radar 2018: disruption as a threat to traditional business models

December 11, 2018

Consolidation, electrification, digitalization and other trends demand strategies

The aerospace & defense (A&D) industry is in flux. Among many disruptions currently hitting the sector, brisk M&A activity is making the headlines, indicative of the considerable scale of consolidation taking place right now. Less well known but equally significant are the developments around innovation – mainly in electrical propulsion – and digitalization, which are giving rise to new business models and changing the way players in the industry work, thus driving transformation. Roland Berger's A&D experts polled the opinions of more than 200 industry insiders from 90 companies in 15 countries for their latest study: The Aerospace & Defense Top Management Issues Radar 2018 highlights the key trends and shows how A&D companies are dealing with them.

Order books are healthy right now but without a clear strategy for the future, companies in the aerospace & defense industry will not survive the radical transformation ahead.

Order books are full in the A&D sector, partly the result of growing defense spending in many countries. Indeed, there is an order backlog of over 5,500 airplanes, which will take another 6.5 years to clear. But the survey of industry leaders showed that companies are also faced with a huge variety of issues heralding unprecedented disruption and therefore demanding focus and strategic preparations. Innovations like aircraft electrical propulsion are shaking the engines industry to the core, while consolidation is rife on the supplier level, turning supply chains upside down. Connectivity and digital services are key issues for players in aerostructures and aircraft interiors. And the industry as a whole is feeling the impact of OEMs' attempts to build a more balanced supplier landscape and protect key areas of their own business.

"Currently, A&D companies are concentrating mainly on short-term issues like ramping up production. But the disruption facing the industry from trends like new forms of electrical propulsion and digital innovations means that players absolutely must consider their long-term strategy, and urgently so."
Portrait of Manfred Hader
Senior Partner
Hamburg Office, Central Europe

Short-term mindset prevents companies strategizing for the future

Even though these trends could easily turn their business on its head, A&D companies are still having trouble identifying the right way to address them. The study found that many managers are struggling with short-term topics, such as program ramp-ups or increases in production just to make sure that they fulfill their orders. But despite the importance of maintaining day-to-day operations, the sheer pace and unstoppable nature of current developments mean that players really need to gear up for the long-term challenges as soon as possible: Their task is to identify the biggest threat to their business model and to develop and implement a clear strategy going forward. Otherwise there is a risk of new entrants like startups and niche players claiming ownership of the big topics of the future and grabbing market share.

Last year, managers acknowledged that "strategy is back". That was a very good sign. So it is all the more alarming to see that now, just one year later, a short-term focus on operational topics appears to be getting in the way of strategically preparing for the disruptions to come. The wide range of challenges is evidently making it difficult to pick the right area to concentrate on. To address this, companies need to prioritize so they can maintain a focus.

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Aerospace & Defense Top Management Issues Radar 2018


Roland Berger's poll of more than 200 senior industry executives from 90 companies in 15 countries offers an insight into the key challenges and stand-out trends in the A&D industry and how companies are dealing with them.

Published December 2018. Available in
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