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#3 - DIGITAL SIMULATION

OP-ED. Aeronautical Companies Facing the Threat of a Digital Crisis

Shaken, like all sectors, by the digital revolution, the aeronautical, space and defense industries are at a turning point in their transformation. 3D printing, cloud computing, data analytics, artificial intelligence or simulation… stakeholders are accelerating their investments in digital technology but for the moment aren’t reaping the benefits.

By Philippe PLOUVIER, Partner and Managing Director at The Boston Consulting Group

 

Managers are questioning the value created by their digital investments

The entire value chain of the aeronautical sector – systems manufacturers, equipment manufacturers but also service providers – has been digitizing its activities for several years. To support this approach, investments in digital technologies have continued to grow and will increase again this year for a majority of investors (54%). As such, a quarter of companies will invest no less than 100 million dollars in 2018 in order to accelerate their digital transformation. These investments aim to digitize their operations while developing new growth drivers.

Paradoxically, the managers of these companies never cease wondering about the relevance of these investments; are they really fruitful? In many cases, the answers do not seem to be sufficient or are even disappointing. Worse, while it seemed to be better underway than the digitalization of the automotive sector and other industrial fields- because it was carried by companies that have clearly and more rapidly integrated the disruptive nature of the digital change- the transformation of the aeronautical sector now seems to be lagging behind according to our maturity analysis. Faced with this, managers are asking for concrete demonstrations of the value digital creates. This uncertainty is leading certain stakeholders to reduce or even stop their investments. There must be a third way to clear the horizon.

Investing in the foundations key to unlocking investment value

In order to benefit from the investments that have already been made in digital technologies, investors in the sector must invest in the foundations of digitalization. These seem to be insufficiently developed compared to practices in other industrial sectors. Our experience invites investors to focus on five areas:

  1.    Management: the sector cannot hope to create value without defining value creation objectives, understanding customer expectations and implementing management to ensure that these projects are steered. Agility is required to allow for the acceleration or cancellation of projects when necessary. Hiding behind these principles of common sense is a major revolution within certain companies for whom it’s a question of abandoning technological approaches (even digital ones) in order to concentrate on what is likely to create value for the customer.
  2. The skills: the aeronautical industry needs to develop more digital profiles (Chief Digital Officer, data scientists, developers, UX/UI lead designer) in internal and external talent pools, and above all offer them interesting career prospects, which will require the implementation of new talent management methods.
  3. Leadership and culture: digitalization should no longer concern a handful of employees working in a defined department or be limited to decision-makers. All employees should be trained on digital and it should be integrated into each management structure and decision-making body.
  4. Data and infrastructure management: data must be a value-creating asset and an integral part of the company’s strategy: data valuation should be integrated into the business model. This requires technological infrastructures to exploit this data. This also requires establishing data management that enables data to be shared both within the company and with its customers, suppliers and partners.
  5. “Agile” procedures: behind the success of companies such as Space X is an operating method that is no longer restricted to digital start-ups in the Silicon Valley. The principles are simple: customer orientation, incremental development of imperfect products but enabling rapid convergence towards a solution that meets market expectations through rapid feedback loops. These methods are arriving in the industry and will be essential for diffusing the new possibilities digital makes possible.

After a period of experimentation and discovery, the aeronautical and defense sector is entering a pivotal period. Should investments be accelerated and the switch to digital be resolutely made? Is this an imperative priority or a fad? To help make these decisions, managers are demanding results. We believe that there is a way to create value. It requires working on the fundamentals of digital transformation; clarifying the objectives by putting the customer at the center of concerns, developing digital talents, adapting the culture and investing in data and IT infrastructure management while gaining in agility.


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