IBM Business Consulting Services
Reprogramming Aerospace and Defense
Bolstering the business ecosystem is key to sustainable growth
An IBM Institute for Business Value executive brief
ibm.com/bcs
The IBM Institute for Business Value develops fact-based strategic insights for senior
business executives around critical industry-specific and cross-industry issues. This executive
brief is based on an in-depth study created by the IBM Institute for Business Value. This
research is a part of an ongoing commitment by IBM Business Consulting Services to provide
analysis and viewpoints that help companies realize business value. You may contact the
authors or send an e-mail to iibv@us.ibm.com for more information.
Contents
Introduction
1
Introduction
1
Profitable growth is the goal...
2
... adaptation is the hurdle
6
Hidden clues: A closer look at
the A&D ecosystem
9
Ecologically minded: Caring
for the ecosystem
Over several decades, industry domination and the desire to control the industry
have emerged as prevailing objectives among original equipment providers (OEPs)
and suppliers across the Aerospace and Defense (A&D) industry. More recently,
the need for tighter integration and collaboration among industry participants has
created a more networked and complex industry structure where the success of
individual companies is increasingly intertwined with the performance and capabilities of others inside and outside the A&D business ecosystem.
12 About the authors
This inherent conflict between the historical pursuit of industry dominance and the
economic necessity of increased collaboration is steadily decreasing the effectiveness
of traditional business models and jeopardizing the health of the A&D ecosystem.
To foster growth over the long term, industry players need to adjust their mindsets
and their strategies, taking into consideration their role in the industry ecosystem and
emerging business models that are more conducive to innovation and rapid change.
A recent study conducted by the IBM® Institute for Business Value highlights the key
challenges faced by OEPs and suppliers, assesses the current health of the A&D
ecosystem and offers concrete actions that can help OEPs and suppliers “reprogram,”
setting a course for profitable, sustainable growth.
12 About IBM Business
Consulting Services
13 References
Profitable growth is the goal…
According to the IBM 2004 Global CEO study, revenue growth tops the list of
executive priorities, followed closely by cost reduction.1 A&D participants mirror
overall results (see Figure 1). The economic challenges of the past few years have
made cost-efficiency an underlying assumption in all areas – and growth initiatives
are no exception. CEOs are interested in profitable growth, not growth at any cost.
Figure 1. Key focus areas of CEOs around the globe.
Revenue growth
Cost reduction
Asset utilization
All respondents
A&D
Risk management
Effectiveness improvements
0%
10%
20%
30%
40%
50%
Source: “Your Turn: The Global CEO Study 2004.” IBM Business Consulting Services. 2004.
1
Reprogramming Aerospace and Defense IBM Business Consulting Services
60%
70%
80%
To gain insights about the A&D growth challenge in particular, the IBM Institute
for Business Value interviewed executives of leading OEP and supplier firms and
supplemented those conversations with additional industry research. What we
found was an industry at a critical inflection point.
With three straight years of losses in the airlines industry,2 traditional airlines have
limited funds for investment. Defense budgets remain under constant pressure.
For decades, defense budgets worldwide have declined as a percentage of GDP
and were at 2.3 percent at the beginning of the decade.3 Even in the United States,
where the bulk of defense spending is concentrated, challenges are mounting.
The U.S. Department of Defense (DoD) is addressing the 2004 budget shortfall of
US$12 billion through funds transfers and program delays.4
In terms of fleet value,
In response, traditional customers are shifting strategies – sharing more risk with
suppliers while requiring them to invest more, leasing aircraft versus buying, experimenting with new revenue streams and converting fixed costs into variable costs.
International Lease Finance
Corporation (ILFC) is the largest
aircraft leasing company in the
5
world, with over 130 airline
…adaptation is the hurdle
6
customers worldwide.
These financial pressures have made business transformation more urgent for
airlines and defense departments; OEPs and suppliers, on the other hand, are
generally not adapting as quickly. Failure to anticipate or respond quickly enough is
creating challenges in several areas:
Excess capacity
With 2,390 aircraft (of which 1,399 are widebody or narrowbody aircraft) currently
sitting in storage,7 experts are debating about how many could return to active
service, leaving OEPs and suppliers in a quandary. Trying to hedge their risk,
some OEPs are ramping up refurbishment capabilities, planning for an active
after-sales market. However, regardless of the outcome, companies are likely to
end up with excess capacity somewhere – idle manufacturing plants or underutilized after-market services. Internally, supply is out of sync with demand, too.
Industry consolidation has left firms to deal with tremendous internal redundancy.
During the 1990s, for example, 11 different companies melded into the present day
Northrop Grumman.8
Decommissioned defense
aircraft (17 Skyhawks
and 17 Aermacchi jets)
currently cost the New
Zealand government some
$8 million to maintain and
store, rising at a rate of
about $320,000 a month.
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Reprogramming Aerospace and Defense IBM Business Consulting Services
Underserved (or unserved) customer needs
Looking at the commercial market, most low-cost carriers (LCCs) have continued
to make a profit despite the difficult travel environment, and they are the customers
buying new planes (see Figure 2). Their requirements are somewhat unique in that
LCCs’ businesses have been designed differently from the start – with cost-efficiency
top of mind. They were early and intense users of Web technology for ticketing and
check-in. Operationally, they chose to do business in smaller airports, away from
ground and airspace congestion. Among commercial customer segments, these
airlines operate on such different terms, with lower (albeit more consistent) net
profits, that many OEPs and suppliers are evaluating whether the LCCs can truly
sustain their growth. On the defense side of the business, customer demands are
morphing as well. Requirements for world war (where nations had common enemies
and conflict was confined to certain regions) are not the same as those for global
war (where conflict can erupt quickly in any number of random places at the same
time and enemies can prove difficult to locate). Today’s war on terror, for example,
is being waged globally, demanding the collaborative efforts of governments and
private sector companies around the globe.
Figure 2. Fleets are growing at low cost airlines.
Percentage
10
7
7
-4
-1
2004E
2005E
5
5
0
-3
Low cost airlines
Traditional airlines
-5
2002
2003
Source: Cordle, Vaughn. “Airline Financial Outlook.” AirlineForecasts, LLC. 29th Annual FAA Aviation Forecast Conference,
Washington, D.C., March 25-26, 2004.
Talent upheaval
According to the Aerospace Industries Association, the average age of the
aerospace engineer is 54, and the average blue collar worker is 51.10 In the US, over
one quarter of the aerospace workforce will be eligible to retire by 2008.11 As these
baby boomers approach retirement, A&D companies are justifiably concerned about
retaining the knowledge they need as employees exit the business – and backfilling
them with employees that have the right skill set for the future. Attracting new talent
has been difficult as well. Although the overall number of engineering graduates
is growing in Europe (doubled between 1975 and 1992) and Asia (tripled between
“It is difficult for A&D companies
to get the skills our market
needs because the best ones are
‘stolen’ by industries that seem
to be more attractive than A&D
– interestingly companies like
high-tech or games producers.”
– Lynn Borek, Senior Director,
Global Aviation Information
Management, Rockwell Collins
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1975 and 1995),12 the US trend runs in the opposite direction: engineering program
enrollment declined 20 percent from 1983 to 1998.13 Within aerospace engineering in
particular, the number of degrees awarded in the US fell by 47 percent between 1991
and 2000.14
Regardless of the size of the talent pool, A&D must still compete against other
industries that are now perceived as more exciting, stable or lucrative. Such skill
shortages provide even more incentive for alliances, outsourcing and various
forms of collaboration.
Escalating integration complexity
The need for collaboration and integration is pervasive and rapidly increasing, but
companies’ processes, infrastructure and culture are having difficulty keeping pace.
Today, it is not unusual to have six or seven tiers between the prime contractor and
the lowest member in the supply chain. Collaboration must also cross regional
and corporate boundaries. For instance, Boeing’s 7E7 program currently spans
8 countries and involves 30 different companies.15 Although collaboration within
programs is commonplace, and some leading companies are breaking down
program silos to share practices and insights enterprisewide, most A&D companies
still lack the necessary infrastructure to seamlessly integrate a growing network of
external partners and suppliers. Even when companies have established such an
infrastructure, they often cannot afford to maintain and operate it. Engineering in
particular relies heavily on homegrown or heavily customized applications. A large
percentage of A&D manufacturers lack fully operational ERP systems, and because
of the customized nature of their businesses, they have a high number of disparate
product lifecycle management systems.16
“The open standards for IT and
the business processes which
are missing are proving to be
a big inhibitor for A&D-wide
operational improvements.
While it’s nice to be able to
exchange engineering data, it
is a ‘must’ that key segments
in the value chain – right up
to suppliers and partners
– are ‘networked,’ in order
to achieve a real impact.”
– Klaus Peter, VP Strategy
and Transparency, European
Aeronautic Defense and
17
Tech not enough
Companies are finding that technology, in and of itself, is an insufficient differentiator.
Typically, everyone has access to the same “raw” technology – the differentiation
comes in how creative a company is in its application. Perhaps more critical, technological sophistication must be in balance with customer need (and their willingness
to pay). For instance, travelers will determine the success of regional versus large
jets. Airline customers may be more than willing to trade the inconvenience and short
time delay involved in transferring between smaller, regional planes if that saves
them enough money on a cross-continental flight.
Space Company (EADS)
“Don’t bring me a
$1,000,000 missile to
destroy a $10,000 truck.”
– Michael Wynne, Acting
Undersecretary of Defense
18
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Reprogramming Aerospace and Defense IBM Business Consulting Services
Custom no longer customary
Deviating from the norm in the defense sector, the US Navy opted for off-the-shelf collaboration
software which they procured and implemented quickly. They chose a package that relied on standard
(preexisting) infrastructure and a generic Web browser, which allowed greater interoperability, rapid
deployment and lower costs. By resisting the tendency to tweak and customize, the Navy was able
to implement their “collaboration@sea” solution in 42 days, with just 7 people, at a price they could
afford. Their implementation was so successful that militaries in other geographies such as Canada
soon followed suit.
19
Innovation and speed-to-market are more critical than ever
Despite the historical prevalence of technology-driven product innovation, the
actual innovation needed may be low-tech or even no-tech – innovativeness,
after all, is judged by the marketplace not the maker. Innovation does not have
to center on the product either. Process or operational innovation can be just as
critical to profitable growth. When innovative firms were asked in a 2001 National
Science Foundation study to identify which type of innovation (product or process)
developed during the past year contributed most to company revenue, process
innovations outnumbered product innovations by almost 60 percent.20 In fact,
product innovation without operational innovation can lead to commercialization
shortcomings. For instance, Rockwell Collins developed the first generation of
military Global Positioning System (GPS) user equipment in 1979,21 but lacked the
operational capabilities to commercialize the technology successfully in other
segments such as recreation. While they equipped the military, other companies
took the technology and outfitted the world’s backpackers, fishermen and sailing
enthusiasts. Similarly, Boeing (at that time, McDonnell Douglas) worked with NASA
to invent winglet technology – but Airbus was the first to use it commercially.22
While product and process innovation are the most obvious targets, innovation can
take a variety forms – social, political, economic – and bring sweeping change to
individuals, nations and governments as well as corporations.
Mind-bending social innovation for society at large
Although seemingly farfetched, futurists have proposed fundamentally altering long-standing conventions
such as the five-day workweek, suggesting, for instance, a nine-day “continuing” week where a third of
the workforce is at leisure during each three-day period. While the percentage of time each individual
works may drop slightly (71 to 68 percent), proponents highlight offsetting benefits such as betterutilized assets and facilities (no upgrades for peak usage), a less-stressed, more productive workforce
and the ability to stage work and teams so that progress continues nine days a week. Society benefits too:
a higher quality of life for families and individuals; less congestion involved in typical weekend activities;
23
and stores, museums, mechanics and doctors that are available each day.
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Reprogramming Aerospace and Defense IBM Business Consulting Services
Hidden clues: A closer look at the A&D ecosystem
Industrial-age management
Similar to species that are part of a biological ecosystem, businesses do not exist in
a vacuum; they are part of a complex business ecosystem comprised of competing
and complementary value nets. Each company’s value net consists of its particular
set of customers, suppliers, complementors and competitors.
theories “…can’t tell us
how to manage a network of
business partners that is 1000
times the size of the firm,
Recent management science research has delved deeper into this biological
parallel to shed light on conditions that foster thriving business ecosystems – and
vice versa. As highlighted in research conducted by the University of Kiel, Germany
and the IBM Institute for Business Value,24, 25 companies within business ecosystems
tend to exhibit certain behaviors that cast them in one of three roles:
as is the case in industries
as different as apparel and
software. They don’t tell
us why IBM’s innovation
strategy is more dependent
• Dominator – The defining characteristic of a dominator is its drive to cover the
entire ecosystem, expelling or defeating other species. In a business ecosystem
context, dominators integrate vertically or horizontally in an effort to gain more
control. Consequently, they tend to have a high physical presence and produce
value directly. They use proprietary platforms and expect suppliers and partners
to adhere to their particular process and system requirements. In the short term,
this mode of operation makes the dominator productive – but over time, programs
suffer because it takes too much time to respond to market changes, compliance
costs creep into suppliers’ prices and ultimately critical relationships are damaged
beyond repair.
on influencing the behavior of
the millions of free software
developers scattered outside
its organizational boundaries
than on the hundreds located
in its internal TJ Watson
Research Center.”
– Marco Iansiti, The Keystone
Advantage: What the New Dynamics
of Business Ecosystems Mean
• Niche – Similar to their biological counterparts, business ecosystem niches have
specialized capabilities that differentiate them. But because of their relatively small
size, they often have difficulty defending against dominators. As a group, they
create most of the value within the business ecosystem.
for Strategy, Innovation, and
Sustainability, 2004
• Keystone – In nature, keystones are not focused on proliferation; instead they
are content with keeping the ecosystem in balance. Likewise, keystones within
a business context strive to improve the health and sustainability of the entire
ecosystem. They drive policies, establish standards and create open platforms
that enable better collaboration. Because their focus is on facilitating value
creation (as opposed to creating it all themselves), they can maintain a low
physical presence. To sustain value creation over the long term, they carefully
balance value extraction with sharing.
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Reprogramming Aerospace and Defense IBM Business Consulting Services
Role reversal: Hypothetical niche company surprised by dominator’s new mode of operation
When the leaders of TwoReel Engines received their invitation to join Global Aircraft at its Concept
Kickoff, they had mixed reactions. Although definitely anxious to be part of designing the “aircraft of the
future,” they were skeptical about how this new program might work. Would their innovative ideas be
vetoed because they were outsiders? That happened often enough. Would this mean they had to buy
more new hardware and software to comply with the latest edict? Based on prior experience, the cost
of doing business with Global Aircraft often neutralized initially optimistic growth projections. Was this
really an opportunity to radically improve the aircraft of tomorrow (and how they are made) – or simply a
survival move?
During its last program, Global Aircraft acted as prime contractor, doling out work to subcontractors.
Although program participation was billed as a consortium, Global’s specialized methods were the basis
for all activity. Design efficiencies were limited, and infrastructure costs mounted for all involved. From
concept to rollout, Global owned and controlled every aspect of the program. Although the resulting
plane could outperform all others in the marketplace, it was costly to manufacture – and many airlines
could not afford to purchase or operate it. Despite substantial value chain improvements in recent
years, the company continued to struggle financially, always in a constant battle with other large aircraft
companies for industry supremacy. To TwoReel, Global Aircraft was just another one of the big four.
Driven by a combination of hope and fear, TwoReel decided to accept Global Aircraft’s invitation. And they
were glad they did. At the Concept Kickoff, Global seemed like a totally different company. They brought
together a broad cross-section of companies: airlines; part and component designers; IT providers;
program management experts; maintenance, repair and overhaul companies; airport management and
regulatory agencies – just to name a few. They expressed a sincere interest in the expertise that each
participant could offer. It was clearly more than a consortium; Global Aircraft was providing seed money
in key areas and was assuming over half the risk. For their part, other participants joined in, agreeing to
share ownership, cost, risk and reward equitably.
The team of companies moved together through each phase of the program as if they were one
enterprise. From phase to phase and activity to activity, the leadership baton passed to different keystone
and niche companies based on their particular expertise and ability to enable the rest of the team. With
an expressed goal of using common standards and open architectures, the team decided on tools
and methods that could be shared easily across the team and around the world. Global Aircraft acted
like a global company – not just one with operations in different parts of the world. They became a
central information and communication hub both inside the company and across the entire network
of partners. They established platforms that could receive and disseminate data and information in a
variety of formats so that everyone involved could access necessary information about the aircraft and
its subsystems. They also suggested affordable, off-the-shelf, Web-based tools that facilitated quick
communication about the myriad design, manufacturing, supply and regulatory items that inevitably
arose during the course of the program. Because Global Aircraft was focused on leveraging the expertise
and innovativeness of the entire team and managing a complex network of high performers, the end
result was an aircraft that provided acceptable margins for all program participants and a product that
suited customers’ functional and financial needs. Along the way, they had also managed to implement a
new business model that promised higher – and more sustainable – growth.
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Reprogramming Aerospace and Defense IBM Business Consulting Services
The health of a business ecosystem dictates its longevity and propensity for growth.
Healthy business ecosystems are composed of productive companies. Here, the
financial standing of major entities is solid and robust, and niches of highly innovative
companies emerge regularly. Conversely, unhealthy business ecosystems have
low innovation rates. Niche firms are forced into low-margin positions, leaving them
with insufficient funds to innovate. With little variety added in types of businesses
or products, the business ecosystem can become rigid and slowly stagnate. When
new members enter unhealthy ecosystems, productivity tends to go down instead of
up. In these ecosystems, dominators are usually extracting more value than they are
contributing. Or, there could be more than one dominator which tends to polarize the
business ecosystem, leaving it in a perpetual tug-of-war where one side eventually
loses to the other – or both sides lose to an opportunist that enters with a more
unifying approach.
In evaluating the A&D ecosystem, the IBM Institute for Business Value has taken the
three health barometers of a business ecosystem – productivity, robustness and
niche creation26 – and translated them into a ten-point evaluation tool composed of
both qualitative and quantitative measures.27 Using 17 major OEPs and suppliers28
as a proxy for the industry, detailed analysis suggests that the A&D ecosystem is
generally unhealthy (see Figure 3).
Figure 3. As an industry, A&D is not very productive and, on average, not generally robust.
Productivity assessment
Company Q
Robustness assessment
Company A
Company Q
Company B
Company P
Company P
Company C
Company O
Company A
Company B
Company C
Company O
Company D
Company N
Company D
Company N
Company E
Company M
Company E
Company M
Company F
Company L
Company F
Company L
Company G
Company K
Company J
Company G
Company K
Company H
Company I
ROIC
Revenue growth
Platform maturity
Average
Source: IBM Institute for Business Value.
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Reprogramming Aerospace and Defense IBM Business Consulting Services
Company J
Beta factor
EBIT margin
Credit rating
Average
Company H
Company I
Although dominator behavior provides a certain level of productivity, the point at
which the ecosystem no longer benefits is often vague and difficult to predict. Direct
and indirect productivity in an ecosystem is a result of the role played by any given
participant, and is determined by each player’s operational decisions. The number
of dominators in an ecosystem also influences overall productivity. When many
dominators exist, the ecosystem tends to be more variable – although still not as
productive as a system predominantly influenced by keystones. However, when two
companies become the prime dominators and are at odds with each other, they
leave room for competition to enter the market and move into an influential keystone
position, bringing robust niche participants and new and innovative processes.
Dominators and keystones measure productivity differently. Dominant company
productivity measures are often built on how much a given set of employees can
produce over a specific period, while keystone companies understand the flux in
the system and measure the overall productivity of the entire collection of participants, including how many new ideas are generated and commercialized. When
domination permeates a company’s identity and culture, the challenge of moving
from one role to another requires not only a change in operational decision-making,
but also a modification of behavior and performance measures.
“The A&D industry must now
accept that the model is shifting:
OEM-specific requirements lead
to solutions unique to each OEM
which increases the operational
cost of doing business, and,
with the electronic information
management changes [that] are
coming into the marketplace,
competition is coming from new
sources, not necessarily the
traditional A&D companies.”
– Lynn Borek, Senior Director,
Global Aviation Information
Management, Rockwell Collins
Robustness, another facet of the health check, measures company stability – how
the firm reacts to stock market fluctuations, what its financial performance and
outlook is and, therefore, how much others can comfortably depend on them. In an
ecosystem where a few dominant companies create, and control the core standards,
platforms and processes for the entire network of participants, and often expand
at the expense of others, there is less diversity and less ability to absorb shocks to
the system. The A&D industry has repeatedly demonstrated its inability to absorb
shocks, most recently with events ranging from security threats to global infectious
disease. Even seemingly unrelated incidents can destabilize the industry.
Ecologically minded: Caring for the ecosystem
Based on the IBM Institute for Business Value assessment, it appears that the A&D
ecosystem has an abundance of dominators and too few keystone and niche
companies. This unbalanced condition creates challenges. For instance, dominators
throughout the industry are all adopting different technologies, platforms and applications, forcing suppliers that serve them all to have separate or highly customized
systems for routine operational activities. Without strong keystones, establishment
of standards has largely been left to those outside the A&D ecosystem, such as
Industry Solution Vendors or IT companies.
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Reprogramming Aerospace and Defense IBM Business Consulting Services
To improve long-term growth prospects for themselves – and the industry as a whole
– A&D companies should consider recasting themselves in a keystone or niche role.
This sort of “reprogramming” requires strategic discipline and a concentrated effort to:
• Understand who’s who. This involves companies knowing not only their own role
and strengths, but also understanding the key contributions of others. Keystones, for
instance, should understand, value and capitalize on the innovation contribution of
niche firms. Those in niche positions should acknowledge and take advantage of
the facilitation and leadership contributions made by strong keystones.
• Use rather than build. Keystone and niche companies leverage the services of
their value net where they have gaps or weaknesses, rather than attempting
to build and operate on their own. This provides flexibility to respond faster
(as a value net) to changes in the marketplace. It can also allow companies
to become more variable with the ability to scale up and down as demand
dictates. By leveraging others (and their assets), companies can become more
virtual and reduce their overall physical presence.
• Act in accordance with desired role. For keystones, this means moving actively to
become a “hub” – a point of connection, integration and information exchange.
Hubs facilitate the flow of information (such as quality information), making
the appropriate details available to all that need it. For niche firms, this means
creating and maintaining a rapid R&D process that allows them to stay on the
“edge” of the ecosystem, continuously introducing innovative new products or
entering new market segments.
• Exert influence, not control. Simply put, in today’s increasingly networked industry,
A&D companies need to become more adept at exerting influence without
having direct control. Growth in influence may place keystone leaders in unfamiliar
positions – such as investing in standards development or in a niche’s business,
without expecting any type of direct financial return.
Niche companies
10
Do
Preserve differentiation of product portfolio
Do not
Assume keystone responsibilities such as standard-setting
Focus intently on finding next niche
Slip into commodity-like behavior where they end up
competing with keystones
Stay at the leading edge of the industry
Drift into the industry mainstream
Maintain loose connections with keystones
Allow themselves to look like an extension of a keystone
and lose their own distinctiveness
Keep operations “entrepreneurial” size
Outgrow your ability to innovate regularly and quickly
Reprogramming Aerospace and Defense IBM Business Consulting Services
Keystone companies
Do
Create tools and building blocks that enable
everyone to innovate
Do not
Insist that niche firms use their proprietary
platforms
Set high performance standards, then help
everyone meet them
Compensate for internal inefficiency by
demanding a higher standard from others
Standardize and simplify communication and
data exchange across A&D ecosystem
Burden niche companies with sophisticated,
but unaffordable, collaboration tools
So, what do your behaviors suggest about your role in the A&D ecosystem? Here are
some questions to help you uncover dominator tendencies in your own operations:
• Which do you require more often from your suppliers: that they meet industry
standards (where they exist) or that they adhere to your company standards?
• Does the complexity and length of time it takes to negotiate new customer and
supplier partnerships impact your bottom line?
• How much emphasis is placed on sharing risk, costs and rewards throughout
your value net, and is there a real or perceived imbalance of risks?
• Are you driven to consider acquiring niche players based on their ability to
innovate swiftly?
• Does the investment community pressure you about buying companies that are
for sale, even when you believe those firms would do better on their own?
• How variable is your cost structure? Instead of “owning” every aspect of the value
chain (and bearing the associated fixed costs), where can you rely on others so
that your costs vary with actual use?
• Have you virtualized as much activity as possible, making it easier for others in the
ecosystem to assume responsibility for particular functions?
• How often are your growth strategies constrained by what you can do (or think
you can do) on your own?
• Does your company culture predominantly engender dominance or influence?
• How do other companies both inside and outside your business ecosystem
perceive you?
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Reprogramming Aerospace and Defense IBM Business Consulting Services
As industry networks evolve and become even more complex, it is essential that
companies understand how their networks function, how key firms within those
“ecosystems” support or inhibit innovation, how different actions enhance or damage
operational productivity and how they can encourage healthy, vibrant environments where new products and new firms emerge on a regular basis. To find out
more about the IBM Institute for Business Value Aerospace and Defense study or
to discuss ways your company can reprogram itself to help create a healthier A&D
ecosystem, please e-mail us at iibv@us.ibm.com. To browse other resources for
business executives, visit our Web site:
ibm.com/bcs
About the authors
Sandra Kearney is part of the Global A&D Team at the IBM Institute for Business
Value. With 22 years of aviation experience, Sandy is focused on providing A&D
executives with insights they can use to build stronger, more effective companies.
Sandy can be contacted at skearney@us.ibm.com.
Dr. Hagen Wenzek leads the Global A&D and Electronics Teams at the IBM Institute
for Business Value. Hagen is active in both academic and business research
projects, helping spark new and innovative business strategies across the A&D
industry. Hagen can be contacted at wenzek@de.ibm.com.
Contributors
Alberto Castano-Pardo, Consultant, IBM Business Consulting Services
Daniel Graf, Consultant, IBM Business Consulting Services
Ionel Grecescu, Architect, IBM Product Life Cycle Management Solutions
Keshav Gupta, Consultant, IBM Business Consulting Services
Leanne Viera, Global A&D Industry Solutions Leader, IBM Business Consulting Services
About IBM Business Consulting Services
With consultants and professional staff in more than 160 countries globally, IBM
Business Consulting Services is the world’s largest consulting services organization.
IBM Business Consulting Services provides clients with business process and
industry expertise, a deep understanding of technology solutions that address
specific industry issues and the ability to design, build and run those solutions in a
way that delivers bottom-line business value.
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References
13
1
“Your Turn: The Global CEO Study 2004.” IBM Business Consulting Services. 2004.
2
Cordle, Vaughn. “The Outlook for Commercial and Civil Aviation,” Presentation at
29th Annual FAA Aviation Forecast Conference. AirlineForecasts LLC, March 2004.
http://apo.faa.gov/Conference/2004/Panel2/FAA%20presentation%20update%
20vaughn%20cordle.ppt
3
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May 2003. http://www.pwc.com/pl/eng/ins-sol/publ/2003/tice_eeo_america.pdf
4
Weisman, Jonathan. “War Funds Dwindling, GAO Warns: Pentagon Needs Billion
More This Year in Iraq, Afghanistan.” Washington Post. July 22, 2004.
5
International Lease Finance Company Web site. “Introduction.” http://www.ilfc.com/
history.htm
6
International Lease Finance Company Web site. “Worldwide Customers.”
http://www.ilfc.com/customersAll.htm
7
“Aircraft fleet and statistics: Aircraft in Storage by Airlines and Lessors.”
SpeedNews. July 2004. http://www.speednews.com/lists/lists.shtml#storage
8
IBM Institute for Business Value analysis.
9
“Govt Pays Out $1M For No-Sale of Fighter Jets.” New Zealand Press Association.
September 2, 2004.
10
Carney-Talley, Sandra. “AIA Will Focus on Creating Workforce Opportunities in
Election Year 2004.” AIA Update. September 2003.
11
Commission on the Future of the U.S. Aerospace Industry. “Final Report of
the Commission on the Future of the United States Aerospace Industry.”
November 18, 2002. http://ita.doc.gov/td/aerospace/aerospacecommission/
aerospacecommission.htm.
12
National Science Board. “Science & Engineering Indicators 1998.” Arlington, VA:
National Science Foundation, 1998. http://www.nsf.gov/sbe/srs/seind98
13
Commission on the Future of the U.S. Aerospace Industry. “Final Report of
the Commission on the Future of the United States Aerospace Industry.”
November 18, 2002. http://ita.doc.gov/td/aerospace/aerospacecommission/
aerospacecommission.htm
14
Ibid.
15
The Boeing Company. “7E7: Interactive Supplier Map.” http://
www.newairplane.com/en-US/FunStuff/Multimedia/SupplierMap.htm
Reprogramming Aerospace and Defense IBM Business Consulting Services
© Copyright IBM Corporation 2004
16
IBM Institute for Business Value analysis.
17
IBM Global A&D Transformation Study. IBM Institute for Business Value.
August, 2004.
IBM Global Services
Route 100
Somers, NY 10589
U.S.A.
18
Wynne, Michael. Presentation at Credit Suisse First Boston/Aviation Week
Aerospace and Defense Finance Conference. May 17, 2004.
Produced in the United States of America
09-04
All Rights Reserved
19
IBM Corporation. “Collaboration at Sea: Fleet Command and control efficiency.”
http://www-1.ibm.com/industries/government/doc/content/casestudy/
273975109.html
IBM and the IBM logo are registered trademarks
of International Business Machines Corporation
in the United States, other countries, or both.
20
National Science Board. “Science & Engineering Indicators 2004.” Arlington, VA:
National Science Foundation, May 2004. http://www.nsf.gov/sbe/srs/seind04/c6/
c6s6.htm#c6s6l2p3
21
Rockwell Collins. “Navigation & GPS Systems.” http://www.rockwellcollins.com/
products/gov/page1429.html
22
de Melo, Jaime. “Notes on the Boeing-Airbus Rivalry.” INSEAD. October 25, 2000,
http://www.unige.ch/ses/ecopo/demelo/Commerce/Lectures/Boair.pdf
23
Howe II, Harold. “The Glories of the Nine Day Week.” World Future Society Social
Innovation Forum. http://www.wfs.org/howe.htm
24
Gothlich, Stephan E. “From Loosely Coupled Systems to Collaborative
Business Ecosystems.” Paper No. 573, University of Kiel, May 2003. http://www
.bwl.uni-kiel.de/grad-kolleg/de/kollegiaten/goethlich/Business%20Ecosystems%204b%201,5Z.pdf
25
Gothlich, Stephan E. and Dr. Hagen R. Wenzek. “Underlying principles of
business ecosystems.” June 29, 2004. http://www.wiwi.uni-muenster.de/
~06/igt/papers/Workshop02/Abstracts/Hr_S_Goethlich_H_Wenzek/
Goethlich,%20Wenzek_Underlying%20Principles%20of%20Business%
20Ecosystems.pdf
26
Iansiti, Marco. “The Keystone Advantage: What the New Dynamics of Business
Ecosystems Mean for Strategy, Innovation, and Sustainability.” Boston: Harvard
Business School Press, 2004.
27
IBM Global A&D Transformation Study. IBM Institute for Business Value. July, 2004.
28
Companies included in analysis: BAE Systems, Boeing, Dassault Aviation,
EADS, Embraer, Finmeccanica, General Dynamics, Goodrich, Honeywell,
L-3, Lockheed Martin, Northrop Grummon, Raytheon, Rockwell Collins, Smiths
Group, SNECMA, UTC.
Other company, product and service names
may be trademarks or service marks of others.
References in this publication to IBM products
and services do not imply that IBM intends to
make them available in all countries in which
IBM operates.
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