What's on the horizon for aerospace and defense manufacturers in 2017

January 26, 2017
It's a disruptive time in aerospace and defense, and this disruption is coming from both inside and outside the industry. Here's a look at some key factors that may impact A&D manufacturers in 2017.

  • Regulatory uncertainty. With Brexit in the UK and the new administration in the US, uncertainty hangs over the aerospace and defense industry. According to a recent article in Aviation Week & Space Technology:

"Aerospace has always played a long game. Aircraft and systems can take decades to develop and serve for decades more. But the industry is having to learn to cope with short plays and unconventional tactics to hit the emerging political curve balls."

This uncertainty may affect international trade and the movement of labor around the world. The question is how will these things be affected?

  • Increased US defense budgets. Defense industry watchers anticipate the Trump administration will be good news for defense contractors. According to a recent article in the Washington Post, contractors expected to benefit the most include BAE Systems, General Dynamics, Boeing, Lockheed Martin, Northrop Grumman, and Huntington Ingalls. The article reports that the administration's promises around defense could mean up to an additional $55 billion in defense spending.

  • Drones. 2017 may be the year commercial drones become more prevalent. The FAA issued commercial drone rules in August 2016, clarifying the details around what is and isn't legal. According to a recent article in Government Technology, PricewaterhouseCoopers predicts the commercial drone market could grow from about $2 billion now to more than $127 billion by 2020. The same article also notes the FAA estimates the nation's commercial drone fleet will grow from 32,800 in 2016 to 542,500 in 2020.

  • Commercial space travel. SpaceX just completed a successful Falcon 9 rocket launch and landing to start off 2017, delivering satellites into orbit for Iridium, a satellite communications company. In this instance, the satellite delivery was secondary to the fact the Falcon 9 rocket launched successfully, deployed the satellites, and returned to Earth exactly as planned. While SpaceX is one step closer to producing a reusable rocket, it is also opening up new business opportunities for telecommunications, global positioning, and other industries wanting access to Earth's orbit.

Where to go from here

The priorities of the A&D industry are changing. According to Deloitte, "Approximately 60% of the revenue for the largest A&D companies is associated with business units whose business models are no longer well aligned to market needs. This revenue is at particular risk of disruption."

Here are a few things to think about as you look closer at your operations and their future competitiveness.

  • Put your customers' needs first. If Deloitte’s assertion is accurate, you may lack understanding about what your customers need from your products and services. Talk to your customers, survey them, and listen to what they are telling you. Identify the most prevalent trends and issues, and prioritize those as the ones to address first with updated business strategy and process enhancements.

  • Identify new revenue opportunities. After you know what your customers need most, you may find entire areas where they would like your help if you only provided what they needed. For example, if you are in maintenance, repair and operations (MRO), are customers asking you to add drone maintenance and repair to your service offerings? There may be several services you haven't thought about where your customers would like some help—and you may be just the company to do it.

  • Modify business for a better customer experience. Your customers may tell you they would like working with you much better if you changed X, Y, or Z. These fixes may be as simple as a small change to how account managers interact with customers, or as comprehensive as additional technological systems to support a customer dashboard or portal.

  • Confirm your technology systems are helping, and not hindering, your operations. When you make changes to how you do business, you need to make changes to the supporting technology. Once you know the kind of business changes you want to make, consult your IT leaders. Is your current system capable of supporting the new processes and systems? If yes, what sort of adjustments need to be made to enable your updated operations? If no, what new software applications will help you provide the best experience for your customers and your bottom line?

The A&D industry is about to experience a wide variety of changes in 2017. Some may require new planning and development cycles to ensure you are ready to go. Take the time now to assess both the business and technology sides of your operations to succeed on all fronts.

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