When A&D executives look at digital opportunities, too many still use the traditional technology lens for developing or improving products without sufficiently evaluating the related business model impacts.
The effects of digital disruption are prevalent across industries. The confluence of connectivity, big data and leaps in computing and software capabilities are disrupting old business models and enabling digital-savvy startups and other competitors to push into new markets. In industrial goods, which include A&D, startups raised $40 billion in venture capital to build new businesses in 2015. Leading-edge incumbents are also using digital innovation to fundamentally change their offerings. John Deere, for example, is shifting from selling farm equipment to providing data-enabled “agricultural solutions” (which include smart tractors). Some A&D incumbents are getting into the game, too.Rocketdyne used 3-D printing to reduce the parts in a core injector to two from 100, reducing time to market to eight weeks from one year. Pratt & Whitney, working with its tech partners, analyzed the “exhaust” data from engine sensors to develop a more compelling and profitable power-by-the-hour program.
With digitization marching through sector after sector, incumbents will continue to disrupt or be disrupted, and A&D, despite its long lead times and product cycles, will not be an exception.
A good first step for A&D leadership teams is to build a “digital road map” for their companies. While the breadth of technical innovations to consider on the road map can be quite broad, the business model questions quickly become paramount. For example:
- If the customer is no longer buying hardware (such as a satellite) and is now buying an outcome (say, ubiquitous communications), then how does that change the way we develop and price our products?
- If the money invested in autonomy is 1,000 times greater outside the company than within, how should we develop better partnering capabilities?
• If we can predict product performance, access maintenance data from anywhere in world and 3-D-print spares on site, how should we retrain and redeploy our service workforce?