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The Digital Coming of Age Seizing the Digital Opportunity in Aerospace

Digital is transforming the aerospace and defense industry. Or is it? Conventional wisdom would suggest that digital is a pervasive change agent across the industry, changing how companies interact with customers and suppliers, manage talent, make their products, and support them in operation. We wanted to know more.

“Digital” is generally defined as a set of technologies that include social, mobile, analytics, big data, and cloud. Accenture takes this technology-focused definition further, focusing on the impact of digital technologies in a given industry. We do this from two perspectives. The first is digital customers, markets, and channels—understanding how digital can deliver a consistent, meaningful, and relevant customer experience across all channels, customer segments, and geographies. The second is the digital enterprise—demonstrating the impact of digital on optimizing the efficiency and effectiveness of internal operations and the delivery of products and services.

The Digital Coming of Age | 1

Given that aerospace and defense Original Equipment Manufacturers (OEMs) and tier one suppliers can be both digital customers and enterprises, the industry provides a complex proving ground for the value of digital. To evaluate the impact of digital in the industry, Accenture surveyed a global set of executives from several leading commercial aerospace companies to understand how they view, value, and are investing in digital. The perspective of these industry leaders and Accenture’s digital experience leads us to an evolved understanding of the implications of digital within the aerospace and defense industry and a set of recommendations for how the industry can take full advantage of digital’s promise.

Accenture Digital Framework©

Comms /Media /Tech

Digital Customers, Channels & Markets

Digital Strategy & Business Architecture

Digital EnterpriseFinancialServices

Products Health /PublicService

Resources Comms /Media /Tech

FinancialServices


Resources

Digital Sales

Digital Marketing

Digital Content Management

Digital Commerce

Digital Customer Service

Digital Corporate Functions

Digital Supply Chain , Manufacturing, Operations

Digital Connected Products

Digital Customer Experience

Digital Social Media & Collaboration

Digital Applications

Digital Connected Devices

Analytics

Comms /Media /Tech

Digital Customers, Channels & Markets

Digital Strategy & Business Architecture

Digital EnterpriseFinancialServices


Resources Comms /Media /Tech

FinancialServices


Resources

Digital Sales

Digital Marketing

Digital Content Management

Digital Commerce

Digital Customer Service

Digital Corporate Functions

Digital Supply Chain , Manufacturing, Operations

Digital Connected Products

Digital Customer Experience

Digital Social Media & Collaboration

Digital Applications

Digital Connected Devices

Analytics2 | The Digital Coming of Age

Developing a New PerspectiveThe aerospace industry was an early adopter of digital, particularly in digital design and engineering. Our research shows that the industry is ready to take the next step.

Digital is now starting to transform every aspect of the aerospace value chain, from the design of aircraft through to the onboard passenger experience. The executives we surveyed are increasingly making strategic investment decisions through a digital lens that looks across the asset lifecycle from the supply chain and manufacturing, to the in-flight experience and aircraft service and support. Combined with the existing digital foundation in engineering, these developments mark an opportunity to optimize cost, service, and revenue. While our survey shows that design and engineering still attracts the greatest amount of digital investment, customer service, supply chain, and manufacturing are drawing digital investment (FIGURE 1).

How then should aerospace companies harness digital to improve outcomes from design through the passenger and operator experience? While our survey shows that many companies are investing for a digital future, it also reflects that the industry perceives some major challenges in realizing that future. Internally, respondents were particularly focused on how to develop a digital strategy, attract and retain digital talent, and understand the maturity and effectiveness of emerging digital technologies (FIGURE 2). Externally, the uses of digital to improve customer relationships and to drive incremental and new revenue were seen as the most significant challenges (FIGURE 3).

Given this perspective, how is the industry investing in and applying digital?

53%Engineering

Customer service

Supply chain

Manufacturing

23%

17%

7%

73%Reduce cost

Improve efficiency

Improve product lifecycle management

Better use of analytics/predictive analytics

Reduce manufacturing delays

73%

53%

47%

43%

Improve safety 10%

73%Customer retention/improve customer relationship

Grow revenues

Improve relationship with partners

Differentiation from competitors

Identify new business opportunities

70%

43%

37%

33%

Customer acquisition 23%

FIGURE 1 | In which one of the following areas is your company planning to invest the most in digital capabilities in the next two to three years to increase opportunities?

FIGURE 2 | In your company, what are the top three most important internally focused reasons to invest in digital capabilities?

FIGURE 3 | In your company, what are the top three most important externally focused reasons to invest in digital capabilities?


Building the Digital Aerospace EnterpriseOur results indicate that the industry’s appetite to adopt and develop digital capabilities is strong. Nearly half of the companies we surveyed are preparing to substantially invest in digital capabilities over the next three years. How substantially?

Nearly 50% of respondents indicate that over the next two to three years their companies will invest more than 5% of their total revenues in digital, while nearly 30% of those surveyed will devote over 10% of their revenues to new digital capabilities (FIGURE 4).

Aerospace companies are developing digital strategies and capabilities to realize the value of these investments. When asked about digital strategy, respondents to our survey indicate that they are focused on addressing three challenges: creating a coherent vision for digital, securing digital data, and improving the consistency of information across their supply chains (FIGURE 5).

We also asked respondents about their perspectives on the digital capabilities that will turn strategy into reality. They told us two main things: First, many question whether digital technologies are mature enough to deliver on their promise. Second, the industry is finding that it requires a more digitally savvy workforce, not only in IT but across the business in areas that will benefit from digital, data-driven operations (FIGURE 6).

Don’t know:17%

<1%:7%

1–4%:27%

5–10%:20%

49%will spend 5% or more of total revenue

>10%:29%

43%Difficulty creating a coherent vision

of the digital future

Data security

Inconsistent information at various partsof supply chain

43%

40%

73%Lack of confidence in sufficiently

mature technologies

Lack of internal skills

Lack of infrastructure

70%

53%

FIGURE 4 | What share of your total revenue do you estimate will be allocated to developing digital capabilities in your company in the next two to three years?

FIGURE 5 | What are the top three challenges for your company in developing a successful digital strategy in the next two to three years?

FIGURE 6 | What are the top challenges for your company in developing successful digital capabilities in the next two to three years?

4 | The Digital Coming of Age

Driving the Digital StrategyLooking further, we see that aerospace companies are taking steps to address the needs for having a coherent digital strategy and building digital talent.

For example, our survey indicates that companies are moving toward centralized ownership of digital strategy, a move that will provide a platform for driving forward a single, coherent digital strategy (FIGURE 7).

As digital strategies mature, aerospace companies expect that they will generate potential benefits across their supply chains. Digital’s promises of improved data accuracy, timeliness and insight underscore the potential benefits that survey respondents expect from imple-menting a digital strategy. In particular, they pointed to reduced costs, fewer program delays, and overall process optimization as targeted outcomes of their digital strategies (FIGURE 8).

Aerospace companies also expect that their digital strategies will drive benefits in specific operational areas. Corroborating the perspective gleaned from additional Accenture research on product lifecycle management in aerospace, our survey results suggest high confidence in digital’s ability to accelerate the design and development process (FIGURE 9).

63%2014

2017

2014

2017

2014

2017

60%

47%

60%

7%

13%

Function within each business/geographic units

Function across business/geographic units

Digital transformation activitiesas a separate business (spin-off)

73%Reduce costs


Optimize processes

Improve customer service

Reduce risk of errors

Speed to market

Higher profits

Develop new services

53%

50%

40%

33%

27%

20%

3%

87%Reduce costs


Optimize processes

Improve customer service

Reduce risk of errors

77%

70%

40%

23%

FIGURE 8 | What will be the biggest impact of a digital strategy on your supply chain?

FIGURE 9 | What will be the biggest impact of a digital strategy on your design and development activities?

FIGURE 7 | Which function or functions within your company are currently in charge of implementing the digital strategy and which will be in three years‘ time?


Building Digital CapabilitiesAs aerospace companies begin to translate digital strategies into reality, they remain concerned about the maturity of digital technologies.

The way forward to the digital enterprise in aerospace may well follow that of the industry’s products. Contemporary aircraft are platforms, with software increasingly used to augment or supplant physical systems. Indeed, today’s aircraft have nearly three times the number of software-driven functions as their predecessors from the 1990s. (Source: EU Scarlett Program, 2014.)

This shift to software has enabled greater flexibility and performance for aerospace assets. By taking the long view and building open, flexible architectures, aerospace companies can benefit from mature digital technologies while creating a defined roadmap to incorporate digital capabilities that will emerge over the length of a program’s lifecycle. Our respondents indicate that they are taking such a lifecycle-centric view to their digital investments. To this point, engineering continues to garner the majority of digital investments (FIGURE 10).

Yet as the bow wave of new programs currently in development moves into operation, we see indications that digital investments will similarly move into the manufacturing, service, and support functions. Our research suggests that the industry is looking to digital as a means to support product and services development, shorten design/development lifecycles, reduce program and service delays, and increase the efficiency of Maintenance, Repair and Overhaul (MRO) execution and in-service support (FIGURE 11).

Our survey also indicated a growing focus in the industry on acquiring digitally savvy talent. These requirements extend across the entire enterprise, from software engineering to digital marketing, operational analytics, additive manufacturing, human resources, and beyond. As their talent supply chains broaden to acquire digitally fluent talent, aerospace companies

are no longer competing for talent solely within the industry but also across the broader technology ecosystem. Too often, they are losing. Aerospace companies will need new talent supply chain strategies, from identifying and developing new sources of internal supply to selectively using teaming arrangements and third parties to augment their digital talent.

53%Engineering

Customer service

Supply chain

Manufacturing

23%

17%

7%

93%Design collaboration

Important:33%

Very important:60%

37% 56%

40% 43%

40% 33%

54% 13%

36% 27%

Engineering collaboration

Digital supply chain

Supporting MRO

Forecasting and prediction using big data technology

Virtual prototyping

93%

83%

73%

67%

63%

FIGURE 10 | In which one of the following areas is your company planning to invest the most in its digital capabilities in the next two to three years to increase opportunities?

FIGURE 11 | How important are the following capabilities for your company’s digital strategy?


recommendationsOur survey confirms that aerospace companies recognize that digital has the potential to deliver significant benefits for their own businesses and for their customers. From increased integration of design and manufacturing to new customer experience- driven revenue streams, digital is driving fundamental changes in the industry. Based on these research results, we suggest five important steps that aerospace companies should take to realize the digital promise:

it sounds obvious: “develop a strategy.” Yet, our research clearly shows that aerospace executives are wrestling with the complexity of building digital strategies that can deliver measurable benefits, not just buzz. The challenge starts with the breadth of digital’s reach and impact, from core enterprise activities such as engineering, to the operator and passenger experience. As our survey indicates, aerospace companies understand digital’s potential, but their investments have yet to mature beyond the funding of “hot” functional areas such as engineering to a prioritized roadmap of digital enablement.

respondents understand that future investments in digital will need to reach across the full value chain. This requires an integrated digital vision that incorporates enterprise and customer imperatives: enhancing supply chain operations, increasing manufacturing efficiency, improving in-flight experience, and improving fleet availability through aircraft service and support.

Develop a comprehensive digital strategy across the organization.

1


As aerospace companies shift from digital strategy to digital operations, they will need to address two concerns voiced in our survey results: developing cross-functional digital teams and building confidence in digital technologies. Our experience indicates that digital strategy doesn’t become digital reality without formalized leadership and governance to set the digital agenda and measure outcomes. To be most effective, digital program governance should have internal authority and external input. Internally, stakeholders from across the organization should be represented in the governance process and have objectives aligned to its outcomes. Externally, digital governance should incorporate customer and business partner feedback to accelerate acceptance across the supply chain.

Establish a digital governance framework to coordinate the development of digital assets and capabilities.

2


Our survey and market experience strongly suggest that digital is central to aerospace companies’ thinking as they move toward providing full lifecycle products and services. For product-centric companies, digital provides a platform for the rapid introduction of complementary services and greater customer intimacy. in return for access to new service channels, aerospace companies must be prepared to deliver those services in a fashion that addresses the specific requirements of customer segments and even individual operators.

use digital to support a comprehensive value chain.

3


Aerospace companies recognize that they face a shortfall in the talent needed to enable their digital strategies. Importantly, as digital becomes part of functions across the enterprise, the need for digital talent will extend far beyond the IT organization. To address these gaps, companies must be able to identify and acquire cross-functional digital skills. This will require managing multiple channels across the digital talent supply chain, from traditional sources of hiring, to investments in key skill areas and strategic teaming relationships with third parties.

Develop a plan for capability and skills which taps into multiple pools of digital talent.

4


use digital to improve collaboration across the extended supply chain from manufacturing through to service and support.

5Delays in entry to service and return to service from maintenance have had significant impacts on OEM and supplier financial performance. Our research confirms that many aerospace companies expect digital to build deeper and more pervasive collaboration across design, manufacturing, and aftermarket. As digital tightens connections across the supply chain, participants in the extended supply chain will seek to realize their long sought-after objectives of lowering total cost and pooling risk.


ConclusionAs digital strategies offer new and improved ways to optimize the supply chain, reduce time to market, and increase revenue, many aerospace companies are considering how they use digital to generate and sustain business results—a digital “coming of age.” Our research confirms that now is the time to think proactively about how to leverage digital technologies to solve big challenges. Aerospace companies are aligning their cultures and operations to the accelerated pace of digital, re-imagining how to serve connected customers and their own internal operations.

Pilot and Passenger Experience

Operation &Maintenance

Engineering &Manufacturing

SupplyChain

Research &Development

Flight DeckData

PredictiveMaintenance

Product Lifecycle Management /Process Optimization

EnterpriseCollaboration

Software Capabilities /Application Lifecycle Services

Inflight Entertainment/Wi-Fi

Inventory Optimization

Planning/Forecasting

Order Management

InformationSecurity

Personal ElectronicDevices

OperationsCrew Management

Automation/3D Printing

SupplierCollaboration

Risk PartnerCollaboration


Digital Coming of Age in Aerospace

Copyright © 2014 Accenture. All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

This document is produced by consultants at Accenture as general guidance. it is not intend-ed to provide specific advice on your circum-stances. if you require advice or further details on any matters referred to, please contact your Accenture representative.

Accenture Digital in Aerospace Survey 2014Accenture polled executives from 30 aerospace companies to assess the maturity of digital in the commercial segments of this industry and to discover their views on the principal challenges and opportunities associated with digital implementations. These executives represent aircraft manufacturers, engine manufacturers and suppliers from Brazil, Canada, France, Germany, italy, Spain, the united Kingdom and united States.

To learn more about Accenture services for the Aerospace & Defense industry, please contact:

Damien Lasou Global Managing Director Aerospace & Defense +33 1 53 23 67 15

John Schmidt North America Managing Director Aerospace & Defense +1 847 274 8984

Accenture Direct +1 312 737 8842 [email protected]

Contributors Bouchra Carlier Craig Gottlieb Joyce Kline Mélina Viglino Jeffrey Wheless

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with more than 305,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of uS$30.0 billion for the fiscal year ended Aug. 31, 2014. its home page is www.accenture.com.

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