Aerospace & Defense sector facing digital crisis says BCG

07 June 2018 3 min. read

A ‘looming digital crisis’ in the Aerospace & Defense sector has been identified by the Boston Consulting Group. A detailed study from the Big Three strategy consulting firm found that senior A&D executives are worried that their heavy investment in digital has been wasted.

After interviewing hundreds of leading executives in the thriving Aerospace & Defense (A&D) sector, the Boston Consulting Group (BCG) concluded that, despite its size, the industry is digitally immature. This is especially true when A&D is compared to similar industries – automotive and manufacturing – which have fully embraced digital transformation.

In its report ‘Is the Digital Revolution in Aerospace and Defense in Crisis?’ the strategy consulting firm may have given away its conclusion in the title. But the fears expressed by A&D leaders in BCG’s second annual global survey of digital transformation in the sector are very real.

“The survey results point to a looming digital crisis,” says Greg Mallory, a BCG senior partner and a coauthor of the report. “Executives have invested a lot in digital and now want to see returns for that money. Yet, in terms of digital adoption, the industry is still immature compared with automotive and industrial manufacturers.”

The problem is not a lack of ambition, or appreciation for the immense commercial benefits digital adoption presents to companies operating in any industry. More than half of the 200-plus executives polled by BCG said their organization planned to increase spending on digital technology in 2018. Nearly one in four said that spending would exceed $100 million this year alone, a huge sum by any stretch of the imagination.

Nine Digital Technologies Reshaping A&D

Nor is ignorance the problem. The highest investment priorities were 3D printing capability, Big Data, analytics, cloud storage, and simulation-based design. A full 96% of respondents said they planned to digitize their core internal operations to improve efficiency, R&D capability, time-to-market for new products, and customer understanding.

Yet respondents seemed disheartened by the relative lack of value their organizations’ had derived from such momentous spending on digital tools. In 2017 the executives cited ‘cultural concerns’ as the most common digital challenge. Fast forward one year and billions of dollars and ‘demonstrating value from digital investments’ is now challenge No. 1.

Although it is natural to become more concerned about returns as investment soars to unprecedented heights, there is a clear problem in the A&D sector which is not paralleled in the automotive or manufacturing industries. BCG analysts believe that A&D executives are missing a crucial piece of the puzzle – investment in digital enablers. 

A&D is strong on vision but lacks on enablers

Enablers offered as relevant examples include talent, leadership, agile at scale, data strategy, and digital ecosystems. Report co-author Lacy Ketzner argues that: “Companies should complement their direct investments in digital applications with simultaneous supporting investments in digital enablers.”

This, she believes, is a third approach to unlocking value, which is more effective than simply doubling down on investment, or even pulling out altogether. Mallory agrees and suggests that what BCG’s survey indicates is that smart and targeted digital investments are the way forward for stressed A&D executives.

A&D clearly has a long way ahead to catch up on its sister sectors automotive and manufacturing. The AutoTech business, the land of autonomous cars and advanced infotainment systems, is accelerating at full speed. Meanwhile, US factories are shedding their outdated image and are now pioneering the use of robotics and advanced AI technology to gain a competitive edge over global rivals.