As with every industry, the COVID-19 pandemic and related shutdowns forced Aerospace & Defense companies to quickly adjust and adapt. In a survey I conducted of more than 30 A&D company executives in the weeks following the outbreak of the pandemic, the three largest pain points were reassessing supply chains (65%), rebalancing capital (68%) and accelerating digital initiatives (60%). And while executives are indeed reeling from 2020’s turmoil, for most, the year ended in a much stronger position than expected.
There will certainly be permanent changes to the way the world does business and the way the government handles defense. Dozens of leaders I spoke with are mindful of restructuring as consolidations and layoffs continue, and largely plan to remain risk-averse in the first quarter. The A&D industry is bifurcated in terms of the impact of COVID-19 to the industry, with the defense segment faring much better than the commercial side. While there was a precipitous drop in the demand that feeds commercial OEMs and suppliers, strong defense budgets continued to prop up the defense segment. It’s no surprise then, that companies with a diversified customer base across both defense and commercial segments have enjoyed more stability and room to adjust than their solely commercial aerospace counterparts.
As we kick off 2021, keep an eye out for the following trends from successful organizations and incisive leaders.
1. Be agile and start thinking ahead now.
In 2020, A&D companies came face-to-face with both the vulnerabilities and the resilience of their supply chains. When COVID-19 struck, the prevailing theory was that–as a matter of economic and even national security–companies would stop relying on foreign suppliers altogether, and as a result local manufacturing would benefit. In practice, that has largely not been the case. It may seem an oxymoron to say “plan in order to be agile,” however, the companies that most expediently resumed their operations were the ones that had invested in supply chain resilience technologies and practices pre-pandemic. These companies used technology to tell them where excess capacity in the supply chain could be optimized, how employees could be redeployed across facilities, and in some cases to help them reimagine their operations to create new products. Their supply chain and operations executives had already established and maintained strong relationships with back-up suppliers. That smart planning permitted a speed and agility that allowed organizations to outperform. We’re not out of the woods yet; expect this emphasis on agility to continue well into 2021.
2. Be innovative and opportunistic.
For various reasons, A&D and government services companies traditionally shied away from work-from-home. However, many of those companies whose teams were able to quickly initiate remote operations have recognized the value of technological agility, and as a byproduct, decided to accelerate other technology initiatives company-wide. For example, one aerospace manufacturer shifted some of its production to 3D printing, which significantly reduced overhead and backlog, at a time when workers couldn’t fill the shop floor. This has had the added benefit of reducing materials waste and thus has cut costs significantly. Other examples include companies doubling down on data & analytics, automation, and sensor technologies to hasten automation, planning and inventory management, and direct customer engagement. And the development of secondary supporting technologies, such as cyber, artificial intelligence and 5G, is doing double-step as well. The pandemic has provided us an unexpected and unparalleled opportunity to test the business case for these technologies, and many companies would appear to have ended internal debates about their value. With technology innovation and new digital capabilities, these smart companies will make leaps ahead of competitors, bypassing future supply chain disruptions, quickly adapting to manufacturing or workforce changes, and flexing newly-built product innovation muscles. If you have new technology initiatives still sitting on the shelf, you may be hamstringing your ability to compete this year. Roll them out.
3. Onboard leaders who are decisive, can pivot and who are sensitive to emotions.
As you think about future-proofing your organization, ensure you have executives on board who can succeed in change management and organizational transformation. Generally, turnaround experts are known for their abilities to slash and burn. But the best leaders this year have been the executives who were calm under pressure and could appeal to their team’s humanity. Interestingly, many executives I’ve spoken with have echoed findings of a recent Harvard Business Review study concluding that female leaders were more effective during this pandemic. While that may be further evidence of the importance of diversity, regardless of gender, leaders who are steadfast, can connect with employees and can navigate emotions have been tremendous difference-makers throughout the past ten months’ turmoil. To future-proof your organization as we continue into 2021, look for the type of leader who can, in the worst of times, steady, inspire and retain employees through issues such as pay cuts and reassignments.
While it may be difficult to predict what obstacles the A&D industry will face next, taking the right steps to ensure future agility, making needed technological advances and bringing on board leaders who can be both decisive and sensitive to team members’ emotional needs are critical pathways to success in 2021. Take a few moments now to assess where your organization measures up in each of these areas and where you may be able to take steps to surge ahead of the industry.
Mercedes LeGrand is a Managing Director at Raines International and co-leads our Aerospace, Defense and Government Services practice. Reach out to email@example.com to discuss these trends and how Raines can help you identify the difference-makers your organization needs in 2021.