Over the past quarter of a century, between 25 and 50 percent of aerospace and defense (A&D) companies at any given time have maintained strategies and business models that have not adapted to significant changes in the industry’s environment, structure and requirements, according to Deloitte’s report, “The Next Era of Aerospace & Defense: How to Outperform in an Environment of Innovative Disruption.” Today, more than 60 percent of large A&D companies’ revenue is associated with business models that no longer truly reflect current market needs.
The report further shows that the companies that have adapted their strategies and business models to the changing environment outperformed others by up to seven times.
“This has been and still is a thriving industry, but we’ve finally reached a point at which today’s disruptive factors require A&D leaders to rethink both their strategies and business models to succeed in the longer term,” said Erich Fischer, principal, U.S. aerospace and defense, Deloitte Consulting LLP. “The democratization of technology, digitization, globalization and other factors have led to a level of industry disruption that has not been seen for years. These forces are opening the door for more nimble and new entrants, and in some areas will likely continue to accelerate market needs away from traditional A&D industry models.”
The report explores the factors that led to the current state of the industry and proposes strategies for companies to maximize their potential and outperform their peers. Deloitte also assessed the fundamental changes driving these shifts and who in the industry is best positioned to turn them into a long-term success story. Overall, companies that wish to grow and change with the market must begin to make explicit decisions to employ active, rather than passive, strategies. Companies that simply work harder in the same direction rather than innovate in areas beyond pure technology will likely find themselves stagnated in the industry and see less successful financial returns.
Forward-looking organizations are already taking current market disruptions to heart and rethinking their strategies in order to stay on top of the industry in the next decade.
“Rethinking the constraints that form the basis of strategy and business model decisions today will be the hallmark of those companies that are truly poised to outperform the A&D industry over the next decade,” said Fischer.
About Deloitte’s Aerospace and Defense Practice
Deloitte is a leading presence in the aerospace and defense industry, providing audit, consulting, risk management, financial advisory and tax services to 95 percent of the Fortune 500 aerospace and defense companies. Deloitte’s insights, services and approaches include M&A, supply chain and operations excellence, breakthrough program performance improvement, business model restructuring, organizational talent transformation and digital business transformation to assist market leaders in aerospace, aviation and defense. For more information, please visit www.deloitte.com/us/a&d or follow us @DeloitteMFG.
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