ACCELERATING TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017
TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017: THROUGH DIGITAL TURBULENCE A powerful combination of market trends, technology developments and geopolitical upheaval continues to change and disrupt the aerospace and defense industry. In response OEMs are taking both structural and tactical actions. They are reshaping their portfolios through consolidation and unlocking new revenue streams, particularly in the aftermarket. Additionally, they are embracing digitally-based business models to improve revenue generation, drive efficiency and improve supply chain performance. Geopolitics and commercial air traffic in the Asian and Middle East markets continue to be sources of aerospace and defense market growth, for both defense and commercial segments. A renewed space race is also underway, with new entrants pushing down manufacturing and launch costs. Silicon Valley players are becoming active in the aerospace sector along with new technologies such as 3D-printing, cloud computing, IoT and analytics, promising increased supply chain efficiencies, faster time to market and new value propositions. 2 TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017
MAJOR FORCES CONTINUE TO RESHAPE THE FUTURE OF AEROSPACE AND DEFENSE Defense budgets remain flat Global defense acquisition spend of $441 billion is expected to be flat or experience minimal global incremental growth over the next five years. Falling orders for airliners The $736 billion airline industry is expected to double air travellers, from 3.8 billion in 2016 to 7.2 billion in 2035. However, orders for new airliners have fallen precipitously from their 2013-2014 peak. Both Airbus and Boeing are at half of their 2014 full-year net orders with softness in the order books anticipated for the next 2-3 years. In the short term, robust backlogs will ensure short to medium term continuity in new deliveries and the aftermarket. Supply Chain Pressure Production rates are increasing with Boeing and Airbus expected to respectively increase their quarterly production rates 13 percent and 23 percent by the end of 2018 as compared to 2015 rates. Successful production rate ramp ups are challenging OEMs and suppliers alike as they seek to more efficiently utilize capacity and bring new production online. Big data explosion Aircraft are generating unprecedented volumes of data, raising demand for big data insight. Aircraft can generate one terabyte of operational data per flight. 65 percent of aerospace and defense executives see artificial intelligence as a key enabler for data analysis and insight, and 74 percent see it as an accelerator for technology adoption. A shrinking talent pool Competition for science and technology talent comes from other, more visibly digital industries such as software and social media. Demand for these skills is expected to grow at double the rate of other occupations. Operational cost optimization Slashed defense budgets mean that upgrades, rather than platform replacements, are taking priority. Commercial operators are seeking greater insight into operational data to fine-tune support operations and reduce costs. TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017 3
TECHNOLOGY TRENDS 2017 The Accenture Technology Vision 2017 sets out the technology trends that will decisively reshape all industries. These trends are having an impact on aerospace and defense, as the relationship between people and technology continues to evolve, powered by advances in AI, the continuing development of industry ecosystems and new technology-enabled workforce models. TREND 1 AI IS THE NEW UI AI is making every interface both simple and smart and setting a high bar for how future interactions will work. It will act as the face of a company s digital brand and a key differentiator and become a core competency demanding of C-level investment and strategy. Two-thirds of aerospace and defense executives believe Artificial intelligence (AI) will have a major impact on both the aerospace and defense industry and their firm. Productivity was the most cited benefit (74 percent) to their organization for embedding artificial intelligence into user interfaces. TREND 2 ECOSYSTEM POWER PLAYS Companies are increasingly integrating their core business functionalities with third parties and their platforms. But rather than treat them like partnerships of old, forward-thinking leaders leverage these relationships to build their role in new digital ecosystems instrumental to unlocking their next waves of strategic growth. 67 percent of aerospace and defense executives agree their competitive advantage will not be determined by their organization alone, but by the strength of the partners they choose. TREND 3 WORKFORCE MARKETPLACE Driven by a surge of on-demand labor platforms and online work management solutions, legacy models and hierarchies are being dissolved and replaced with open talent marketplaces. This resulting on-demand enterprise will be key to the rapid innovation and organizational changes that companies need to transform themselves into truly digital businesses. 90 percent of aerospace and defense executives agree that organizations are under extreme competitive pressure to extend innovation into their workforce and corporate structure. 74 percent of aerospace and defense executives believe corporate bureaucracies are stifling productivity and innovation. 4 TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017
TREND 4 DESIGN FOR HUMANS The new frontier of digital experiences is technology designed specifically for individual human behavior. Accordingly, 84 percent of aerospace and defense executives agree that their organizations need to understand not just where people are today, but where they want to be and shape the technology to act as their guide. Designing experiences around human needs is seen as increasingly important: 79 percent of aerospace and defense executives agree that firms that can truly tap into what motivates human behavior and design the customer experience accordingly will be the next industry leaders. TREND 5 THE UNCHARTED With 81 percent of aerospace and defense executives believing their organizations are entering entirely new digital industries, they understand how technology is doing more than simply creating new products and services. Instead, it s having a decisive impact across the whole industry ecosystem, from technology standards, to ethical norms and government mandates. 81 percent also agree that many of the innovations their organization is working on fall into regulatory gray areas. 78% of aerospace and defense executives agree that the industry is facing complete or moderate disruption. 100% of aerospace and defense executives agree that their organizations must innovate at an increasingly rapid pace just to keep a competitive edge. TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017 5
THE DIGITAL INTERSECTION Aerospace and defense companies have been relentlessly developing digital capabilities for many years. But the urgency to fully embrace these emerging technology trends is increasing. The focus of digital is now expanding beyond engineering to Big Data that is increasingly embracing every aspect of the industry value chain. The Boeing 777, for example, was designed in the 1990s using digital tools. The Airbus A350 XWB has a fully 3D digital model for partner design collaboration. However, the focus of digital is now expanding beyond engineering to Big Data that is increasingly embracing every aspect of the industry value chain: from inflight passenger experience to airline operations and from design and manufacturing to service and support. Big Data is driving decisive changes in the way that businesses operate, interact and integrate with the world around them. This is empowering people to discover insights that are driving success measured in many incremental gains across the entire value chain. So while today aerospace and defense companies differentiate through their products, digital, and in particular Big Data, will start to enable differentiation in their operations. Digital will increasingly secure its place at the heart of the industry value chain, reshaping people s activities from design to operations and all the way through to the passenger experience. Accordingly, aerospace and defense companies are focused on how digital can help them harness people and technology to reduce cost, manage product lifecycles, deliver on time, become more efficient and improve customer service. Examples of how digital is continuing to expand its presence in aerospace and defense include: Increased use of real-time aircraft communications for both operational and navigation purposes New ways to interact with operators civil and government through digital channels to integrate more effectively with their operations Supply chain integration and analytics to streamline logistics and inventory management 3D printing to optimize part design characteristics and bill of material reduction Collaboration across the supply chain to shorten increasingly longer development cycles and ensure parts availability during production upswings Integration of digital threads and digital twins for full product and in-service lifecycle management Product and Application Lifecycle Management supporting the shift from hardware to software-enabled capabilities 6 TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017
IMPLICATIONS AND ACTIONS Digital strategies offer new and improved ways to optimize the supply chain, reduce time to market and increase revenue. As a result, many aerospace and defense companies are considering how they use digital to generate and sustain business results. Simply being able to perform endless analytics or simulations is not the answer. Investments in digital capabilities must count and should be carefully considered to ensure that they can simultaneously deliver both operational savings and revenue gains. Accenture suggests that companies evaluate their digital investments and adopt a comprehensive digital strategy based on the answers to three key questions: 1 2 3 What are the most important touch points and the moments that matter with your customers, suppliers and employees and how can digital help maximize value at each? 84 percent of aerospace and defense executives agree aerospace and defense firms need to understand not just where people are today, but where they want to be and shape the technology to act as their guide. Customer experience and touch points matter. Over half of aerospace and defense executives reported a moderate to significant gap between what their customers report they want in terms of the organization s products or services versus what they actually need. 84 percent of those executives agree that a new competitive differentiator for organizations is understanding the context in the customer experience and creating technology capabilities that align to human behavior. How can you use digital to drive higher customer value, lower cost, shorten cycle time, improve quality, shorten delivery time and avoid delays? 90 percent of aerospace and defense companies believe we have entered an era of technology advancement that is no longer marked by linear progression, but by an exponential rate of change. 84 percent of aerospace and defense companies believe individual technologies are rapidly advancing, but it is the multiplier effect of these technologies that is creating innovation breakthroughs. How can digital and the Internet of Things (IoT) help you improve your products, better understand customers and capture new business? How can it help secure a bigger share of business by doing more with the same product, leveraging untapped expertise or extending an existing process? 68 percent of aerospace and defense companies are comprehensively investing in digital technologies as part of their overall business strategy. Data is evolving from being a valuable resource to becoming the basis for entire business models, for both top-line and bottom-line benefits. Companies must manage their digital pivot by continually balancing investment and resource allocation between their core business and the new. TECHNOLOGY VISION FOR AEROSPACE AND DEFENSE 2017 7
ABOUT ACCENTURE Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialized skills across more than 40 industries and all business functions underpinned by the world s largest delivery network Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders. With approximately 401,000 people serving clients in more than 120 countries, Accenture drives innovation to improve the way the world works and lives. Visit us at www.accenture.com. ABOUT ACCENTURE LABS Accenture Labs incubate and prototype new concepts through applied R&D projects that are expected to have a significant near-term impact on clients businesses. Our dedicated team of technologists and researchers work with leaders across the company to invest in, incubate and deliver breakthrough ideas and solutions that help our clients create new sources of business advantage. Accenture Labs is located in seven key research hubs around the world: Bangalore, India; Beijing, China; Dublin, Ireland; Silicon Valley, California; Sophia Antipolis, France; Washington D.C.; and Israel. ABOUT ACCENTURE RESEARCH Accenture Research shapes trends and creates data-driven insights about the most pressing issues global organizations face. Combining the power of innovative research techniques with a deep understanding of our clients industries, our team of 250 researchers and analysts spans 23 countries and publishes hundreds of reports, articles and points of view every year. Our thought-provoking research supported by proprietary data and partnerships with leading organizations such as MIT and Singularity guides our innovations and allows us to transform theories and fresh ideas into real-world solutions for our clients. Copyright 2017 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks. Information regarding third-party products, services and organizations was obtained from publicly available sources, and Accenture cannot confirm the accuracy or reliability of such sources or information. Its inclusion does not imply an endorsement by or of any third party. The views and opinions in this article should not be viewed as professional advice with respect to your business.