Six Budget Considerations for Digital Aviation, Aerospace & Defense Transformations

The traditional annual budgeting cycle in the aviation, aerospace and defense (AA&D) industry puts greater pressure on any Digital Transformation initiative. First, a typical program will span multiple years depending on the scope and scale of the transformation targeted to enable the future operating model/state desired. Second, this program will compete for resources such as budget and people and other investments or initiatives which target growth, and the future of the enterprise.

This is in addition to the ever-present surprises, course corrections and policy or compliance ‘mandatory actions’, all naturally occurring in AA&D. Below are considerations to aid in the ‘puts’ and ‘takes’ of the annual budgeting process where a Digital Transformation is in play:

1. What is your Digital Transformation strategy?

2. Does a Future State Operating Model and Program Roadmap exist? The Future State Operating Model document should outline elements such as people, processes, applications, data, infrastructure, partnering and ecosystem-wide collaboration etc. The Program Roadmap should outline the digital journey from the current state to the future state. The combination of these two living documents provides critical insights for the investments necessary for success at any given point in time, year over year.

3. Are you optimizing talent and investing in your people “in advance” of the planned development and deployment of new digitally enabled capabilities? There are countless people across the AA&D ecosystem with talent, interests, jobs, roles, responsibilities, incentives, rules and regulations that in many cases are not aligned well with “the future.” This is a “pay me now, or pay me later” trap which can and likely will derail any transformation effort.

4. How is your ecosystem integration? Almost no one in the AA&D industry is anywhere near full vertical integration. Everyone from OEM/supplier, owner-operator to service provider depends on everyone else to operate successfully. Have you engaged with them and discussed how your priorities are aligned with theirs? It is very likely that you would find misalignments in scope, scale and timing that would affect mission critical capabilities. In addition, you may also find significant synergies at the same which you can leverage. The AA&D digital future will demand ecosystem-wide collaboration. Start now and amend your budgeting priorities in such a way to neutralize threats and build in leverage.

5. Is it more important to ‘stay within budget’ or ‘successfully deliver measurable outcomes’? If the former, then less is clearly more. If the latter, then contingency is clearly mandatory. This is not to say that all digital transformations will be over budget. Quite the contrary, most have the ability to accelerate benefits when planned and executed well. Think about how you can build benefits realization and/or budget redeployment into an annual cycle and your Roadmap. Perhaps a transformation escrow could be mobilized to flatten your spend year over year.

6. Finally, are you prepared to fail and learn? Recognize that a Digital Transformation is very different from a new aircraft, weapon system, ship or spacecraft where failure is far less tolerable (if at all). Embrace and practice a “fail fast, innovate, and recover faster” mentality for the transformation program and the budgeting for it. Admittedly this is not easy – culturally or procedurally in AA&D – but it is possible. Think ‘skunk works’ because we believe these transformations will be as ground breaking for AA&D as breaking the sound barrier. Build some risky and/or exciting stuff into any budget for your Digital Transformation program.

Digital Transformations are underway and affect every participant in the AA&D ecosystem. Planning your strategy early gives you more opportunity to build your business case, secure budget and move the project forward. While the journey will be lengthy, the gains will be exponential.

For more insights into how leaders in the AA&D are deriving business value from the vast and multiple data sources to drive Digital Transformation in their operations, please download our research report Digital Aviation MRO Innovation and Disruption.

To learn more about MRO Digital Transformation, contact me or download our recent research report.