Bridging generational gaps and embracing innovation: The role of digital transformation in aerospace & defense

In this rapidly changing landscape, however, digital transformation has emerged as a critical factor for success. As with most buzzwords, the concept of digital transformation can become a bit disjointed from the people it impacts. That’s why we are looking forward to many meaningful conversations with colleagues on this subject inside our chalet at the upcoming Paris Air Show.

In the meantime, I wanted to explore why digital transformation is so important at this specific time in our industry while there is a seismic shift in innovation and labor.

Regaining global dominance in Research & Development

The need to embrace digital transformation in the aerospace and defense industry becomes even more compelling when considering the shifting dynamics of global research and development (R&D) investments.

According to the Congressional Research Service, the United States has experienced a significant decline in its share of global R&D spending, dropping from 69 percent to 30 percent. This decline can be attributed to several factors, including the substantial R&D investments made by other nations and formidable competitors.

Notably, China has emerged as a formidable force in global R&D. In 2017, China’s investment in R&D reached approximately $280 billion, equivalent to 2.12% of the country’s GDP. Remarkably, this expenditure constituted a significant 20% share of the total global R&D spending.

China’s massive R&D spending has propelled its technological advancements and positioned it as a major competitor in various industries, including A&D. In 2020, China’s military R&D spend was $378B USD. In that same year, the US spent $105.3B.

In this context, digital transformation becomes imperative for aerospace and defense organizations to maintain a competitive edge on the world stage. As we clear out our older inventory during geopolitical conflicts, we have an opportunity to replace that older inventory with newer products designed and built through the enablement of digital transformation.

While it is not new for us to provide older inventory to countries in need, as we did during the Afghanistan/Russia conflict in the 1980s, the scale of our support to Ukraine is much larger. What we are providing Ukraine is, in general, our lower-tech material. (Howitzers, HIMARS, etc.) We’ll need to replace most, but not all of those products.

We need to see this opportunity as a potential catalyst for us to make up some ground as China outspends us in R&D. The good news is that the FY2024 budget has increased the US Military R&D to $145B and $170B allocated for Procurement. This is often touted as the largest increase in some time, however with inflation hitting 9.2% recently, this really represents a single-digit percentage increase from FY2023.

To make the most of our investment in R&D, it is crucial for organizations to have the necessary infrastructure and tools in place to leverage digital transformation. Embedding digital transformation into your business from the inside out is essential.

Embracing digital technologies and integrating them into business operations enables organizations to enhance efficiency, foster innovation, and deliver cutting-edge products and services that meet the evolving needs of the market. By capitalizing on the current inefficient spending and establishing a strategic framework, we have the opportunity to not only drive a significant transformation but also initiate an evolutionary shift in our approach.

The individuals behind innovation – using digital transformation to tackle labor challenges

The A&D industry is grappling with a pressing issue: the imminent departure of experienced workers possessing valuable intellectual property (IP) and generational knowledge.

Essentially, we are looking at an entire generation of people with knowledge that walks when they do. The implications of losing this collective knowledge are profound. Their deep understanding of complex manufacturing processes, intricate engineering techniques, and historical perspectives is incredibly valuable.

In fact, the parent company of the Paris Air Show, Groupement des Industries Françaises Aéronautiques et Spatiales (GFIAS), has placed labor challenges as a top emphasis for the event. According to Guillaume Faury, the chairman of GIFAS and CEO of Airbus, recruitment has emerged as a top concern for members, surpassing even energy prices.

To counter these challenges, organizations must optimize processes, streamline operations, and implement effective knowledge-sharing mechanisms. Implementing these solutions does not necessarily replace all of the experience and knowledge that leaves when workers do. However, it allows the new wave of workers to ramp up more quickly, empowered by things like automation and digital communication. These tools change the dynamic of intricate portions of their daily work and lessens the ‘newness’ of taking on a role.

Digital transformation serves as a powerful enabler in this process. Leveraging advanced technologies and digital platforms, organizations can create a digital ecosystem that facilitates seamless knowledge transfer and collaboration. This not only mitigates the impact of the imminent knowledge drain but also ensures that the organization continues to thrive in the face of evolving industry demands.

Bridging the generational gap

Digital transformation serves a crucial business purpose, but more importantly, it acts as a magnet to attract the next generation of talent.

Let’s be honest. Generally speaking, Gen Z is not accustomed to reading blueprints or unfolding giant paper sheets, only to pass them along by snail mail to the manufacturing facilities. Their world is centered on mobile devices, granting them immediate access to information and connectivity.

The message to the next generation needs to be: “We embrace the technologies and innovations that you grew up with.” Organizations need to demonstrate that they embrace robot automation, integrate telemetry data from our machines, and adopt predictive and preventative maintenance practices. The next generation of employees is expecting to be able to manage these aspects of the business through intuitive portals and real-time dashboards, enabling a comprehensive view of operations. Digital transformation is more than streamlining manufacturing processes; it becomes a powerful tool for acquiring and retaining top young talent who will step into the shoes of those departing in the next 5 to 10 years.

In a Capgemini Research Institute (CRI) report on Digital Mastery, researchers found that 63% of organizations today involve their employees in digital initiatives – that’s up from 36% in 2018.

In essence, digital transformation not only revolutionizes the industry’s operations, but also attracts the brightest minds, and ensuring continued success in the face of impending generational shifts.

Reshaping your organization – why transformation is more than just technology

A key factor in the success of digital transformation initiatives lies in shaping the culture and identity of the organization. According to CRI, culture consistently emerges as a significant barrier to digital transformation. Recognizing this challenge, organizations have been actively promoting the exploration of new ideas and fostering a culture of experimentation. In fact, a notable increase can be seen, with 67% of organizations today actively encouraging such exploration compared to only 35% in 2018.

It is crucial to understand that the unique capability of organizations does not solely lie in implementing technology. Taking a ‘plug and play’ approach to digital transformation – simply installing specific programs and processes into your existing system – is not effective or sustainable. Instead, organizations must focus on working with insights and leveraging technology as an enabler, rather than a standalone solution.

Successful digital transformation goes beyond adopting new technologies; it necessitates a holistic transformation of the organization to fully capitalize on the possibilities that these technologies present. By understanding the critical role of culture and identity in digital transformation, organizations can align their values, beliefs, and practices with the evolving digital landscape. This alignment creates a foundation for embracing change, fostering innovation, and effectively leveraging technology to drive sustainable growth and competitive advantage.

Digital transformation and the Paris Air Show

Digital transformation is an imperative for the industry, which is why it will be a focus at the Paris Air Show. While we talk about technology as the driving force of this transition, we have to remember that people are still at the center of every organization. People drive the strategies, implement the technologies, and plan for what’s ahead. Not only does the industry need to address a labor shortage but recognize that the next generation of employees will be expecting digital readiness in the companies they work for. We welcome the opportunity to have a conversation around the technologies and people needed for your digital strategy. If you’re at the Paris Air Show, we’ll be in Chalet No. 323 and welcome your visit!