Cycle of Startup Disruption Continues to Advance the Aerospace Industry By Chris Brumitt, Vice President, Maine Pointe
As the aerospace sector faces new competition and changes, how will long-time industry giants fare compared to the upstarts?
IBM, TWA, American Airlines, Nokia, Kodak — what do all these companies have in common? They were all stratospherically successful leaders in their industries that were brought down to earth by disruptive and innovative companies that entered their respective markets with aggressive business plans, technological innovation, flexible decision making and a heavy dose of brashness. And for many reasons, including hubris, inflexibility, entrenched thinking, and prioritizing cost over innovation, these companies were too slow to respond to their new competitive threats and paid a heavy price.
For decades, IBM was “Big Blue,” the most dominant stock on the New York Stock Exchange, with the company manufacturing as much as 70% of all business computers. Then along came a few upstart companies, including Apple, Dell and Compaq, that turned the computing world upside down, with more customer-friendly, intuitive and cost-effective approaches to bringing the world of computers into homes and small businesses. As the 1980s and 1990s wore on, these IBM clones’ ability to be nimble, creative, lean and mean turned IBM into just another competitor in a very congested market. By 2005, Lenovo had bought the last of IBM’s personal computer business and IBM was now a “business services” company — transformed and still relevant, but no longer the NYSE darling it had been.
So, why is this story an important lesson in today’s world? Because history really does tend to repeat itself, and there is no other business sector that is a better example of this concept right now than aerospace, specifically commercial space. For nearly 70 years, this sector has been dominated by a handful of stalwart players, including Boeing, Raytheon (now RTX), Lockheed Martin and Northrop Grumman, and for most of that time, these giants (both in size and historical significance) have acted nearly as part of the U.S. government, with massive contracts that can last decades. These entities built their dynastic influence through dominant engineering organizations, top-notch physics, nearly unlimited R&D budgets and production capabilities that have allowed them to control customer mind share, unchallenged since the days of Eisenhower…until now.
Enter Blue Origin, Virgin, Rocket Lab and a host of others in commercial aerospace, including another little company called SpaceX. In just under a decade, these ‘upstarts’ have been able to turn commercial aerospace and the aerospace sector in general on its head. Unencumbered by the long-term, engrained models that the vanguard of aerospace primes have relied on, these well-funded, fast reacting businesses are able to utilize large investment dollars in IRAD (Internal Research and Development) to innovate with a more “off the shelf” product mentality. This approach has allowed them to achieve cost, quality and delivery at a much faster pace and with an approach to the customer that may not be the perfect design, but meets most of the specifications and is sold for far less than the primes can deliver. Faced with restrictive funding limitations and delivery timelines, the customer (NASA, etc.) has very little choice but to work with the “disruptor.” The result of course is that more and more contracts are being won by this new breed of aerospace companies that model themselves more closely with other high-tech, rapid development sectors like robotics, computers, and mobile phones.
The upside to all of this disruption in commercial aerospace is that new technologies and innovation are happening at speeds we have not seen since the early space race. Aided by powerful cloud, AI, digital and model-based systems engineering, these newer aerospace sector players are utilizing capabilities they learned in other industries like technology and computers, automotive (Tesla), and supply chain/distribution (Amazon/AWS). The outcome of these new innovative approaches is an exponential growth of new and previously unthought-of capabilities like first-stage re-entry and vertical landing on a drone ship and launching hundreds of mini-satellites into LEO. Additionally, the other lesser-known benefit from this disruptive influence is that competition breeds cost reduction and speed to market. The trick is to be able to accelerate the overall development time while reducing cost for the customer and still meeting/exceeding quality expectations. The balancing act that must take place in this bid-award-design/develop-produce process is complex and involves creating a highly collaborative organization that allows for creativity through design and engineering excellence while continuously monitoring and evolving what should be vertically integrated or partnered with outside sources in order to optimize cost while reducing production time.
The benefits of this increased competition go far beyond just the amazing technology that we see being launched into orbit on a daily basis. The results of the race to win the next contract and create the next new innovation ha been a plethora of spin-off technologies that have benefited we earth-bound humans in ways that many of us never realized. Most people know about Velcro and Tang (think Gemini and Apollo days), but there are many products and technologies that are currently being spun out of the commercial aerospace race that impact our lives every day. Products like aerogel insulation, collaborative robotic technology, controlled environment agriculture, environmental sensors and even ventilators that have been used during the pandemic. NASA actually released a publication, Spinoff 2022, that describes thousands of innovations that are being utilized to better our world today.
As always when there is a fundamental sea change in an industry sector, the question becomes, how will the long-standing giants deal with their new aggressively innovative interlopers? In the case of the aerospace sector, and particularly commercial space, how will the primes respond and how quickly can they adapt to match the speed and cost advantages that the smaller, more flexible organizations employ to gain market share? Will they adapt and evolve to find even greater success (Apple, Amazon) or will they lose relevance in the coming years?
Most importantly, how will this new level of competition, in such a dynamic and demanding environment, enable us in our quest to continue exploring beyond our world and benefit us through new and creative technologies with our critical need to make our current home safer and more habitable for generations to come? One thing is for sure, if the vanguard aerospace primes and the disruptors can match each other in innovation capability and perhaps work together from time to time, this Space Race 2.0 has the potential to do more for humanity than ever before.
Chris Brumitt is vice president and industry partner for the aerospace & defense sector of SGS-Maine Pointe. He has worked within the business operations consulting industry for the past 34 years to help CEOs and senior management realize the acceleration and execution of significant strategic goals. His responsibilities include market analysis and business engagement to help clients accelerate improvements across the end-to-end supply chain and operations. Brumitt’s past experience working with top performing, Fortune 500 companies has been across many industry areas, including aerospace-defense, aviation, industrial manufacturing, electronics, high tech/computer systems, energy, airlines and financial services.
You must be logged in to post a comment.