BOSTON – June 2, 2023 – Market pressures impacting the aerospace and defense (A&D) industries have pushed executives to prioritize increased efficiency in value chains as companies look to innovate and bring products to market more quickly while meeting ambitious sustainability requirements. A new study by Bain & Company, “Engineering and R&D in Aerospace and Defense,” looks at a sector currently undergoing one of its largest transformations in decades, as engineering and research and development (ER&D) shifts to include digital disciplines such as software and cybersecurity.

As well as making products better and more cheaply, leading players are increasingly using ER&D as a strategic tool to shape new business models, investing in new areas such as digital transformation.  Demand for quicker development cycles continues to rise, driving organisations to increasingly use advances in commercial aviation technology to deploy defense systems faster.

Bain & Company found that 59% of engineering executives expect budgets and production to grow in the next three years, despite the fact that employment still has not yet recovered to 2019 levels. Leaders at Boeing and Airbus each plan to add over 10,000 workers to increase production. The upsizing will focus on consolidating companies’ digital transformation and pursuing full digitization of engineering processes, which allow products to come to market more quickly and save millions of dollars.

Sustainability is another area in which A&D companies are ramping up investments. ER&D executives say they are exploring sustainable aviation fuels, hybrid and electric airplanes, as well as new types of engines that can reduce emissions.

Chief engineers in aerospace and defense (A&D) face mounting market pressures. The common denominator is speed—namely, whether to bring products to market more quickly, or to slash the costs of existing products, or to meet sustainability requirements by 2050 (if not earlier). And companies are racing to address these issues all while struggling to fill an expanding talent gap.

“Aviation and defense is undergoing rapid change in response to evolving global pressures, and chief engineers are being pressed to bring products to market more quickly than ever before” said Jim Harris, co-leader of Bain & Company’s Aerospace, Defense & Government Services practice. “Meanwhile, they’re being asked to cut costs and meet ambitious sustainability goals. Those that come out ahead will act with agility to adopt new technologies and upskill talent accordingly.”

Bain & Company identified four success factors that leading A&D companies have on their radar.

• Build products to evolve. As a progression from the historical development approach of “build to last,” A&D developers are now looking to build products to evolve. From satellites constructed at a fraction of the cost with software that can be updated over the air with commercially available technology, to on-the-spot defense solutions to conflict and warfare, leaders must evolve models to keep pace.
• Reimagine the business model. Just as the electric car has ushered in a new era in the automotive industry, the A&D industry is entering a period of transformation. Zero-emissions aircraft will require different value chains and new systems—from engineering to operations and distribution. The adoption of hydrogen, electricity, and sustainable aviation fuels (SAFs) will further alter the value chain.
• Seek smart alliances. Cooperate with innovative commercial companies to bundle resources and investments. With partnerships, there is the potential to benefit from increased data points while protecting intellectual property and getting access to new capabilities.
• Find the right talent. Talent has arguably never been trickier to secure. Aircraft manufacturers such as Boeing and Airbus expect a sharp increase in production while A&D employment still has not yet recovered to 2019 levels. To meet this growing demand, leaders ensure that employees are tackling the appropriate scope of work and that they are allocating work to the appropriate resources. Above all, they are implementing new productivity tools and finding ways to attract the right talent for the future.

Editor's Note: For more information or interview requests please contact Katie Ware at katie.ware@bain.com or +1 646 562 8107.