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Defence innovation poised to help drive UK prosperity (Studio)

15th April 2021 - 12:00 GMT | by Studio

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The UK aerospace and defence (A&D) sector is poised to be a global innovation leader, according to a new report.

The UK aerospace and defence (A&D) sector is confident in its status as a global innovation leader but faces many obstacles that prevent it from fully flexing its muscles. 

That's the finding of a new report from professional services giant PwC and ADS Group, the UK aerospace, defence, security and space industry body. 

Asking if the two positions are at odds with one another or 'simply an expression of an industry in flux, coping with wide-ranging volatility', the report finds the answer is much closer to the latter position.  

Titled "Harnessing Innovation in Aerospace and Defence", the report was based on a survey of executives from across the sector.

It paints a picture of 'a vibrant industry facing a series of live economic, political, and societal events, complicated by existing sector-specific barriers and challenges'. The coronavirus pandemic is front of mind, along with the associated lockdowns. 

The report notes that the pandemic's effect appears to be different from past crises, in terms of the disruption to everyday life and the damage to the economy. These effects have been varied. 

It points to investment priorities, noting that without the pandemic, product and service innovation would remain the primary focus for companies in the sector, with 78% rating it a high priority. 

However, over half of respondents – 56% - said the fallout from the pandemic would increase internal operational innovation. The study notes that 'as the emphasis on internal operational innovation rises, attention on product, service, and business model innovation falls'.

Of course, there are two sides to A&D: commercial and military. The former has been hit by a dual demand and supply shock, the report states, while also managing a testing shift towards decarbonisation.

While the defence sector has suffered less in the short term from demand shock, with insulation provided by long-term contracts and an unrelenting global threat landscape, there are longer-term trends to consider. These include budgetary pressures, emerging threats that demand new technologies, and new approaches to delivery.

The report highlights a range of challenges and opportunities, in areas including talent and resources; leadership and culture; investment; and external support. It also dives deep into the critical success factors that 'an organisation must consider to make innovation part of its DNA'.

First is a need to foster a leadership culture that promotes innovation. This is one of the survey's core findings, with nine out of ten respondents pointing to leadership culture as imperative for successful innovation. Leaders must work towards a culture that promotes change, encourages autonomy, and permits unconventional thinking. 

Diane Shaw, EMEA Aerospace, Defence and Security Consulting Strategy & Leader at PwC UK, notes that culture is often underestimated in organisations. She urges them to move away from a sequential, 'waterfall' mentality and where possible adopt a more agile 'fast fail' culture.

'It needs to be at the heart of things at the early stages of development,' she argues.

The leading companies in the UK defence sector know the importance of innovation. 

Adam Clink, Head of Carrier Strike at Lockheed Martin UK, told Studio in a separate interview that his company's ethos 'is all about being at the forefront of innovation'. 

Clink points to the development of the F-35B – the UK's new fifth-generation fighter – as an example of a programme that 'doesn't come without having excellent people within the company who can bring that innovation to bear'. 

Such innovation brings obvious rewards, with the fighter aircraft generating work for 500 companies of all sizes across the British supply chain and supporting more than 20,000 jobs across the UK. The F-35 programme is projected to eventually generate some £40 billion for the UK economy, according to a study by KPMG. 

Pointing to other vital success factors, the PwC/ADS report highlights the need for a well-defined innovation strategy. While over 60% of organisations do not have innovation fully and formally defined and embedded in their strategy, there is merit to the idea, helping provide a 'North Star' and avoiding wastage. 

However, the report notes that A&D innovation is not the same as other parts of the economy. 

Compared to a sector such as consumer goods, where there are millions of would-be buyers of game-changing products and services, A&D companies can count the numbers of key customers on the fingers of a hand, and each contract is worth much more. The dynamics are, therefore, different. 

'The critical mass doesn't necessarily exist to encourage high-stakes experimentation.'

The report also points to the need to develop an absolute understanding of customer need, which is particularly important for A&D due to that limited sales base and the longevity and value of each contract. It highlights a demand to rethink funding and investment, and calls for sustainable recruitment and retention plans. 

Finally, the report underscores the importance of a willingness to collaborate, which 'frequently emerges from the survey as a route to innovation success'. 

It is a vital component in closing the skills gap, the report notes, while also providing a boost to creativity and sustainable funding. The survey found that 68% of organisations were choosing partnerships, strategic alliances and joint ventures as a route to drive innovation. 

'That's recognition that innovation isn't necessarily going to come from within,' says Sameer Savani, Head of Innovation and Engineering at ADS Group. 

'You need to collaborate, particularly outside the immediate sector, to draw on innovation from those who are doing it better.' 

He points to aerospace manufacturers working with automotive makers on the adoption of autonomous systems as an example.

The benefits of partnerships are built into the DNA of the F-35 programme, which now comprises 13 nations and three US military services, and involves the contributions of hundreds of companies worldwide, notes Kelvin Truss, Head of Strategic Engagement for Air Programmes within Lockheed Martin UK. 

This feeds into a culture of innovation and continuous improvement that the company strives to achieve, Truss says, which runs through the history of Lockheed Martin's aviation platforms, from the F-117 Nighthawk to the F-22 Raptor and the F-35 Lightning. 

'Each [project] takes something positive from the previous one, but improves on it and adds some new innovation, some new technology along the way,' Truss said. 'It's easy to see that we're on a positive trajectory.'

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