Commercial aerospace is one of the most challenging industries to disrupt. Long product life cycles, industry dynamics, and the outsized role of regulation have traditionally resulted in a more incremental approach to innovation.
As we have shared in a recent article, many actors along the value chain are rightly focused on improving current operations to deliver value to shareholders.1 However, a confluence of factors—including evolving customer preferences, technological innovations, and a global push to decarbonize—are likely to transform the industry in the coming decades.While these aerospace trends are not yet widespread, there are certain pockets, such as recent advances in novel propulsion for regional aircraft, where early signs are apparent.
For long-term success, incumbents must simultaneously address current operational challenges while preparing for the coming innovations that could disrupt their businesses. In this article, we outline five megatrends that could drive disruption in commercial aerospace, as well as strategies that incumbents can take to navigate disruption. As they contemplate these disruptions, industry stakeholders (such as OEMs, suppliers, airports, and airlines, as well as maintenance, repair, and overhaul organizations) should first consider three critical questions:
- What revenues from my core business could be at risk?
- What opportunities for margin expansion could be unlocked?
- What new value pools could be created?
Five disruptive megatrends could converge in the coming years within commercial aviation:
- Autonomy and robotics
- Greater emphasis on sustainability concerns
- Novel propulsion technologies
- Emergence of new business models
- Greater use of data fusion and advanced analytics
Some aerospace trends, such as those related to robotics and advanced analytics, are already transforming the commercial aviation value chain, while others, such as autonomy, novel propulsion, and a greater emphasis on sustainability, are expected to accelerate in the coming years. Together, these megatrends could radically alter the aviation landscape.
While incumbents in commercial aviation are focused on near-term operating challenges, they will also need to plan for the disruption that is already appearing at the margins of the industry. As these disruptions accelerate in the coming decades, incumbents should plan for extreme uncertainty and attempt to capture emerging opportunities by:
- Identifying where and when disruption will occur and how to participate. Companies must understand how specific megatrends will disrupt their business, as well as the extent and timing of their impact. They will also need to identify the signals to prompt action and decide how they participate (for instance, when to shift from R&D partnership to scale). Identifying and prioritizing new value pools will be critical.
- Make the case for change. Senior teams and boards must align on the need for transformation, despite the potentially longer timeline for value capture. They should ensure that employees, customers, investors, and suppliers understand the changes.
- Realign the technology and go-to-market road map. Companies may need to make new technology investments (both internally and through acquisitions) and develop a new market and sales strategy.
- Rewire the operating model. Three questions are important to consider here: How will talent and investment needs change? Can you use these changes to speed up decision making? Going forward, what activities should be stopped?
- Leverage external partnerships (including outside capital). While all companies have distinctive internal capabilities, they should also determine if they need external partnerships to acquire key technologies and build scalable ecosystems. Another consideration is whether they can harness outside sources of capital to de-risk future investment decisions.
