SPONSORED  BY  

Aerospace and defense executives from the Americas and Europe met June 4-6 for the fourth annual Aviation Week Executive Summit in Denver. Sponsored by Siemens PLM Software, the Summit focused on the challenges presented by a dramatic increase in production required for the civil aviation sector, new successes for the industry manned space program, and equally dramatic drawdowns in funding for NASA and the Defense Dept. The summit opened with a keynote by Norm Augustine, Chairman Emeritus of Lockheed Martin Corp. Augustine revisited his now legendary tome, the 1982 publication of “Augustine’s Laws.” Other speakers included the Honorable Kenneth J. Krieg, former Undersecretary of Defense AT&L and founder of Samford Global; David Shook, SVP and Managing Director Americas for Siemens PLM Software; Phil Dunford, Chairman of the American Helicopter Society and Chief Operations Executive of Boeing Military Aircraft; Joel Cawley, IBM’s Corp VP Strategy and Enterprise Initiatives; Jean Botti, Chief Technology Officer for EADS; Eric Roegner, President ALCOA Forgings and Extrusions; Gina Burns, Chair of AIA’s Workforce Committee; and Jennifer Pollino, EVP, Goodrich Corp.

The Summit brings together those who have attended Aviation Week’s Executive Roundtables throughout the year. The focus during 2012 was on

2012  Executive  Summit:      

Renewing  the  Laws  for  a  New  Era  

Carole  Rickard  Hedden  Denver,  CO  June  4-­‐6,  2012      

   

 

                                                                                                                                                                                                                                     

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reviewing Augustine’s Laws and also challenging the participants to develop new laws that reflect the current environment and guides to how industry can build during the coming years. To write the laws, the interactive discussions built on presentations by the speakers in four key areas: Analyze Create Make/Sustain Who Since 2004, the Aviation Week Executive Roundtable has brought together leaders from across industry and the government to discuss the most pressing issues most pressing in assuring delivery of quality systems to end-users. Action is the desired outcome for the event, and among the actions outlined by the group was a rebranding and marketing initiative directed toward current and future A&D employees – and utilized outside of the Washington DC environment using new and established media. Greg Hamilton, Aviation Week’s President, and Tony Velocci, Editor in Chief, will convene a working group on this action. The second action was to revisit Augustine’s Laws and develop a new set geared to the current economic, technological and global environment. Aerospace and Defense 21st Century Laws Law 1: If you want “A List” people, you must have “a List” supervisors/leaders. - Matrix organizations make this a

challenge, but everyone needs to know where to go for constructive feedback and functional expertise.

Law 2: Lead with a light touch. – Delegate, empower, hold accountable,

allow failure.

Law 3: Respect n = f (respect “out”)

Bring  together  the  industry’s  best,  brightest  and  most  forward-­thinking  leaders.    Stir  in  provocative  presentations  from  inside/outside  the  industry.    Develop  new  laws  for  a  new  era.    

 

                                                                                                                                                                                                                                     

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Law 4: People are not interchangeable parts. - A pair of hands comes with a brain (and a heart).

Law 5: Cool work – BS + Respect > Compensation (cool work minus the BS plus respect is greater than/equal to compensation) Law 6: Your expectation of your employees is a self-fulfilling prophecy. Law 7: A little (visible) recognition goes a long way.

Law 8: In a culture of innovation, the only rules you cannot break are the known laws of physics. Law 9: The speed of innovation is inversely proportional to the organizational coefficient of friction (see Norm: … the epoxy that greases the wheels of progress). Law 10: Government has a high tolerance for failure … as long as it does not happen. Law 11: Export control and ITAR policies ensure that the Pentagon will get yesterday’s technologies tomorrow. Law 12: Feed your innovators (employees and smaller suppliers) … or they will starve and/or go to another table. (i.e. impact of 120-day accounts payable) Law 13: Innovation cannot survive without top cover; allow failures early and often, but when still relatively cheap. Law 14: If the profits of labor are greater than the profits of innovation, a company almost certainly will fail. Law 15: Innovation is inversely proportional to the weight of the procurement specifications. Law 16: The farther away from the government you get, the more money you can make. Law 17: The only time an engineer is optimistic is when establishing a schedule for completion. Law 18: Creating  and  disciplining  well-­‐defined  interface  standards  in  defense  and  security  would  expand  competition.  Example:  telephone  integration  standards  allowed  many  players  to  participate  in  telecom.  Open  standards  today  are  really  proprietary  standards  that  provide  a  long-­‐term  annuity  to  the  owner.    

 

                                                                                                                                                                                                                                     

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Law 19: Co-­‐opetition  will  rule.  The  G7  must  bring  China  and  other  emerging  economies  into  the  global  commercial  “rule  system”  as  soon  as  possible.  The  sooner  this  happens,  the  more  responsible  China/they  will  be  in  the  global  community  of  modern  industrialized  nations.    OR,  stated  another  way:  Pirates  eventually  die  of  rum  or  become  shipping  companies  –  make  emerging  economies  shipping  companies  early.   Law 20: Lead, Follow or …. Regardless of the industry sector, winners will be those aligned in the shaded blue area (see diagram below).

 More  Laws  to  Consider  While  the  Summit  attendees  were  focused  on  developing  20  new  laws  to  complement  Norm  Augustine’s  original  list,  there  were  additional  thoughts  worthy  of  consideration.      The  brilliance  of  an  outside  idea  introduced  into  a  design  team  against  its  will  dulls  in  direct  proportion  to  the  brilliance  of  the  design  team.    

 

                                                                                                                                                                                                                                     

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The  cost  of  a  system  is  inversely  proportional  to  the  level  of  trust  between  government,  primes,  and  supply  base.    Innovation  –  takes  a  village,  where  big  players  don’t  starve  the  villagers  in  the  process  and  bring  them  to  the  design/build  process  early.      The  age  of  technology  in  a  fielded  system  is  proportional  to  the  program’s  development  funding.  The  more  money  you  have,  the  older  the  tech  will  be  when  it  goes  to  market.    There  are  two  theories  of  disagreeing  with  your  customer.  Both  of  them  are  wrong.    The  quantity  and  quality  of  innovation  is  directly  proportional  to  the  magnitude  of  the  M  factor  (M=  motivation).    If  you  build  a  better  mousetrap,  the  government  won’t  beat  a  path  to  your  door.    Feed  your  innovators  or  they  will  starve  –  or  go  to  another  table.   Successful  innovation  depends  on  more  than  just  technology;  it  requires  a  paying  customer  willing  to  embrace  the  change.    To  pursue  high-­‐risk  innovation  you  need  an  exit  strategy,  particularly  if  you  are  a  large  company.      What  is  considered  to  be  business  innovation  frequently  is  no  more  than  a  shift  of  work  from  one  functional  area  to  another.      The  primary  focus  used  to  be  how  much  money  can  I  make.  Now  it  is  how  much  risk  can  I  take.  The  corollary  to  this  is  you  shouldn’t  necessarily  expect  customer-­‐funded  development  in  this  environment.    Remember  the  movie,  “A  Bridge  Too  Far”  –  don’t  outrun  your  infrastructure,  including  suppliers.      For  the  first  time  since  WWII,  affordability  is  a  higher  priority  than  performance  gains.    Defense  companies  need  commercial-­‐like  headlights  in  technology,  time.    

 

                                                                                                                                                                                                                                     

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To  drive  innovation  in  outcomes,  we  must  better  align  stakeholder  interest/incentives  to  create  two-­‐way  transparency,  build  trust  and  shorten  time  required  to  deliver  products  to  market.  In  the  government-­‐contracting  world,  law/regulation  mitigates  trust.  We  need  a  third  party  to  play  a  role  in  fixing  this  shortcoming.      Don’t  expect  innovation  when  you  provide  the  spec.        Aerospace  and  defense  needs  to  link  technology  roadmaps  with  product  introduction  cycles.  The  current  gap  between  the  two  is  the  “chasm  of  death”.    Developing  the  link  provides  the  means  to  sustain/grow  over  time.    Failure  to  understand  the  portfolio  of  innovation  in  your  enterprise  is  a  great  peril.  All  innovation  has  different  time  frames,  risk  levels  and  resource  requirements  –  if  all  is  high,  then  you  can’t  get  too  much  product.    Culture  trumps  technology.    Too  much  computing  results  in  too  little  thinking  –  thinking  through  the  physics,  science,  environment  of  the  problem  is  required.      Electronic  communication  and  3D  models  are  poor  substitutes  for  face-­‐to-­‐face  communication.    We  design  by  mission,  not  testing,  alleviating  us  of  pesky  problems  —and  opportunities  to  eliminate  them  early.      Partnerships  are  anything  but  partners.  Shared  destiny  too  often  becomes  destruction.      Time  for  governance  outstrips  industry  capability.        Success  is  proportional  to  innovation;  innovation  is  a  power  function  of  ability  to  attract  new  talent.    If  you  don’t  keep  the  battery  charged,  it  will  be  dead  when  you  need  it.    If  you  don’t  know  where  you’re  going,  all  roads  look  good.    Game  changers  don’t  know  the  meaning  of  “good  enough.”  

 

                                                                                                                                                                                                                                     

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 Innovation  is  a  team  sport.    The  path  to  collaborative  innovation  is  strewn  with  barbed  wire;  the  path  to  success  comes  to  those  who  can  find  a  new  or  alternate  path.    Funhouse  mirrors  are  the  business  equivalent  of  perceived  risk.      The  degree  of  integration  is  directly  proportional  to  reward  potential  or  equal  to  the  expected  value/expected  cost.    A  government  spec-­‐driven  process  does  not  create  a  Watson  (see  IBM/Jeopardy).    Long-­‐term  sustainment  of  a  program  doesn’t  sustain  the  industrial  base.    If  policies  attack  failure,  failure  is  assured.    The  state  of  the  U.S.  military  industrial  base  is  directly  proportional  to  the  margin  allowed  and  proportional  to  Augustine’s  16th  law.    If  the  profits  of  labor  are  greater  than  the  profits  of  innovation,  the  industry  will  fail.      The  best  innovations  are  those  that  a  million  people  said  wouldn’t  work.    The  first  step  to  a  solution  is  acknowledging  the  problem.    The  greatest  innovations  come  with  the  least  knowledge  of  how  they  should  be  accomplished.  We  are  not  constrained  by  what  should  be.      If  the  government  can  ignore  commercial  business  models,  it  will.    If  the  government  can  dis-­‐incentivize  innovation  through  its  IP  policy  it  will.      The  government  has  a  high  tolerance  for  failure,  as  long  as  it  doesn’t  happen.    The  OEMS  are  delegating  design  authority  to  suppliers,  unless  they  don’t  build  what  the    OEM  specified.    Buying  In  is  now  a  future,  not  a  one-­‐time  event.    Innovation  is  inversely  proportional  to  the  depth  of  the  procurement  spec.  

 

                                                                                                                                                                                                                                     

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 NOTES FROM DISCUSSION Several  of  the  small  groups  created  charts  and  note  lists  relative  to  how/why  they  proposed  specific  laws.      Elements  of  a  Business  Model        

Today         Should  Be  Customer-­‐value  proposition  

Minimize  unit  production  cost  

Life-­‐cycle  cost    

Profit  model   Constrained,  regulated   Open-­‐value-­‐driven  Innovation   Customer  funded  

(technology  Supplier-­‐funded  (cost  control)  

 

Resources   Diminishing  Drawn  to  more  dynamic,  challenging  industries  

Drawn  to  new,  exciting  opportunities  

Business  Culture   Risk-­‐averse,  focused  on  H1  

Need  to  promote  risk-­‐taking  Freedom  to  fail  

Business  Process   Detailed,  processes  and  procedures  Restrictive  

 

 Priorities  for  industrial  innovation:    

Technology       .  Expand  the  frontier       .  Weight  reduction       .  Propulsion  technology  

Necessity–driven       .  3D  printing       .  Rapid  prototyping  

Business  model  innovation       .  Sources  of  value       .  Delivery  mechanisms    Enablers  of  innovation  required  for  the  future  

o Processes  to  identify  disruptive  technologies.  o An  industry  and  organizational  culture  willing  to  embrace  and  learn  

from  failure.  o Employees  and  cultures  who  are  curious  and  who  learn  continuously.  

 

                                                                                                                                                                                                                                     

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o Processes  designed  to  capture  unmet  customer  needs.    o Rewards  and  recognition  that  work  and  meet  human  needs.    

Impediments    to  innovation:    • Current  acquisition  system  –  lack  of  commitment  to  justify  risk/reward;  • Profitability  constraints  impede  corporate  willingness  to  invest;  • Functional  “this  is  how  we  have  always  done  it”  attitudes;    • Inability  to  value  the  outcome  over  the  specification;  • A  generation  that  is  gaining  limited  experience  moving  from  “innovate”  

to  “make”;    • Cultures  where  innovators  are  often  punished  –  those  shot  from  behind  

as  others  move  forward;  • Leadership  development  programs  that  “stamp  out”  new  leaders  vs.  

encouraging  natural  leaders.    The  faster  you  exert  downward  margin  pressure  on  suppliers,  the  more  difficult  it  is  for  their  business  to  succeed.    The  higher  the  number  of  projects  on  your  innovation  horizon,  the  greater  the  resistance  your  shareholders  will  exert.    Organizational  constructs  are  required  to  support.    Stop  waiting  for  the  customer  to  tell  you  what  it  wants.      Stop  relying  on  the  government  for  investment  capital.    Focused  competency  trumps  diversification.    The  farther  away  from  the  government  you  get,  the  more  money  you  can  make.    The  best  law  for  the  perfect  business  model  is  yet  to  be  developed  –  keep  working.    Innovation  without  impact  …  isn’t.    The  supplier  of  the  future  is  an  innovation  source  and  partner  to  his  customer.    Innovation  doesn’t  happen  in  a  vacuum.  It  is  incentivized  by  the  prospect  of  business  success.      The  seeds  of  innovation  are  inversely  proportional  to  the  organizational  coefficient  of  friction.  (Internal  layers  of  processes,  resistance,  etc.)  (Epoxy  of  progress)    

 

                                                                                                                                                                                                                                     

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Create  ambassadors  across  the  A&D  of  how  unique  this  industry  is.      Investment  is  required  to  drive  sales  growth;  investment  is  also  required  to  survive  declining  sales.        

     

           Employees  want  direction  and  strategy  –  what  am  I  going  to  be,  where  am  I  headed  and  how  do  I  get  there?    Young  people  have  gadgets  in  their  hands  every  day,  and  every  day  something  is  happening  in  A&D  companies  that  can  be  delivered  via  these  devices  to  create  excitement.    We  need  an  agnostic  aerospace  branding  fund.    Every  employee  needs  the  ability  to  shape  the  future.      Continuously  deliver  direct,  specific  and  useful  feedback  –  early  and  often.    If  you  want  the  best  people,  be  the  best  leader.      Always  do  the  right  things,  whether  someone  is  watching  or  not.        Retention  of  ‘A’  players  is  a  function  of  the  quality  of  leadership  –  matrix  organizations  make  this  a  real  challenge  –  who  is  my  boss?    Engagement  of  95%  who  want  to  do  good  work  is  a  function  of  dealing  with  the  bottom  5%  -­‐-­‐  the  95%  know  long  before  the  leader  knows  who  the  5%  is.  Sometimes  the  5%  are  just  in  the  wrong  job.    

-­‐-­‐                                                                                              Growth                                                                                              +  

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11  SPONSORED  BY  

 Don’t  forget  the  top  5%  -­‐-­‐  they  have  options.    Surround  yourself  with  people  who  are  smarter  than  you  are.    Feedback  does  not  have  to  be  unpleasant;  it  does  have  to  be  real.  Feedback  is  a  function  of  respect.    People  need  to  know  the  notional  path  to  success  in  this  organization.      People  want  to  be  valued  –  and  this  does  not  necessarily  mean  a  huge  paycheck.    Observe  the  Platinum  Rule  –  people  want  to  be  treated  as  they  want  to  be  treated  –  not  necessarily  how  you  want  to  be  treated.    Leaders  need  to  engage  people  with  ambition  in  the  probability  discussion  –  what  they  desire  versus  what  is  possible/likely.    Your  expectation  of  your  employees  is  a  self-­‐fulfilling  prophecy.    A  strategy-­‐driven  culture  is  the  DNA  of  a  high-­‐performance  organization.    You  probably  have  a  leadership  problem  when  employees  vote  with  their  feet.    The  ability  to  attract  and  retain  high-­‐quality  workforce  is  directly  proportional  to  the  quality  of  an  organization’s  leadership.    A  little  recognition  goes  a  long  way.    Job  function  without  accountability  is  human  capital  squandered.    

About Siemens PLM Software Siemens  PLM  Software,  a  business  unit  of  the  Siemens  Industry  Automation  Division,  is  a  leading  global  provider  of  product  lifecycle  management  (PLM)  software  and  services  with  seven  million  licensed  seats  and  more  than  71,000  customers  worldwide.  Headquartered  in  Plano,  Texas,  Siemens  PLM  Software  works  collaboratively  with  companies  to  deliver  open  solutions  that  help  them  turn  more  ideas  into  successful  products.  For  more  information  on  Siemens  PLM  Software  products  and  services,  visit  www.siemens.com/plm  <http://www.siemens.com/plm>    .