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Aviation Week Executive Summit

Professor Rahul Kapoor, The Wharton School

Michael Langman, Wharton Aerospace

08 June 2010

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Wharton School Ties to the A&D Industrial Base

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The view from Philadelphia

Strategy Development (2009 Theme): Strategy development is not that difficult

when monopsonies meet duopolies & oligopolies in a growing & transparent

market – but changes are coming.

Strategy Execution (2010 Theme): Creating a strategy is nothing compared to

executing it successfully – at the heart of solid execution are program

management, supply chain management and technology management skills.

Strategic Agility (2011 Theme): Certain companies will be better than their peers

at dealing with current (and coming) waves of market discontinuities. They will

see declining budgets as an opportunity to take market share and outperform

competitors.

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Strategic Agility

The capacity for a business model to identify and capture opportunities more

quickly than its rivals.

Source: Fast Strategy

Yves Doz & Mikko Kosonen

Wharton School Publishing

Hear more at Wharton Aerospace 2011

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“My company gets it. In fact, we’re attuned to shifting priorities by going after

cybersecurity, healthcare IT and smart grid markets”.

- VP Strategy at an unnamed firm

This is not Strategic Agility

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Strategic Agility and Strategic Sensitivity

Processes, people and culture shape strategic sensitivity.

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Strategic Agility and Leadership Unity

Strategic sensitivity is of little use when hierarchical organizations & functional

stovepipes do not share mutual common goals or commitments.

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Strategic Agility and Resource Fluidity

Re-allocation of both capital and human resources are dynamic.

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Implications for Business Models:

Key Success Factors

Managing alliances – a substitute for capex, R&D and internal innovation

Managing supply chains – redefining boundaries

Managing technology – vertical integration vs. asset specificity challenges

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Managing Alliances: a substitute for capex,

R&D and internal innovation

Competition is increasing between competing alliances

Co-opetition is fact of life.

Prohibitive capital requirements Reduced time from RFI to RFP Winner-take-all risk mitigation Continued access to (contestable) markets

Company X may simultaneously be:

• A supplier to a company Y on one program• A customer of the same company on another program• A team-mate on yet another program• And a competitor on multiple other programs

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Managing Alliances: Competition is

increasingly between competing alliances

EXAMPLE: NAWC-TSD Selects Raytheon-led Warrior Training Alliance for U.S. Army Warfighter FOCUS Program

Value (US$M): $11200; Begins: Jun-07. Ends: 6/5/2017

Supporting Raytheon are CSC North American Public Sector -

Defense Integrated Solutions & Services (DISS) (Falls Church,

VA) and 64 additional teammates—43 of which are small

businesses—committed to innovation and excellence in

warfighter training. Teammates include:

-- AAI Corp. Training Systems (Hunt Valley, MD)

-- BAE Systems Integrated System Technologies (Insyte) (Frimley,

Surrey, England, UK)

-- Boeing Training Systems and Services (St. Louis, MO)

-- CAE Simulation Products/Military (SP/M) [unassigned] (St-

Laurent, Quebec, Canada)

-- Camber Corp. (Huntsville, AL)

-- Cubic Training & Education Div. (Leavenworth, KS)

-- DRS Training & Control Systems, Inc. (Ft. Walton Beach, FL)

-- EDS U.S. Government Solutions (Herndon, VA)

-- Firearms Training Systems, Inc. (FATS) (Suwanee, GA)

-- L-3 Titan Group - Technical Resources Div. (Landover, MD)

-- MPRI, Inc. (Alexandria, VA)

-- Tivoli Software (Austin, TX)

-- Virtual Technology Corp. (VTC) (Alexandria, VA)

-- Tivoli Software (Austin, TX)

-- SAIC Strategies, Simulation & Training (Orlando, FL)

-- Sparta, Inc. (Lake Forest, CA)

-- SRI International, Inc. (Menlo Park, CA)

-- Symantec Corp. (Cupertino, CA)

-- Viecore Federal Systems Division (FSD), Inc. (Eatontown, NJ)

-- Acme Worldwide Enterprises, Inc. (Albuquerque, NM)

-- Adacel Systems, Inc. (Orlando, FL)

-- Advanced Systems Technology, Inc. (AST) (Lawton, OK)

-- Aegis MEP, LLC (Columbus, OH)

-- Ahtna STS (Anchorage, AK)

-- Anark (Boulder, CO)

-- Applied Geo Technologies, Inc. (AGT) (Choctaw, MS)

-- Aptima, Inc. (Woburn, MA)

-- Arcata Associates, Inc. (Las Vegas, NV)

-- Bedrock Company, Inc. (Radcliff, KY)

-- Binghamton Simulator Co. (Binghamton, NY)

-- Carahsoft Technology Corp. (Reston, VA)

-- CLM Software, Inc. (Fort Rucker, AL)

-- Cole Engineering Services, Inc. (Orlando, FL)

-- CymSTAR (Tulsa, OK)

-- Defense Training Systems (Anchorage, AK)

-- The DEI Group (Millersville, MD)

-- ENPRO Consulting (Knoxville, TN)

-- Engineering Support Personnel, Inc. (Orlando, FL)

-- Infinite Computer Technologies (Warminster, PA)

-- Inter-Coastal Electronics, Inc. (Mesa, AZ)

-- LimitLess International, INc. (Orlando, FL)

-- Maxus Strategic Systems (New York, NY)

-- Metters Industries, Inc. (McLean, VA)

-- MYMIC LLC (Portsmouth, VA)

-- Oak Grove Technologies (Raleigh, NC)

-- Oberon Associates (Manassas, VA)

-- Olgoonik Logistics, LLC (Anchorage, AK)

-- Omega Training Group, Inc. (Columbus, GA)

-- Pacific Coast Systems LLC (Asbury, NJ)

-- Pal-Tech (Arlington, VA)

-- ProModel (Orem, UT)

-- Quandrant Simulation Systems (Orlando, FL)

Managing Alliances: Competition is

increasingly between competing alliances (cont.)

Losing bidders included a team known as the Warfighter FOCUS

Alliance which include: General Dynamics Information Technology

(Fairfax, VA), Lockheed Martin Simulation, Training & Support

(ST&S), Commercial Flight Training Center (Orlando, FL), Northrop

Grumman Information Technology (IT) (McLean, VA), and Saab

Training Systems AB (Huskvarna, Sweden).

-- Raydon Corp. (Daytona Beach, FL)

-- Riptide Software (Orlando, FL)

-- SA-TECH (Largo, MD)

-- SBI Technologies Corp. (Reston, VA)

-- Senspex (Rio Rancho, NM)

-- Universal Systems & Technology, Inc. (Centreville, VA)

-- Superior Access Solutions (Burnsville, MN)

-- Tec-Masters, Inc. (Huntsville, AL)

-- Technologies To Be, Inc. (Orlando, FL)

EXAMPLE (continued):

Comments from Raytheon … or GD, Lockheed & Northrop?

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Managing Supply Chains:

Redefining roles & boundaries

From OEM to systems integrator

Horizontal expansion within tiers

Upstream component challenges

constrain firms’ ability to produce;

downstream complementors’ challenges

limit buyers’ ability to fully benefit from

consumption (i.e., A380 vs. B787

lessons)

We will presently discuss a newly

researched eco-systems approach

Source: Sikorsky Aircraft President Jeff Pino, Wharton Aerospace 2010

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Managing Technologies:

Introducing Professor Rahul Kapoor

Production & knowledge boundaries affect

competitive advantage in face of market

and technological change

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Contact Information

Professor Rahul Kapoor

The Wharton School

Kapoorr@wharton.upenn.edu

Michael Langman

Wharton Aerospace Community

Michael.Langman.wg98@wharton.upenn.edu