EY teams have identified four actions that A&D companies can take to impact sustainability for the better.
1. Invest and revisit business models: Leaders are dedicating portions of their R&D budgets to developing more sustainable materials and technologies. They are also building innovation hubs and incubators to make sure that there are always internal stakeholders with sustainability-related advances as their top priority. As noted, these sustainability-focused areas raise the potential for as-a-service business models that should be considered.
Business model innovation requires companies to re-examine, and often challenge, their own core competencies. Sometimes a value creation opportunity demands capabilities outside the company’s experience or beyond its sector. In these cases, manufacturing leaders should focus on building or joining an ecosystem.
2. Build a partner ecosystem and pursue transactions. Forward-thinking firms are increasingly focused externally as well as internally, recognizing that some of the most significant advances can be realized via increased collaboration with ecosystem partners. This can even include working with customers to introduce new commercial models — improving financial outcomes for both parties, as well as the environment.
A&D leaders need to determine where partnerships would best support value creation and delivery by extending capabilities, market presence and innovation. Ecosystems generally provide value creation opportunities for all participants, but leaders should look for ways to own them for greater control over how the additional value is spread.
3. Assess the links in your value chains — including a potential expansion of your portfolio — to understand who is creating the most value and how, showing whether greater collaboration (including with startups) is preferable. Startups and scale-ups are contributing significantly in the AAM as well as earth observation space. Many AAM players are in some form of an alliance with established A&D and mobility players, and the proliferation of satellites and drones has resulted in a rapid increase in the number of earth observation and space tech companies, creating headroom for alliances.