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Are Aerospace CEOs Up To The Challenge?
The A&D industry faces momentous challenges. Is a new generation of CEOs up to the task?
Anthony L. Velocci, Jr. | Aviation Week & Space Technology EMAIL
Advertisement Within the last 18 months, Clay Jones, Bob Stevens and Bill Swanson retired from their CEO positions at Rockwell Collins, Lockheed Martin and Raytheon, respectively. They joined a growing list of peers who also passed the torch to a new generation of aerospace and defense (A&D) leaders in recent years. In the second half of 2009 alone there were nine similar transitions. Such a comprehensive reset invites inevitable comparisons between the newest leaders and their predecessors in charge in the early 1990s, the last time the industry was at a major inflection point. Early in President Bill Clinton's first term, Pentagon officials gathered defense contractors at what became known as the "Last Supper," and bluntly warned them that half their companies would not exist in five years. The dinner signaled a policy of support for consolidation as weapons budgets declined - from a high of $99 billion in 1990 to $48 billion in 1996 (in constant 1996 dollars). Industry leaders took the warning to heart, unleashing what former Defense Secretary James Schlesinger described as an "avalanche of mergers and acquisitions." Out of this milieu emerged various CEOs who recognized they faced a fundamentally different market. They proved to be powerful catalysts for initiating and sustaining the Darwinian consolidation that lasted a decade. Some turned out to be visionaries and served as unofficial but effective spokesmen for the industry. For example, then-General Dynamics Chairman and CEO Bill Anders saw that GD needed a new strategy. In late 1991, he unveiled a plan based on the premise that if the company could not be No. 1 in a given market, it would exit the business. Much to the dismay of some fellow CEOs, Anders went on a two-year speaking tour about why the industry and the country would be better served by a smaller collection of competitors that had critical mass and were run like businesses, not merely large activities. Then there was Kent Kresa who, as chairman and CEO of Northrop Grumman, foresaw a trend toward the expanded use of electronics, computers and information technology. His team literally bet the company on transforming from a producer of military combat aircraft to a manufacturer of integrated systems, combining improved sensors and surveillance capabilities, long-range precision strike and battlefield computer networks. Today it is called network-centric warfare. We'll never know what the industry would have looked like in 2014 if these and some other leaders had failed to correctly assess the harsh market realities they faced and chosen different courses of action. Their transformative leadership was just what the industry and the country needed at the time. The CEOs who immediately followed them had what may have been an even harder but equally important job: integrating all the acquisitions and forging one culture - a process that took years. It would seem their leadership proved its worth, since the U.S. A&D industry's competitiveness over the last decade has been superior to that of any rivals worldwide. But past success is no guarantee of future results. As difficult as the environment was in the early 1990s, a case could be made that CEOs today face an even more challenging set of conditions. In addition to the uncertainties about the size and duration of congressionally mandated budget cuts, they must factor into their business planning a Congress that seems to have little concern for the potential long-term consequences of its actions on the industry or on national security in general. At least Anders, Kresa and their peers generally had the support of government, writ large, for what they had to do to survive and grow. They also faced a competitive landscape that was much more benign. Today's CEOs must champion the right partnerships, properly prioritize company-funded research dollars, achieve the right balance between short- and long-term goals, figure out how to deliver more-affordable products to market faster, and be bolder in how they approach their innovation strategies. If any of the leaders in this day and age have a grand vision, not just for their own companies but also for the greater good of the industry, it is not apparent, so insular is the current crop of CEOs. We can only hope, because it is a vacuum that desperately needs filling. Nor is it clear how effective they will be in guiding their companies through the maze of competitive, operational and political challenges that will define the industry for years to come. Anthony L. Velocci, Jr., was editor-in-chief of Aviation Week & Space Technology from 2003-12. Print
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