Reprogramming Aerospace and Defense, 2004.

IBM Business Consulting Services

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An IBM Institute for Business Value executive brief

Bolstering the business ecosystem is key to sustainable growthReprogramming Aerospace and Defense

The IBM Institute for Business Value develops fact-based strategic insights for senior

business executives around critical industry-specific and cross-industry issues. This executive

brief is based on an in-depth study created by the IBM Institute for Business Value. This

research is a part of an ongoing commitment by IBM Business Consulting Services to provide

analysis and viewpoints that help companies realize business value. You may contact the

authors or send an e-mail to [email protected] for more information.

Reprogramming Aerospace and Defense IBM Business Consulting Services1

IntroductionOver several decades, industry domination and the desire to control the industry have emerged as prevailing objectives among original equipment providers (OEPs) and suppliers across the Aerospace and Defense (A&D) industry. More recently, the need for tighter integration and collaboration among industry participants has created a more networked and complex industry structure where the success of individual companies is increasingly intertwined with the performance and capa-bilities of others inside and outside the A&D business ecosystem.

This inherent conflict between the historical pursuit of industry dominance and the economic necessity of increased collaboration is steadily decreasing the effectiveness of traditional business models and jeopardizing the health of the A&D ecosystem. To foster growth over the long term, industry players need to adjust their mindsets and their strategies, taking into consideration their role in the industry ecosystem and emerging business models that are more conducive to innovation and rapid change. A recent study conducted by the IBM® Institute for Business Value highlights the key challenges faced by OEPs and suppliers, assesses the current health of the A&D ecosystem and offers concrete actions that can help OEPs and suppliers “reprogram,” setting a course for profitable, sustainable growth.

Profitable growth is the goal… According to the IBM 2004 Global CEO study, revenue growth tops the list of executive priorities, followed closely by cost reduction.1 A&D participants mirror overall results (see Figure 1). The economic challenges of the past few years have made cost-efficiency an underlying assumption in all areas – and growth initiatives are no exception. CEOs are interested in profitable growth, not growth at any cost.

Figure 1. Key focus areas of CEOs around the globe.

Contents

1 Introduction

1 Profitable growth is the goal...

2 ... adaptation is the hurdle

6 Hidden clues: A closer look at the A&D ecosystem

9 Ecologically minded: Caring for the ecosystem

12 About the authors

12 About IBM Business Consulting Services

13 References

Revenue growth

Cost reduction

Asset utilization

Risk management

Effectiveness improvements

0% 10% 20% 30% 40% 50% 60% 70% 80%

Source: “Your Turn: The Global CEO Study 2004.” IBM Business Consulting Services. 2004.

All respondents

A&D


To gain insights about the A&D growth challenge in particular, the IBM Institute for Business Value interviewed executives of leading OEP and supplier firms and supplemented those conversations with additional industry research. What we found was an industry at a critical inflection point.

With three straight years of losses in the airlines industry,2 traditional airlines have limited funds for investment. Defense budgets remain under constant pressure. For decades, defense budgets worldwide have declined as a percentage of GDP and were at 2.3 percent at the beginning of the decade.3 Even in the United States, where the bulk of defense spending is concentrated, challenges are mounting. The U.S. Department of Defense (DoD) is addressing the 2004 budget shortfall of US$12 billion through funds transfers and program delays.4

In response, traditional customers are shifting strategies – sharing more risk with suppliers while requiring them to invest more, leasing aircraft versus buying, experi-menting with new revenue streams and converting fixed costs into variable costs.

…adaptation is the hurdleThese financial pressures have made business transformation more urgent for airlines and defense departments; OEPs and suppliers, on the other hand, are generally not adapting as quickly. Failure to anticipate or respond quickly enough is creating challenges in several areas:

Excess capacity With 2,390 aircraft (of which 1,399 are widebody or narrowbody aircraft) currently sitting in storage,7 experts are debating about how many could return to active service, leaving OEPs and suppliers in a quandary. Trying to hedge their risk, some OEPs are ramping up refurbishment capabilities, planning for an active after-sales market. However, regardless of the outcome, companies are likely to end up with excess capacity somewhere – idle manufacturing plants or under-utilized after-market services. Internally, supply is out of sync with demand, too. Industry consolidation has left firms to deal with tremendous internal redundancy. During the 1990s, for example, 11 different companies melded into the present day Northrop Grumman.8

In terms of fleet value,

International Lease Finance

Corporation (ILFC) is the largest

aircraft leasing company in the

world,5 with over 130 airline

customers worldwide.6

Decommissioned defense

aircraft (17 Skyhawks

and 17 Aermacchi jets)

currently cost the New

Zealand government some

$8 million to maintain and

store, rising at a rate of

about $320,000 a month.9


Underserved (or unserved) customer needs Looking at the commercial market, most low-cost carriers (LCCs) have continued to make a profit despite the difficult travel environment, and they are the customers buying new planes (see Figure 2). Their requirements are somewhat unique in that LCCs’ businesses have been designed differently from the start – with cost-efficiency top of mind. They were early and intense users of Web technology for ticketing and check-in. Operationally, they chose to do business in smaller airports, away from ground and airspace congestion. Among commercial customer segments, these airlines operate on such different terms, with lower (albeit more consistent) net profits, that many OEPs and suppliers are evaluating whether the LCCs can truly sustain their growth. On the defense side of the business, customer demands are morphing as well. Requirements for world war (where nations had common enemies and conflict was confined to certain regions) are not the same as those for global war (where conflict can erupt quickly in any number of random places at the same time and enemies can prove difficult to locate). Today’s war on terror, for example, is being waged globally, demanding the collaborative efforts of governments and private sector companies around the globe.

Figure 2. Fleets are growing at low cost airlines.

Talent upheaval According to the Aerospace Industries Association, the average age of the aerospace engineer is 54, and the average blue collar worker is 51.10 In the US, over one quarter of the aerospace workforce will be eligible to retire by 2008.11 As these baby boomers approach retirement, A&D companies are justifiably concerned about retaining the knowledge they need as employees exit the business – and backfilling them with employees that have the right skill set for the future. Attracting new talent has been difficult as well. Although the overall number of engineering graduates is growing in Europe (doubled between 1975 and 1992) and Asia (tripled between

10

5

0

-5

2002 2003 2004E 2005E

Perc

enta

ge

Source: Cordle, Vaughn. “Airline Financial Outlook.” AirlineForecasts, LLC. 29th Annual FAA Aviation Forecast Conference, Washington, D.C., March 25-26, 2004.

-3-4 -1

57 7

Low cost airlines

Traditional airlines

“It is difficult for A&D companies

to get the skills our market

needs because the best ones are

‘stolen’ by industries that seem

to be more attractive than A&D

– interestingly companies like

high-tech or games producers.”

– Lynn Borek, Senior Director,

Global Aviation Information

Management, Rockwell Collins


1975 and 1995),12 the US trend runs in the opposite direction: engineering program enrollment declined 20 percent from 1983 to 1998.13 Within aerospace engineering in particular, the number of degrees awarded in the US fell by 47 percent between 1991 and 2000.14

Regardless of the size of the talent pool, A&D must still compete against other industries that are now perceived as more exciting, stable or lucrative. Such skill shortages provide even more incentive for alliances, outsourcing and various forms of collaboration.

Escalating integration complexityThe need for collaboration and integration is pervasive and rapidly increasing, but companies’ processes, infrastructure and culture are having difficulty keeping pace. Today, it is not unusual to have six or seven tiers between the prime contractor and the lowest member in the supply chain. Collaboration must also cross regional and corporate boundaries. For instance, Boeing’s 7E7 program currently spans 8 countries and involves 30 different companies.15 Although collaboration within programs is commonplace, and some leading companies are breaking down program silos to share practices and insights enterprisewide, most A&D companies still lack the necessary infrastructure to seamlessly integrate a growing network of external partners and suppliers. Even when companies have established such an infrastructure, they often cannot afford to maintain and operate it. Engineering in particular relies heavily on homegrown or heavily customized applications. A large percentage of A&D manufacturers lack fully operational ERP systems, and because of the customized nature of their businesses, they have a high number of disparate product lifecycle management systems.16

Tech not enoughCompanies are finding that technology, in and of itself, is an insufficient differentiator. Typically, everyone has access to the same “raw” technology – the differentiation comes in how creative a company is in its application. Perhaps more critical, techno-logical sophistication must be in balance with customer need (and their willingness to pay). For instance, travelers will determine the success of regional versus large jets. Airline customers may be more than willing to trade the inconvenience and short time delay involved in transferring between smaller, regional planes if that saves them enough money on a cross-continental flight.

“The open standards for IT and

the business processes which

are missing are proving to be

a big inhibitor for A&D-wide

operational improvements.

While it’s nice to be able to

exchange engineering data, it

is a ‘must’ that key segments

in the value chain – right up

to suppliers and partners

– are ‘networked,’ in order

to achieve a real impact.”

– Klaus Peter, VP Strategy

and Transparency, European

Aeronautic Defense and

Space Company (EADS)17

“Don’t bring me a

$1,000,000 missile to

destroy a $10,000 truck.”

– Michael Wynne, Acting

Undersecretary of Defense 18


Custom no longer customary

Deviating from the norm in the defense sector, the US Navy opted for off-the-shelf collaboration

software which they procured and implemented quickly. They chose a package that relied on standard

(preexisting) infrastructure and a generic Web browser, which allowed greater interoperability, rapid

deployment and lower costs. By resisting the tendency to tweak and customize, the Navy was able

to implement their “collaboration@sea” solution in 42 days, with just 7 people, at a price they could

afford. Their implementation was so successful that militaries in other geographies such as Canada

soon followed suit.19

Innovation and speed-to-market are more critical than everDespite the historical prevalence of technology-driven product innovation, the actual innovation needed may be low-tech or even no-tech – innovativeness, after all, is judged by the marketplace not the maker. Innovation does not have to center on the product either. Process or operational innovation can be just as critical to profitable growth. When innovative firms were asked in a 2001 National Science Foundation study to identify which type of innovation (product or process) developed during the past year contributed most to company revenue, process innovations outnumbered product innovations by almost 60 percent.20 In fact, product innovation without operational innovation can lead to commercialization shortcomings. For instance, Rockwell Collins developed the first generation of military Global Positioning System (GPS) user equipment in 1979,21 but lacked the operational capabilities to commercialize the technology successfully in other segments such as recreation. While they equipped the military, other companies took the technology and outfitted the world’s backpackers, fishermen and sailing enthusiasts. Similarly, Boeing (at that time, McDonnell Douglas) worked with NASA to invent winglet technology – but Airbus was the first to use it commercially.22 While product and process innovation are the most obvious targets, innovation can take a variety forms – social, political, economic – and bring sweeping change to individuals, nations and governments as well as corporations.

Mind-bending social innovation for society at large

Although seemingly farfetched, futurists have proposed fundamentally altering long-standing conventions

such as the five-day workweek, suggesting, for instance, a nine-day “continuing” week where a third of

the workforce is at leisure during each three-day period. While the percentage of time each individual

works may drop slightly (71 to 68 percent), proponents highlight offsetting benefits such as better-

utilized assets and facilities (no upgrades for peak usage), a less-stressed, more productive workforce

and the ability to stage work and teams so that progress continues nine days a week. Society benefits too:

a higher quality of life for families and individuals; less congestion involved in typical weekend activities;

and stores, museums, mechanics and doctors that are available each day.23


Hidden clues: A closer look at the A&D ecosystemSimilar to species that are part of a biological ecosystem, businesses do not exist in a vacuum; they are part of a complex business ecosystem comprised of competing and complementary value nets. Each company’s value net consists of its particular set of customers, suppliers, complementors and competitors.

Recent management science research has delved deeper into this biological parallel to shed light on conditions that foster thriving business ecosystems – and vice versa. As highlighted in research conducted by the University of Kiel, Germany and the IBM Institute for Business Value,24, 25 companies within business ecosystems tend to exhibit certain behaviors that cast them in one of three roles:

• Dominator – The defining characteristic of a dominator is its drive to cover the entire ecosystem, expelling or defeating other species. In a business ecosystem context, dominators integrate vertically or horizontally in an effort to gain more control. Consequently, they tend to have a high physical presence and produce value directly. They use proprietary platforms and expect suppliers and partners to adhere to their particular process and system requirements. In the short term, this mode of operation makes the dominator productive – but over time, programs suffer because it takes too much time to respond to market changes, compliance costs creep into suppliers’ prices and ultimately critical relationships are damaged beyond repair.

• Niche – Similar to their biological counterparts, business ecosystem niches have specialized capabilities that differentiate them. But because of their relatively small size, they often have difficulty defending against dominators. As a group, they create most of the value within the business ecosystem.

• Keystone – In nature, keystones are not focused on proliferation; instead they are content with keeping the ecosystem in balance. Likewise, keystones within a business context strive to improve the health and sustainability of the entire ecosystem. They drive policies, establish standards and create open platforms that enable better collaboration. Because their focus is on facilitating value creation (as opposed to creating it all themselves), they can maintain a low physical presence. To sustain value creation over the long term, they carefully balance value extraction with sharing.

Industrial-age management

theories “…can’t tell us

how to manage a network of

business partners that is 1000

times the size of the firm,

as is the case in industries

as different as apparel and

software. They don’t tell

us why IBM’s innovation

strategy is more dependent

on influencing the behavior of

the millions of free software

developers scattered outside

its organizational boundaries

than on the hundreds located

in its internal TJ Watson

Research Center.”

– Marco Iansiti, The Keystone

Advantage: What the New Dynamics

of Business Ecosystems Mean

for Strategy, Innovation, and

Sustainability, 2004


Role reversal: Hypothetical niche company surprised by dominator’s new mode of operation When the leaders of TwoReel Engines received their invitation to join Global Aircraft at its Concept Kickoff, they had mixed reactions. Although definitely anxious to be part of designing the “aircraft of the future,” they were skeptical about how this new program might work. Would their innovative ideas be vetoed because they were outsiders? That happened often enough. Would this mean they had to buy more new hardware and software to comply with the latest edict? Based on prior experience, the cost of doing business with Global Aircraft often neutralized initially optimistic growth projections. Was this really an opportunity to radically improve the aircraft of tomorrow (and how they are made) – or simply a survival move?

During its last program, Global Aircraft acted as prime contractor, doling out work to subcontractors. Although program participation was billed as a consortium, Global’s specialized methods were the basis for all activity. Design efficiencies were limited, and infrastructure costs mounted for all involved. From concept to rollout, Global owned and controlled every aspect of the program. Although the resulting plane could outperform all others in the marketplace, it was costly to manufacture – and many airlines could not afford to purchase or operate it. Despite substantial value chain improvements in recent years, the company continued to struggle financially, always in a constant battle with other large aircraft companies for industry supremacy. To TwoReel, Global Aircraft was just another one of the big four.

Driven by a combination of hope and fear, TwoReel decided to accept Global Aircraft’s invitation. And they were glad they did. At the Concept Kickoff, Global seemed like a totally different company. They brought together a broad cross-section of companies: airlines; part and component designers; IT providers; program management experts; maintenance, repair and overhaul companies; airport management and regulatory agencies – just to name a few. They expressed a sincere interest in the expertise that each participant could offer. It was clearly more than a consortium; Global Aircraft was providing seed money in key areas and was assuming over half the risk. For their part, other participants joined in, agreeing to share ownership, cost, risk and reward equitably.

The team of companies moved together through each phase of the program as if they were one enterprise. From phase to phase and activity to activity, the leadership baton passed to different keystone and niche companies based on their particular expertise and ability to enable the rest of the team. With an expressed goal of using common standards and open architectures, the team decided on tools and methods that could be shared easily across the team and around the world. Global Aircraft acted like a global company – not just one with operations in different parts of the world. They became a central information and communication hub both inside the company and across the entire network of partners. They established platforms that could receive and disseminate data and information in a variety of formats so that everyone involved could access necessary information about the aircraft and its subsystems. They also suggested affordable, off-the-shelf, Web-based tools that facilitated quick communication about the myriad design, manufacturing, supply and regulatory items that inevitably arose during the course of the program. Because Global Aircraft was focused on leveraging the expertise and innovativeness of the entire team and managing a complex network of high performers, the end result was an aircraft that provided acceptable margins for all program participants and a product that suited customers’ functional and financial needs. Along the way, they had also managed to implement a

new business model that promised higher – and more sustainable – growth.


The health of a business ecosystem dictates its longevity and propensity for growth. Healthy business ecosystems are composed of productive companies. Here, the financial standing of major entities is solid and robust, and niches of highly innovative companies emerge regularly. Conversely, unhealthy business ecosystems have low innovation rates. Niche firms are forced into low-margin positions, leaving them with insufficient funds to innovate. With little variety added in types of businesses or products, the business ecosystem can become rigid and slowly stagnate. When new members enter unhealthy ecosystems, productivity tends to go down instead of up. In these ecosystems, dominators are usually extracting more value than they are contributing. Or, there could be more than one dominator which tends to polarize the business ecosystem, leaving it in a perpetual tug-of-war where one side eventually loses to the other – or both sides lose to an opportunist that enters with a more unifying approach.

In evaluating the A&D ecosystem, the IBM Institute for Business Value has taken the three health barometers of a business ecosystem – productivity, robustness and niche creation26 – and translated them into a ten-point evaluation tool composed of both qualitative and quantitative measures.27 Using 17 major OEPs and suppliers28 as a proxy for the industry, detailed analysis suggests that the A&D ecosystem is generally unhealthy (see Figure 3).

Figure 3. As an industry, A&D is not very productive and, on average, not generally robust.

Company A

Company B

Company C

Company D

Company E

Company F

Company G

Company HCompany ICompany J

Company Q

Company P

Company O

Company N

Company M

Company L

Company K

Company A

Company B

Company C

Company D

Company E

Company F

Company G

Company HCompany ICompany J

Company Q

Company P

Company O

Company N

Company M

Company L

Company K

ROICRevenue growthPlatform maturityAverage

Productivity assessment Robustness assessment

Source: IBM Institute for Business Value.

Beta factorEBIT marginCredit ratingAverage


Although dominator behavior provides a certain level of productivity, the point at which the ecosystem no longer benefits is often vague and difficult to predict. Direct and indirect productivity in an ecosystem is a result of the role played by any given participant, and is determined by each player’s operational decisions. The number of dominators in an ecosystem also influences overall productivity. When many dominators exist, the ecosystem tends to be more variable – although still not as productive as a system predominantly influenced by keystones. However, when two companies become the prime dominators and are at odds with each other, they leave room for competition to enter the market and move into an influential keystone position, bringing robust niche participants and new and innovative processes. Dominators and keystones measure productivity differently. Dominant company productivity measures are often built on how much a given set of employees can produce over a specific period, while keystone companies understand the flux in the system and measure the overall productivity of the entire collection of partici-pants, including how many new ideas are generated and commercialized. When domination permeates a company’s identity and culture, the challenge of moving from one role to another requires not only a change in operational decision-making, but also a modification of behavior and performance measures.

Robustness, another facet of the health check, measures company stability – how the firm reacts to stock market fluctuations, what its financial performance and outlook is and, therefore, how much others can comfortably depend on them. In an ecosystem where a few dominant companies create, and control the core standards, platforms and processes for the entire network of participants, and often expand at the expense of others, there is less diversity and less ability to absorb shocks to the system. The A&D industry has repeatedly demonstrated its inability to absorb shocks, most recently with events ranging from security threats to global infectious disease. Even seemingly unrelated incidents can destabilize the industry.

Ecologically minded: Caring for the ecosystemBased on the IBM Institute for Business Value assessment, it appears that the A&D ecosystem has an abundance of dominators and too few keystone and niche companies. This unbalanced condition creates challenges. For instance, dominators throughout the industry are all adopting different technologies, platforms and appli-cations, forcing suppliers that serve them all to have separate or highly customized systems for routine operational activities. Without strong keystones, establishment of standards has largely been left to those outside the A&D ecosystem, such as Industry Solution Vendors or IT companies.

“The A&D industry must now

accept that the model is shifting:

OEM-specific requirements lead

to solutions unique to each OEM

which increases the operational

cost of doing business, and,

with the electronic information

management changes [that] are

coming into the marketplace,

competition is coming from new

sources, not necessarily the

traditional A&D companies.”

– Lynn Borek, Senior Director,

Global Aviation Information

Management, Rockwell Collins


To improve long-term growth prospects for themselves – and the industry as a whole – A&D companies should consider recasting themselves in a keystone or niche role. This sort of “reprogramming” requires strategic discipline and a concentrated effort to:

• Understand who’s who. This involves companies knowing not only their own role and strengths, but also understanding the key contributions of others. Keystones, for instance, should understand, value and capitalize on the innovation contribution of niche firms. Those in niche positions should acknowledge and take advantage of the facilitation and leadership contributions made by strong keystones.

• Use rather than build. Keystone and niche companies leverage the services of their value net where they have gaps or weaknesses, rather than attempting to build and operate on their own. This provides flexibility to respond faster (as a value net) to changes in the marketplace. It can also allow companies to become more variable with the ability to scale up and down as demand dictates. By leveraging others (and their assets), companies can become more virtual and reduce their overall physical presence.

• Act in accordance with desired role. For keystones, this means moving actively to become a “hub” – a point of connection, integration and information exchange. Hubs facilitate the flow of information (such as quality information), making the appropriate details available to all that need it. For niche firms, this means creating and maintaining a rapid R&D process that allows them to stay on the “edge” of the ecosystem, continuously introducing innovative new products or entering new market segments.

• Exert influence, not control. Simply put, in today’s increasingly networked industry, A&D companies need to become more adept at exerting influence without having direct control. Growth in influence may place keystone leaders in unfamiliar positions – such as investing in standards development or in a niche’s business, without expecting any type of direct financial return.

DoPreserve differentiation of product portfolio

Focus intently on fi nding next niche

Stay at the leading edge of the industry

Maintain loose connections with keystones

Keep operations “entrepreneurial” size

Do not Assume keystone responsibilities such as standard-setting

Slip into commodity-like behavior where they end up competing with keystones

Drift into the industry mainstream

Allow themselves to look like an extension of a keystone and lose their own distinctiveness

Outgrow your ability to innovate regularly and quickly

Niche companies


So, what do your behaviors suggest about your role in the A&D ecosystem? Here are some questions to help you uncover dominator tendencies in your own operations:

• Which do you require more often from your suppliers: that they meet industry standards (where they exist) or that they adhere to your company standards?

• Does the complexity and length of time it takes to negotiate new customer and supplier partnerships impact your bottom line?

• How much emphasis is placed on sharing risk, costs and rewards throughout your value net, and is there a real or perceived imbalance of risks?

• Are you driven to consider acquiring niche players based on their ability to innovate swiftly?

• Does the investment community pressure you about buying companies that are for sale, even when you believe those firms would do better on their own?

• How variable is your cost structure? Instead of “owning” every aspect of the value chain (and bearing the associated fixed costs), where can you rely on others so that your costs vary with actual use?

• Have you virtualized as much activity as possible, making it easier for others in the ecosystem to assume responsibility for particular functions?

• How often are your growth strategies constrained by what you can do (or think you can do) on your own?

• Does your company culture predominantly engender dominance or influence?

• How do other companies both inside and outside your business ecosystem perceive you?

Do Create tools and building blocks that enable everyone to innovate

Set high performance standards, then help everyone meet them

Standardize and simplify communication and data exchange across A&D ecosystem

Do not Insist that niche fi rms use their proprietary platforms

Compensate for internal ineffi ciency by demanding a higher standard from others

Burden niche companies with sophisticated, but unaffordable, collaboration tools

Keystone companies

As industry networks evolve and become even more complex, it is essential that companies understand how their networks function, how key firms within those “ecosystems” support or inhibit innovation, how different actions enhance or damage operational productivity and how they can encourage healthy, vibrant environ-ments where new products and new firms emerge on a regular basis. To find out more about the IBM Institute for Business Value Aerospace and Defense study or to discuss ways your company can reprogram itself to help create a healthier A&D ecosystem, please e-mail us at [email protected]. To browse other resources for business executives, visit our Web site:

ibm.com/bcs

About the authorsSandra Kearney is part of the Global A&D Team at the IBM Institute for Business Value. With 22 years of aviation experience, Sandy is focused on providing A&D executives with insights they can use to build stronger, more effective companies. Sandy can be contacted at [email protected].

Dr. Hagen Wenzek leads the Global A&D and Electronics Teams at the IBM Institute for Business Value. Hagen is active in both academic and business research projects, helping spark new and innovative business strategies across the A&D industry. Hagen can be contacted at [email protected].

ContributorsAlberto Castano-Pardo, Consultant, IBM Business Consulting Services

Daniel Graf, Consultant, IBM Business Consulting Services

Ionel Grecescu, Architect, IBM Product Life Cycle Management Solutions

Keshav Gupta, Consultant, IBM Business Consulting Services

Leanne Viera, Global A&D Industry Solutions Leader, IBM Business Consulting Services

About IBM Business Consulting ServicesWith consultants and professional staff in more than 160 countries globally, IBM Business Consulting Services is the world’s largest consulting services organization. IBM Business Consulting Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues and the ability to design, build and run those solutions in a way that delivers bottom-line business value.


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29th Annual FAA Aviation Forecast Conference. AirlineForecasts LLC, March 2004. http://apo.faa.gov/Conference/2004/Panel2/FAA%20presentation%20update% 20vaughn%20cordle.ppt

3 PriceWaterhouseCoopers. “Entertainment and Media Outlook: 2003-2007.” May 2003. http://www.pwc.com/pl/eng/ins-sol/publ/2003/tice_eeo_america.pdf

4 Weisman, Jonathan. “War Funds Dwindling, GAO Warns: Pentagon Needs Billion More This Year in Iraq, Afghanistan.” Washington Post. July 22, 2004.

5 International Lease Finance Company Web site. “Introduction.” http://www.ilfc.com/history.htm

6 International Lease Finance Company Web site. “Worldwide Customers.” http://www.ilfc.com/customersAll.htm

7 “Aircraft fleet and statistics: Aircraft in Storage by Airlines and Lessors.” SpeedNews. July 2004. http://www.speednews.com/lists/lists.shtml#storage

8 IBM Institute for Business Value analysis.9 “Govt Pays Out $1M For No-Sale of Fighter Jets.” New Zealand Press Association.

September 2, 2004.10 Carney-Talley, Sandra. “AIA Will Focus on Creating Workforce Opportunities in

Election Year 2004.” AIA Update. September 2003.11 Commission on the Future of the U.S. Aerospace Industry. “Final Report of

the Commission on the Future of the United States Aerospace Industry.” November 18, 2002. http://ita.doc.gov/td/aerospace/aerospacecommission/aerospacecommission.htm.

12 National Science Board. “Science & Engineering Indicators 1998.” Arlington, VA: National Science Foundation, 1998. http://www.nsf.gov/sbe/srs/seind98

13 Commission on the Future of the U.S. Aerospace Industry. “Final Report of the Commission on the Future of the United States Aerospace Industry.” November 18, 2002. http://ita.doc.gov/td/aerospace/aerospacecommission/aerospacecommission.htm

14 Ibid.15 The Boeing Company. “7E7: Interactive Supplier Map.” http://

www.newairplane.com/en-US/FunStuff/Multimedia/SupplierMap.htm


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16 IBM Institute for Business Value analysis.17 IBM Global A&D Transformation Study. IBM Institute for Business Value.

August, 2004. 18 Wynne, Michael. Presentation at Credit Suisse First Boston/Aviation Week

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22 de Melo, Jaime. “Notes on the Boeing-Airbus Rivalry.” INSEAD. October 25, 2000, http://www.unige.ch/ses/ecopo/demelo/Commerce/Lectures/Boair.pdf

23 Howe II, Harold. “The Glories of the Nine Day Week.” World Future Society Social Innovation Forum. http://www.wfs.org/howe.htm

24 Gothlich, Stephan E. “From Loosely Coupled Systems to Collaborative Business Ecosystems.” Paper No. 573, University of Kiel, May 2003. http://www .bwl.uni-kiel.de/grad-kolleg/de/kollegiaten/goethlich/Business%20Ecosystems%-204b%201,5Z.pdf

25 Gothlich, Stephan E. and Dr. Hagen R. Wenzek. “Underlying principles of business ecosystems.” June 29, 2004. http://www.wiwi.uni-muenster.de/~06/igt/papers/Workshop02/Abstracts/Hr_S_Goethlich_H_Wenzek/Goethlich,%20Wenzek_Underlying%20Principles%20of%20Business% 20Ecosystems.pdf

26 Iansiti, Marco. “The Keystone Advantage: What the New Dynamics of Business Ecosystems Mean for Strategy, Innovation, and Sustainability.” Boston: Harvard Business School Press, 2004.

27 IBM Global A&D Transformation Study. IBM Institute for Business Value. July, 2004.28 Companies included in analysis: BAE Systems, Boeing, Dassault Aviation,

EADS, Embraer, Finmeccanica, General Dynamics, Goodrich, Honeywell, L-3, Lockheed Martin, Northrop Grummon, Raytheon, Rockwell Collins, Smiths Group, SNECMA, UTC.

Reprogramming Aerospace and Defense, 2004.

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