The triumph of the Apollo landings is well known: a presidential pledge ignites a nation’s inventive and industrial spirit. A seemingly impossible goal is achieved … ahead of schedule.

Forty years later, some in the A&D sector worry that the US might not be up to doing it again.

There are many reasons for their anxiety, including weak project and program execution, poor retention rates of young engineers and managers, and cultural biases that stifle innovation. All are on the list of risks named by a spectrum of A&D insiders at Aviation Week executive and program forums this year.  Participants ranged from senior executives of prime contractors and their suppliers to government research directors and engineers. Pentagon acquisition veterans rubbed shoulders with financial analysts and A&D consultants.

As they reflected on the Apollo achievements, it was not lost on these leaders that the images of astronauts in the Sea of Tranquility reflected an entirely different era, not just another world. It was a time when government was the supplier of risk capital to the A&D sector for innovation. There is no current equivalent of the Cold War-era imperative that fueled taxpayers’ willingness to fund research on such a broad front.

Which is not to say that we lack innovation today. Look no further than unmanned aerial vehicles for a model. Their development was sparked as much by smaller businesses willing to take chances as by the aerospace establishment. Their use by US forces in Iraq and Afghanistan is made possible, in part, by spillover from the voracious bandwidth, power and data exchange rate demands of civil comsat programs that found their way to government spacecraft. Ideas are flourishing about how a wider community of users might be served by pilotless aircraft.

If UAVs had come from Silicon Valley, they would be called a “disruptive technology.” A&D loves the idea that disruptive technologies fuel new thinking. But transforming the disruptive technology that Silicon Valley understands to A&D is a challenge. For one thing, traditional disruptive technology rests on the premise, “Build it and they will come.” Steve Jobs did not consult with cell phone users while designing the iPhone.

The A&D sector has a conservative customer base; including customers in new product planning is not only a good idea, it is usually required by the contract.

Product comparisons are unfair, of course, because gadgets produced in Silicon Valley do not have to answer to life-and-death mission requirements. Still, comparisons of the speed and flexibility that is the hallmark of one industry and elusive to another are illustrative. The iPhone arose as a concept in 2000, first appeared in December 2006 and has passed the 33 million mark in sales. The F-35 contract was let in 2001, first flight was in December 2006 and first deliveries are now set for 2012, maybe.

The iPhone and similar devices arose so fast that they changed the way we live. In that same period, the industry began exploring in-flight connectivity. A lot of money was spent assuming that built-in displays would be the norm. Now, service providers assume passengers will carry their own displays onboard.

At the most recent Aviation Week forum, the need for innovation was on everyone’s lips. So was a closely related idea – flexible response. It was especially evident in discussions about countering threats posed in asymmetric warfare. Most attendees expected flexible response to carry equal weight in future Defense Dept. development programs as the more traditional, long-term weapons strategies.

To meet this new challenge, A&D leaders recognize that their business models will need to change. They will need enough running room to allow for experimentation while still taking budget realities into account. Most likely, small and carefully nurtured teams will be required. And, they will have to stay closely connected with their customer. The UAV pioneers were constantly keeping their potential customers informed.

The Defense Dept.’s need for flexible-response program development comes as the nation faces continued deficits, economic upheavals and a growing requirement to fund entitlement programs.

But the Apollo era arose as the nation struggled through the social upheavals of the civil rights era and the costs of Vietnam. We have tackled multiple big issues before.

However, as it tries to introduce innovative new programs there is a harsh reality the A&D sector needs to face, says long-time analyst Wolfgang Demisch. Despite A&D’s technical strengths, the Obama Administration’s stimulus spending is focused elsewhere. The big issue now is growth in personnel accounts. Demisch estimates their price tag at about $200,000 per head and it comes “forcibly at the expense of procurement and R&D accounts that feed the industry.”

An analysis by Booz & Co. of trends in US military operations and maintenance (O&M), research, development, testing and evaluation (RDT&E) and personnel (Milpers) spending concludes much the same thing. It shows a precipitous falloff in the Pentagon’s investment budget as it struggles to balance demand for more personnel needs, such as medical research, child care and headcounts. After reaching $249 billion in fiscal 2008, RDT&E investment is projected to drop $44 billion in fiscal 2010. As Pentagon planners shift funds to support projected average annual O&M growth of 3.5% and milpers increases of 4%, investment accounts are slated to take a 40% hit through fiscal 2013.

With the constraints on development funding that those numbers imply, A&D executives are right to worry about any kinks in program performance. Besides concern about what they do to individual programs, they must also evaluate them in terms of spillover to the rest of the industry. The industry is far more consolidated than it was in the Apollo era. Primes and suppliers are far more likely to be involved in commercial aviation, space and defense programs simultaneously than they were back then.

PRTM Vice President Mike Hackerson and PMG senior analyst Steven Coates have been studying how the acquisition environment has been changing in a series of Supplier Management Council studies with the Aerospace Industries Assn. Some of their findings are sobering for suppliers as they weigh the risks of becoming involved in innovative development programs.

One example is payment schedules.  The median payment period for production materials for AIA members currently is 43 days. But industry best practices are pushing that number out to a net 90 days, more than doubling the cash lag.

For many suppliers, especially in the third and fourth tiers, that change could well drive them out of business. One reason is that they have relied on carry-over capital from small banks, many of which have been acquired by larger banks because of the recession. The larger institutions have far less appetite to fund risky program development efforts, says Hackerson.

Meanwhile, prime contractors have decided not to put all their eggs in one basket. They are spreading their risk by bringing in suppliers as design-and-development partners.

In the old cost-plus programming world, suppliers were paid when they met milestones. But in the new life-cycle management approach, suppliers are not paid until the customers sends a check to the prime. The trickle down from this, should a project fall behind schedule, is disastrous for suppliers, especially the small guys. In many cases, prime contractors are having to prop up them up. In some cases, such as Boeing’s acquisition of Vought Aircraft Industries’ 787 factory, the prime is having to buy out a key supplier. Ironically, the prime finds that the eggs are now back in his basket.

In this environment, it becomes even riskier to innovate. The defense acquisition reforms of 2009 require that contractors bear the cost of prototyping new weapons systems. If suppliers are supporting a multitude of new programs, their cash exposure can be enormous. Who knows how many of the systems they make parts or components for will succeed?

We are a long way from the Apollo era.