Aviation Week and Deloitte Consulting
Web Survey

From top to bottom aerospace companies are feeling pressure to "get on the Web," but there is confusion and conflicting objectives among companies, their customers and suppliers, according to an industry survey by Aviation Week & Space Technology and Deloitte Consulting.

Perhaps most alarming from a business strategy point of view, the survey indicates that companies are largely being driven to establish e-business sites out of fear that they will be left behind by their competitors rather than because their customers are asking for Internet connections.

Deloitte's analysts noted an inability by most respondents to articulate the competitive advantage of aligning within exchanges, although they all think they must do so. This may result from the fear of competition pushing the industry toward B2B activities before it can develop a basic understanding of the strategy and technology behind an exchange.

"Businesses are experimenting as they design and implement and they're prepared to live with that," said Deloitte Consulting analyst Ian Busby, who leads its European B2B team. "I think that's quite exciting. I wouldn't regard that as a negative."

The worldwide survey of senior e-business managers was conducted in late May and early June. It shows that North American manufacturers are most advanced in developing and executing an e-business strategy. Europe, which has been focused more on consolidation for the past year, ranks second and the Asia-Pacific region third. Manufacturers in South America, Africa and the Middle East did not respond.

Even though the three major manufacturing regions have different starting points, respondents in all three said they will be doing about 25% of their business over the Internet in one year. But they are skeptical about how fast the rest of the industry is moving. A majority concludes that it will take others in the industry more than three years to enter the digital economy. A quarter of all companies said they will be fully Internet ready in less than a year.

Most companies ranked their customers as barely ready to take advantage of their e-business initiatives. The manufacturers said they and their suppliers, not other manufacturers or the independent dot.coms, are the best business groups around which to build an Internet portal.

The top e-business strategic objective for being on the Web is to try to reduce the direct cost of manufacturing (a consensus 2.4 on a 0-3 scale where 3 is "high"), followed closely by the need to reduce indirect spending costs (2.3), meaning items such as stationery and lubricating oil.

Manufacturers' top hope on the revenue side of the ledger is that the Internet will help them sell their existing products to their existing customers (2.4 on the 0-3 scale), followed closely by a desire to increase sales to existing customers for new products (2.3 on the 0-3 scale).

Serving their customers better is judged the top non-revenue pursuit, but the consensus ranked it only a "medium" 2.3 on the 0-3 scale. Maintaining an innovative leadership position ranked a mere 1.9.

Those conclusions are quite different from the strategic drive of e-commerce companies in industries such as consumer electronics, where fulfilling customer needs and expanding market share by selling new products on the Internet are top goals.

The ranking that aerospace manufacturers gave to measures they will use to gauge the success of their exchanges is another indication of how much more companies are focusing on their supply chain than their customers. The top rank (4.4 on a scale of 0-5) goes to improving their ability to attract and retain suppliers, followed by an ability to attract and retain new buyers (4.2) and offering value added services (4.2).

North American companies said they will rely on knowledge from outside their companies to develop their Internet strategy and retain their employees. But in the Asia-Pacific region and Europe, companies favor developing that strategy internally.

Fifty percent of the responses came from companies or their business units with $5 billion or less in revenue. One third had revenues of $20 billion or more and the remainder fell in between.

The business mix of North American respondents was about equal between defense and commercial customers, while European firms said their customers were mainly commercial. The Asia-Pacific region's tilt was toward defense.

One measure of the growing influence of the Internet was the view of a majority of respondents that their CEOs have a good understanding of the Internet, e-business trends and strategies. But two-thirds or more of all respondents said the CEO played only a medium role in developing the company's e-business strategy. CEO involvement was lowest in the Asia-Pacific region.

Companies ranked the long-term impact of e-business on their companies consistently around the world. Three categories emerged:

• Reduced production cycle times from development to delivery;
• Lower costs, especially in procurement, product development and inventory; and
• Increased standardization, especially among military customers.

A consensus also emerged on the industry's critical e-business issues over the next 12-months:

• Putting a strategy and business plan in place.
• Allocating investment money and resources.
• Executing the strategy with speed.
• Attaining adoption by customers and competitors.
• Changing internal culture.

Story is reprinted from the latest Aviation Week & Space Technology, available here at Farnborough 2000