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02 November 2018

Winning business in Defence: Shifting perspectives

By Jesse Dukes

The process for winning business is complex regardless of industry and Defence is certainly no exception to the rule, more than likely it is the extreme of the rule. At present Defence organisations are struggling to achieve the levels of growth experienced historically yet profit goals remain ambitious. There are numerous contributing factors but likely the primary driver is continuing pressure in traditional markets on Defence spending. But opportunities still exist, particularly in Asia, the Middle East and South America where spending on defence modernisation is creating some of the largest deals since the 1990’s.

This shift in the market away from traditional growth centres means that the Defence sector needs to think differently about winning business. Perspectives need to change and best practices need to adapt to ensure alignment with the requirements of these new markets. However, enthusiasm for new market opportunity must also be balanced with some pragmatism around capabilities and capacity.

The first and possibly most important point is also perhaps the most obvious - understanding. Understanding should, in this case, be closely linked with perspective. Firstly, Defence businesses must make an honest assessment of entering new markets in pursuit of opportunity from their own unique position and not get caught up in a general industry trend. Although Defence spending is retracting in traditional markets it is still significant, the US still outspends other international markets despite the downward trend. The opportunities must be of a quality which warrants the likely investment, this ‘quality’ doesn’t always have to be profit based, prestige and potential are equally legitimate drivers as long as considered up front of any commitment.

This assessment should not be completed from a single perspective, being able to serve a market and being able to provide value to that market are different things. This is where understanding switches perspective, businesses must assess what constitutes value in these new markets and whether they can truly provide value from the customer point of view. The classic caution is still as valid in Defence as in any other industry, product success and innovation in one market doesn’t always directly translate to new markets. Be it price, requirements, perception of value, there are numerous factors which can hamper the success of previously high performing products or services transferring into new markets and assumptions are dangerous. Understand, adapt and then approach.

This understanding should be deep, understanding market trends is not always enough, identification of close match customers and in-depth understanding of those customers is critical. Proper understanding leading to product, service or commercial model design from this perspective can lead to real competitive advantage for Defence contractors expanding internationally. Indeed that is not to say that this approach only works when expanding internationally. The traditional Defence markets are also experiencing significant shifts and so a fresh, customer perspective driven approach to solution design would likely prove beneficial here too.

Once confident in the understanding of potential returns and the customers perspective of value, the process of actually winning business begins. Of course in Defence as any other industry, price, quality, availability are all key considerations and potential points for competitive advantage. However uniquely in Aerospace and Defence, offsets are increasingly becoming a potential point for competitive differentiation. Some analysts predict the offsets obligation to rise to around $500 billion within 10 years. More than ever, a rounded and comprehensive approach to winning business is absolutely vital. This relates back to the point made about true understanding of value from the customer perspective, but it also introduces another consideration, the increasing requirement for broad-ranging expertise when pursuing new business in the Defence sector.

This creates two challenges for Defence businesses, firstly it introduces a requirement for diverse talent. A challenge in itself, but this is exaggerated if looking to expand into new markets as this talent now has to be sourced internationally and competition for talent in new attractive markets within the Defence sector is increasingly fierce. The second part of this challenge, as the workforce becomes further dispersed is collaboration across teams, departments, geography and across the sector, with partners and customers.

Collaboration within Defence is an ever-increasing trend and has been pitched by many to be a key part of the solution to the pressures on the sector and the broader macro environment within which it operates. A study by KPMG on Defence collaboration in 2016 showed that 87% of staff surveyed were either implementing or planning to implement a collaboration program within the next 12 months (KPMG, Building defence capability: the vital role of collaboration). Closer relationships across the industry can and do provide enormous benefits and indeed in the context of winning business can absolutely provide competitive advantage. Formalised frameworks for collaboration in enterprise level organisations do exist, ISO 11000 provides guidance for businesses looking to implement a robust collaboration policy. However, successful collaboration goes beyond formalised processes or contract negotiations, it is fundamentally about attitude and that is much harder to implement.

The practicalities of working together are also complicated, however technology is solving many of the traditional problems and with increasing commercial pressures meaning that just jumping on a plane is becoming a less appropriate solution, this is good news. The Defence sector still has some way to go before it experiences the efficiency gains and collaborative enhancements new digital technologies are making possible. This becomes more important as working together, internationally and inter-organisationally on new business opportunities becomes more common. Businesses must find ways to smooth out the kinks in the collaboration process that make it all too easy to just ‘do it yourself’ under the false guise of efficiency.

The conclusion that we come to around winning business in Defence has proved surprising. Indeed much of the evidence appears to point towards what would have traditionally been considered ‘soft’ factors as key to success. Attitude and culture shift rather than any aggressive commercial manoeuvring is becoming a truly valid solution. Pursuing broad and deep understanding from multiple perspectives combined with a collaborative and not adversarial approach to solving problems presents opportunities for agile businesses to gain ground. But then perhaps this shouldn’t come as a surprise, these kinds of changes are happening in all other aspects of life outside of business. Of course, let us not pretend that ultimately business decisions aren’t still driven by traditional factors and practicalities but there are clearly opportunities for improvement. There needs to be a response to the increasing pressures to be found in a shift in traditional perspectives of what it takes to win business.

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