More than a year into the pandemic, much is still up in the proverbial air for the aerospace and defense industry.

Passenger expectations and defense budget priorities are shifting. Space is becoming a bourgeoning frontier. Airlines are restructuring fleets. New competitors are emerging.

This inflection point makes winning the race for digital operations more urgent than ever.

Digital operations impact every part of the aerospace and defense business. And the time to act is now.

Aerospace and defense companies have made tremendous strides in the race to mature their digital operations.

For most aerospace and defense companies’ digital operations maturity is somewhere between the pilot stage, with initial digital capabilities implemented in a single site, and the scale-up of those capabilities to multiple sites. (See Figure 1)

As aviation picks back up unevenly across the globe, companies will need to be flexible in meeting diverse and ever-changing needs.

If aerospace and defense companies remain captive to current enterprise technologies—siloed in on-premise data centers—they may not have the agility or decision-making ability required to capture this potential new growth.

Aerospace and defense companies have a unique opportunity to simultaneously grow their core business and plant flags in new segments such as urban air mobility and space-based services.

Well-funded challengers—whether privately held or supported by the billions being funneled into special purpose acquisition companies (SPACs)—will likely fill the void if companies don’t act now.

Aerospace and defense companies sell to demanding customers and have some of the most complex operations and supply chains in the world. Building a cohesive digital strategy, let alone executing on it, is easier said than done.

Companies need to focus on three key strategies to accelerate their transformations and win the digital operations race.

1. Leadership:

Digital operations can’t be scaled if leaders don’t embrace and embed them. If leaders are not fluent in using data-driven analysis to make decisions, investments in digital operations and a more agile operating model will likely fail to live up to their potential.

2. Governance:

Success depends not only on driving decision-making from the top, but also pairing decision-making with the proper oversight of the quality and depth of data that informs it.

3. Skills:

Digital needs to be part of company culture to win this race. There is increased focus on preparing workers for success in the digital future.

What does winning this race mean for the bottom line? Aerospace and defense companies have placed significant digital bets, investing 2.4% of their sales in digital operations and expecting to increase that to 3.8% in the next five years.

They also anticipate seeing operating income impact from their digital plays increase from 2.4% to 3.9% in the same timeframe.

However, outcomes are not only about financial gains. Executives told us that sustainability, workforce engagement, ability to innovate, organizational agility and better customer experience had come to the forefront as success metrics for digital investments. As the industry taxis for takeoff, significant gains across all these fronts can be made with judicious investment in leadership, data governance and digital skills.