Avionics appeared with the electronic and IT era. The civil and military avionic industry brings together a wide range of complex systems and electronic equipment that contributes to aircraft piloting, passenger comfort or in the military field, operational missions (rescue, surveillance etc…). Due to the long lifespan of aircrafts and consequently its equipment, support and maintenance services are essential. 

What does it mean to understand and anticipate a market in this type of field? 

Avionics is an integral piece of the aviation industry which represents a major stake for the great historical powers and more recently the BRICS countries. By its structure, this market is intimately linked to geopolitical and international economic developments. 

The evolution of threats and geopolitical crisis, globalization, economic growth and urbanization of society in BRICS countries, the evolution of oil prices and currency variations (euros, US dollars) are all factors to be considered in the evolution of markets and have a significant influence on customer strategies (aircraft manufacturers). 

It is therefore important to understand the objectives and expectations of a very small number of customers, aircraft manufacturers, who are identifiable and spread geographically. These aircraft manufacturers evolve in an ecosystem with many players. 

Firstly, states or countries with multiple roles (end customer, prescriber, financial source, regulator), aeronautical regulatory and certification authorities, then international funding bodies, pilot training organizations, universities and research centers, direct and indirect competition, and finally the end customer. 

End customers can vary in nature: airline companies and their passengers for transport planes, companies and individuals for corporate jets and helicopters, armed forces for military aircraft… Understanding these ecosystems, the actors, their respective roles and weight, interaction between them are all essential elements in anticipating the market, as each individual, will influence at their level, the definition of the aircraft and its onboard equipment. 

The opportunities of new aircraft or retrofits if limited in number and spread out over time. 

Anticipating the market means anticipated these opportunities, often planned in great secrecy by the aircraft manufacturers. 

Large international companies have an avionic purchase process with complex tender, purchasing and decision-making cycles. It is vital to have an in-depth understanding of the customer, their needs and expectations, and their organization, in order to anticipate and influence the tenders. This is based on quality relationships, established over time, at all levels of the company and constitutes a real partnership.  

Based on the duration and complexity of projects, the quality of relations can help limit risks. 

The limitation of risk is even more important due to the very long cycles.  

It is common to work on call for tenders two to three years before the tender is even published, and the response and negotiation phases can take another few years. The project itself contains several phases: development (3 to5 years), production (20 to 30 years), maintenance (10 years). There is sometimes a mid-life retrofit phase also. 

The length of the project cycle allows to quantitively anticipate the market for a 10-to-15 year period. However, it is important to distinguish between total or potential market and the accessible market for a given company. 

While it is relatively easy to calculate the total fleet or production forecast for aircrafts for 10 to 15 years, it is essential to identify the portion accessible to a system operator. This depends on several internal and external factors, which must be assessed in addition to production forecasts for “acquired” aircrafts including: 

• type of system and equipment required – some need to be double source, while others are at the discretion of the end customer
• geopolitical situation
• quality of prior and existing relationship with aircraft manufacturer
• applicable regulation
• level of suitability of the solution to anticipated needs from a technical and economic perspective
• competition
• etc…

Anticipation of the avionics markets involves multiple elements: economic, geopolitical, complex network of actors, regulations, technologies. It concerns macro-economic levels as well as an understanding of the end customer. The accessible share of the market is at the cross-roads of macro-economic analysis and project anticipation. 

This can change significantly depending on external factors but also internal such as the ability to win a new tender. This is based not only on the quality of the relationship between the aircraft manufacturer and the system operator, but also on the suitability of the solution with the anticipated need, from a technical and economic standpoint. 

Although some companies sometimes confuse the whole thing under the terms “products and innovation” or may organise the boundaries between their different departments in different ways, it may be useful to distinguish three concepts:

• Technological innovation
• Innovation in products and services
• Management of all products

The product policy essentially concerns the last two points. It relies on the technological resources of R&D or R&T: the latter is responsible for technological innovation, which enables the company to control or at least have access to technologies that can be used in products and services.

Product policy, on the other hand, is responsible for both :

• create innovative products using or not using innovative technologies
• strategically managing all the products in the product portfolio, whether or not they are innovative products. In particular, this involves validating the strategy for each product or product line and making resource trade-offs.
• managing product life cycles at the operational level
• establishing the processes and governance rules applicable to all product-related decisions

Technological and product innovation

There are many examples of this distinction. As a simple illustration, we can take the example of the foil in the maritime world.

• Initially discovered and tested before 1900, and followed by various attempts to apply and improve it in the 20th century, the effect of using a foil (or hydrofoil) is based on an application of Bernoulli’s theorem which states that, at similar altitudes, the pressure of a fluid increases as its speed decreases, and vice versa.
• By the difference in pressure between the lower and upper surface of the foil, this effect makes it possible to generate a vertical thrust on the foil as a function of speed, thus supporting a surface marine craft from a certain speed, thus greatly accelerating the possible speed according to a given available energy (wind or engine) by reducing hydraulic friction.
• This technology was first tested in the laboratory and with prototypes in order to determine the best generic shapes of a foil daggerboard.
• This technology has the potential to be used in many different products for different surface marine craft.
• It can of course be used to design innovative boats.
• The product policy of a boat manufacturer will be both to develop these innovative boats and to manage the whole portfolio of boats offered to the market, whether they are conventional boats or boats using foil technology.

The dimensions of product policy in B2B/B2G high-tech

In addition to governance, product policy in the B2B/B2G high-tech company has two equally important dimensions:

• at the strategic level, it consists of defining and validating the strategy for each product and allocating resources between the different products or product families. This allocation of resources will be carried out, whether these products are innovative or not, on the basis of the potential and prospects of each of them. It will essentially be a matter of allocating resources to develop new products or improve existing ones, and of deciding not to support or to discontinue other products. These decisions will be based on a detailed analysis of the situation and prospects of each product from a strategic, technical, economic and financial point of view.
• At the operational level, it consists of managing the life cycle of each product or each product family. This involves taking decisions step by step throughout the life of the product, from the “product idea” and its technical development to its end of life on the market.

Product policy: differences between B2C and high-tech B2B / B2G

There are significant differences between the consumer world and the professional high-tech world in terms of product policy:

• In technology, strategy and product steering are often shared between strategy, R&D or R&T and marketing. In B2C, it is marketing that almost systematically drives products, notably by allocating products between brands and deciding which new products will benefit from any new technology.
• the technological world gives priority to the technical performance of the product to create value for the customer, whereas the consumer world often gives priority to communication and image
• the technological world mainly manages products, whereas the B2C world frequently manages both a product portfolio and a brand portfolio.
• In the technology world, the internal part of the life cycle, the part that precedes the commercial launch, can be long, expensive, risky and is considered to be just as important, if not more so, than the commercial part of the life cycle, the part that follows the launch of the product on the market.
• The commercial product life cycle is generally much longer in the technology field than in the B2C field (with the exception of a few “great B2C products” that are able to span time and generations).

Why the technological world does not recognise itself

It is thus easy to understand that, with the possible exception of some IT and telecommunication companies, high-tech B2B/B2G companies do not recognise themselves very well in the way mainstream marketing literature deals with the product. For example, they do not recognise themselves in:

• Products whose technical dimension is underestimated compared to the communication and image dimension
• Products driven essentially by marketing
• Issues of innovative technology, cost, risk and duration of technical development are often virtually ignored, even though they are essential to the technology
• A product reduced to a simple variable in the marketing mix
• A “product life cycle” often described as the only business life cycle, i.e. starting after the commercial launch
• A product lifecycle that does not adequately address the issues of product evolution over a long period during the maturity phase
• a life cycle that does not sufficiently link products and services

Volatile markets

Volatile because markets reconfigure or disappear rapidly at the rate of technological substitutions which modify their contours, destroy acquired positions and give rise to a new competitive landscape.

Volatile also because “unforeseen events” (COVID 19 or the war in Ukraine, but also sudden changes in exchange rates, political or social unrest) can suddenly make markets disappear or completely change the rules of the game or the strengths of the various players.

It is therefore a matter of being prepared for constant change and never taking a position for granted.

Uncertain markets

Uncertain because it is very difficult to predict how long a market or technology will last, which technical solution will prevail or which leader will emerge in an embryonic or emerging market.

It is therefore a matter of creating, developing and maintaining positions in the face of constant uncertainty.

Complex markets

Complex because this is very often the nature of technology markets. Complexity in :

• Their structure
• Market players and their influence
• Customer needs
• Their operating methods and their evolution
• Anticipation of possible competitor movements

It is therefore a question of being able to read a complex world and still come up with guidelines that are clear enough to be followed collectively, even within a large or international organisation.

Ambiguous markets

Ambiguous because :

• Technology is abundant
• Markets and customers are sending out “weak signals
• These weak signals are often contradictory
• Opinions about the future differ

And that, in spite of everything, you have to take bets, decide and invest for the medium or long term. It is therefore a question of knowing how to interpret these weak signals and to bet on those which will become fundamental trends.

Operating in VUCA universes

The B2B/B2G high-tech company has a certain habit of operating in such an environment: this stems basically from the need to bet and invest in the medium to long term in an uncertain technological world.

However, the VUCA phenomenon is accelerating everywhere and is increasingly challenging the ability of technology companies to identify what the winning bets are in the long run, to develop scenarios based on assumptions of evolution, as well as to develop the necessary agility to adapt quickly to a given technological or economic scenario.

The ability to operate in a “VUCA universe” is a key capability of the technology company.

• At the operational and field level, it is often a capacity developed over time and through experience.
• At the strategic level, it relies on the experience and quality of decision-makers, who sometimes have to make far-reaching decisions (acquisitions or disposals of activities, company acquisitions, technological or geographical choices) on the basis of their convictions.
• It also relies on “strategic intelligence” or “strategic and marketing intelligence” departments or divisions, which are valuable instruments for shedding light on possible or probable futures and guiding companies’ strategic and marketing decisions.

But beyond the innovative aspect, quality must be irreproachable and this must be done consistently over time because products are often intended to last a long time both on the markets and with customers. The latter will find it very difficult to forgive quality defects because they will cause serious problems in their own operations.

The costs incurred by a customer as a result of a disruption to its operations or business, such as the cost of an oil rig shutdown or a plant shutdown, even if temporary, may be out of all proportion to the price of the failed item.

Can you imagine an airline replacing a computer in an Airbus following a failure and having to ground a plane because the new computer is faulty while its stock is limited? The client companies of course put procedures in place to protect themselves from such serious incidents, but these fictitious examples illustrate, among a thousand other possible examples, the challenge and the importance of quality in the B2B/B2G high-tech markets

Non-quality can undermine many efforts in product or service design. If innovation is an important element of customer decision and preference, quality is a fundamental element of customer satisfaction.

But what exactly are we talking about when we talk about “quality” in the technological world and try to link it to customer satisfaction?

Quality in the B2B/B2G world has at least 3 dimensions:

• Design quality: this is an “engineering” issue that impacts both the “usability” of the product, its “serviceability”, its reliability and often its manufacturing costs
• Manufacturing quality: this ensures that the product meets its specifications and performance. It is essentially an industrial problem of consistency in quality
• Service quality: this is both a question of defining the service with the associated commitments (SLA) and a question of consistency in quality, which often depends on the definition of service processes and the industrialisation of these processes. Depending on the case and the way in which the service is produced and delivered, it will refer either to the training of the men and women in charge of delivering the service or to the performance and reliability of the IT system if the services are delivered remotely in a computerised manner.

It should be noted that in several activities in the high-tech B2B world, certification and inspection bodies are responsible for certifying components or equipment to authorise them to be placed on the market, to remain in service or to check that each of them individually complies. Their intervention is compulsory in activities where a lack of conformity can present major risks. The typical case is of course air transport.

The high-tech B2B/B2GC markets may be affected at the same time:

• By cycles of different nature
• By “unforeseen events”

Cycles and events will often require changes to both product strategies and decisions during the product life cycle management phases.

Different types of cycles

The cycles are essentially of three types:

• Economic cycles, which mean that an activity or markets will grow for a period of up to a few years, then decline and so on. Some activities are even almost structurally cyclical, such as air transport or construction.
• Technological cycles, where one technology will replace another, either gradually or suddenly. To illustrate, these effects are similar to those that led to the substitution of physical media by digital music or plasma screens by OLED screens in the general public. In technology, however, these substitutions are much more numerous and sometimes much faster
• Adoption cycles, which mean that the adoption of a new technology or product will either be rapid or slow, either “linear” or along a more erratic curve with phases of rapid growth and other phases of levelling off or decline, before the new technology or product is adopted by the market and finds its cruising speed.

Unforeseen events

Unforeseen events” can be of various kinds and are sometimes sudden and brutal. They will impact countries or economic zones, particularly affecting companies or international groups and sometimes forcing them to reorient themselves rapidly according to their consequences: political and social unrest, sudden changes in legislation or regulations, variations in exchange rates, natural disasters, etc. COVID 19 and the war in Ukraine have unfortunately given us an example of the devastating effects that these unforeseen events can have.

Unforeseen events do not only affect B2B/B2G high-tech companies of course, but their relationships with governments, financial stakes, technological or commercial partnerships, ongoing long-term contracts or local industrial locations can make reorientations particularly difficult or demanding.

Core capabilities

The presence of both cycles and unforeseen events in the technology business will require two fundamental capabilities from high-tech B2B/B2G companies:

• A capacity for anticipation to be able to anticipate cycles and their consequences. This will be the subject of hypotheses and possible scenarios. This will not always be easy and will often require making bets on economic or technological futures or on the adoption of a technology or product by the markets.
• A reaction and reorientation capacity, which should be prepared within the framework of the scenarios, allowing for an adapted reaction as quickly as possible in all the dimensions necessary for a scenario or a type of event. In all cases, this capacity will test the company’s decision-making, internal coordination and agility in the face of the unexpected.

Of course, all cases are possible and will sometimes be encountered:

• A company specialising solely in customised high-tech products (a test bench or a specific simulator, for example) or, on the contrary, in standard products (an oscilloscope, a medical device): it will then have a typically “product” strategy and marketing
• A company specialising solely in customised projects (large buildings, large structures, site security).
• a company specialising in standard or quasi-standard projects (urban mini-tunnels): it will then have a strategy and marketing that are in fact more “product” oriented

However, in technology, a large number of companies will simultaneously practice standard and customised by combining them in different ways.

Tailor-made products and projects based on standards

There will be companies offering “tailor-made products based on standard” and “tailor-made projects” based on shared products.

They must therefore succeed in combining different logics, which is neither without challenges nor without difficulties

Product companies will seek to benefit from both the cost-cutting effects of standardisation and the margins afforded by customisation:

• They will practice terminal differentiation of their products while pooling as much as possible the common upstream elements between products
• They will develop platforms. To illustrate, even if the businesses are different, this logic is similar to that of a car manufacturer which creates its models by pooling elements in a platform.

The project companies will endeavour to offer “tailor-made” projects in the sense of being adapted as closely as possible to the client’s needs, while pooling as many elements as possible between different projects. These shared elements may be components but also studies or processes.

A double challenge

Project companies that produce products at the same time will face a double challenge.

The first challenge will be of the same type as before: creating platforms and sharing components or building blocks

The second challenge will be to ensure coexistence:

• A project-based approach, which is often historical in the company and which will most often militate in favour of developing tailor-made products, specific to a given project, as close as possible to the customer’s request
• A product logic, which on the contrary will militate for developing products for multi-project markets and not for a single project.

Product logic will depend in part on the leeway given by the customer in the project specification. It will be difficult to apply with customers who will be very detailed in their specifications. It will be a matter of negotiation not to jeopardise the future market for products that have been developed specifically for a particular project.

This product/project coexistence is often delicate internally because if all the products are used in the context of projects, it is the projects that generate margins, whereas the products require development investments

The imperative of product logic

It should be noted that the “product logic” has become more and more indispensable in project companies because it is often impossible to win a project because the price is too high if you have to develop products specifically.

Clients are less and less willing, with some exceptions, to pay for complete customisation. In order to reduce costs, it is therefore necessary to standardise and pool project “bricks”, whether they are process elements, components or “building blocks”. It is a question of making “partially or totally customised products based on standards”.

In the case of the high-tech B2B/B2G company, we can see that the difficulty is that this leads to a particular tension between two opposing logics that must be reconciled: the logic of standardisation/mutualisation and the logic of customisation. Although customisation has long been the historical logic of the company, it is generally the logic that dominates the debates because it brings resources and profitability. Nevertheless, it will be necessary to make room for and bring to life the product logic of standardisation/mutualisation, which is a vital issue for winning projects.

How will these objectives be achieved in practice?

• Through product engineering work, which will be responsible for creating platforms and pooling components and building blocks as much as possible
• By the creation, in parallel with the project centre, of a product centre responsible for defending the product logic against the project logic, as well as the definition of an arbitration body between these two centres.

Governance in the high-tech company B2B / B2G

Some aspects of governance in the high-tech B2B / B2G company are directly relevant to the product markets competition aspects.

Product/market/competition governance concerns aspects such as

• General business ethics
• Risk management, compliance and liability, including product liability
• Processes and decision making

Without getting into the many debates about the moral responsibility of the companies to which it belongs, let us say that general business ethics formulate how a company believes it should behave towards different partners.

This can range from rules of behaviour towards customers and competitors to those towards society in general in the context of CSR/O (corporate social responsibility), for example to avoid the risk of harming people with certain technologies. Similar to those relating to bioethics, the current debates, for example, on the risks of AI (artificial intelligence) in general or applied in particular to robotics with autonomous decision-making are characteristic of these issues.

Moreover, the activities of hi-tech B2B/B2G companies are increasingly subject to regulatory and financing conditions, and raise particular issues of risk management, compliance and liability in the context of CSR, especially with regard to products.

For example, ensuring that technological products are ethical and non-hazardous during their manufacture, that they are as environmentally friendly as possible during and after use, and that they are more energy efficient, are among the concerns that will be taken into account and influence product design and development activities.

Processes and decision-making define both how a number of essential activities are to be conducted (the process standard applicable to all) and who has the right to decide what. For example, in the area of products/markets/competition, how the analysis of a market, the technical and economic feasibility of a product should be conducted and presented before authorising the commitment of development expenditure, a commercial product launch or the capture of a project. At the same time as the process to be followed with compulsory steps, the level of hierarchical responsibility associated with decisions will be defined. For example, who has the right to do so will be defined:

• Validate the commitment or cessation of development expenditure
• Decide whether or not to respond to a call for tenders
• To launch or stop a product on the market.

This aspect of clearly defining decision-making responsibilities is extremely important in order to avoid both a proliferation of unauthorised initiatives and decisions being taken “by default” without anyone taking responsibility for them.

Some of the classics in technology, both damaging and costly, are:

• Anarchic technical developments without overall coherence
• commercial launches that are too early or too late
• Decisions that turn out to have been wrong without it being possible to identify the cause
• Or product catalogues that contain too many products that are useless for the business simply because no one is in charge of deciding whether to stop selling them.