A Journey of Change in the Aircraft Industry

Publication contents

This section briefly describes the publications purpose and content.

The publication is intended to convey a comprehensive picture of Saab's strategic work with capability development and to show how Saab realises this in practice.

The focus of the publication is on describing and exemplifying how Saab has developed successful working procedures and consequently been able to dramatically increase its organisational capabilities.

A Journey of Change in the Aircraft Industry provides a comprehensive, all-encompassing description of Saab's journey of change. It is comprised of an executive summary and five chapters with in-depth descriptions of selected parts of the journey. The various chapters address how benefits are provided to customers and how low product life-cycle costs are achieved.

An account is provided of the capacity to adapt to new requirements, which may be related to political or market factors, as well as to the constant development of techniques and technology. The factors for success are also described that have guided development of Saab's organisational capabilities. Experiences are described from working procedures in international environments that have given Saab very effective and unique development skills.

The publication was written by Martin Hjelm, Master of Science (MSc) in Industrial Engineering and Management, who has worked at Saab for 33 years. He also spent four years at another military defence company during the 1970s, Volvo Flygmotor. Martin Hjelm was previously in charge of development of operational capability for the Saab Aeronautics business area and served as the strategy administrator for the business area’s future organisational capabilities, just to mention a few of the posts he has held at Saab.

Professor Staffan Brege from Linköping University closely collaborated in producing the publication.

The publication was commissioned by Deputy CEO Lennart Sindahl, Saab AB.

A number of people have contributed in producing the publication and have provided the author with material. The publication also incorporates internal and external interviews, and research of internal and external material. Contributors and interviewees are listed at the end of this part of the publication.

Supporting factors vs complex requirements

This section summarises the supporting factors for Saab’s journey of change. A brief description is provided here of the external and internal requirements that Saab has had to deal with over the years. Most important in this context are the international security factors that have affected Saab, as well as the decisions by the Swedish State over the years.

Also addressed are the market requirements through the decades and how these have been implemented in industrial capacity.

A Journey of Change in the Aircraft Industry is the story of how Saab has been affected by global changes through the decades and how Saab has developed its organisational capabilities. The publication describes Saab's ability to adapt to new rules of the game and new requirements during the past 15 years. A description is also provided of how Saab with limited resources, has been able to develop a unique operational capability, making Saab world leading in effective working procedures.

Saab has been able to meet these new requirements by developing new working procedures that make work more efficient and that have resulted in products with unique functions and properties at a low life-cycle cost. Saab's unique knowledge is in the working procedures and in the tradition of network-based collaboration between employees that characterise the organisation.

Through structured and sustainable change management, Saab has retained its position as one of the world-leading companies in military aircraft systems.

Most important in meeting the new requirements is Saab's ability to adapt to change in the global market and to the subsequent evolving rules of the game. By working systematically, Saab has gained a solid understanding of the political aspects, new customer requirements, needs for changes in working procedures, and not the least, how unique products are developed with low life-cycle costs.

The capacity to innovate has enabled advances in both industrial collaboration and for actual product development to be achieved in an entirely new way. The figure below is a compilation of the factors that have affected Saab’s operations. It also shows the most important qualities necessary for operating as an effective enterprise in the defence industry. Also shown are the other topics addressed in the publication. The various capabilities are explained on the following pages.

The figure provides a general summary of stakeholders and capabilities, as well as of the main theme of the publication.

International security

International security has dramatically changed since the end of the Cold War. This has entailed that the perception of the threats against Sweden has changed several times. The period after the Cold War was initially characterised by lessened tension in the world. The need for new orders of defence materiel seemed unnecessary.

This was followed by a new phase, an awakening, when it was realised that a new type of defence capability was needed. This could be viewed as a geopolitical orientation, calling for participation in international security-related missions under the auspices of the UN or EU, as well as close collaboration with NATO. Additionally, international collaboration was required with other countries and their defence industries.

The Six Nation Pact in Europe was formed and it resulted both in research projects of interest as well as the production of various types of technology demonstrators. Sweden and Saab participated in the Neuron project, for instance, which was a successful example of this type of collaboration. European governments encouraged collaboration. This subsided however, and new collaborative constellations between countries and companies were formed.

The security policy changes have influenced the Swedish State’s actions, which in turn have influenced government agencies and the Swedish military’s mandate to place orders for new products. The financial situation both in Sweden and abroad has also influenced new product orders and the opportunity to develop new systems and products.

The international security situation was considerably heightened after Russia's actions in Georgia and most recently in Ukraine.

State

The Swedish State, in the form of political parties, the government, Parliament and government agencies, has maintained the strength of Swedish defence for several decades. The State has also been favourable to there being a strong Swedish defence industry.

This has enabled Sweden as a nation to be self-sufficient to some extent regarding the most important capabilities that a strong Swedish defence must have. The defence industry has also contributed to developing expertise that has benefited all aspects of Swedish industrial development. This was the situation until the end of the Cold War. The State thereafter changed the orientation of the Swedish military and went from defence against invasion to an orientation with operational defence and participation in international missions.

This has resulted in the Swedish defence industry, and consequently Saab, developing a substantial capacity to adapt in order to deal with decreasing orders for new development.

The State and the national procurement agencies naturally want products with good capabilities. This means product properties and capabilities that provide the desired operational capacity to conduct military missions of varying character.

Moreover, the State and the national procurement agencies have set more stringent requirements. New, more advanced products are to be developed at significantly lower cost than before, at the same time as the technical content and demands on operational capacity have been dramatically increased.

The State has strongly reversed its position regarding the needs of the Swedish Armed Forces since the implementation of Russia's new ideology within the region. This has now resulted in orders for the Gripen E for the Swedish Armed Forces. A new generation of the Gripen system will be able to meet the needs of the Swedish military for quite some time.

Market

Saab has developed and refined a number of new working procedures to increase its ability to conduct operations more efficiently and to be able to develop more advanced products based on market demands that have dramatically changed over the years. Market and customer demands have been developed based on several new international security assessments made by politicians and government agencies in recent years. The geopolitical situation has strongly affected how politicians have assessed defence needs over time. There are also many other challenges and requirements facing a company that operates in the defence industry.

International collaboration is necessary for keeping defence materiel costs at a reasonable level. At various points in time, the market has pushed for consolidation in the defence industry. The nationalistic interests however, have been very strong and it is difficult to attain more extensive, international and long-term collaboration.

It can instead be deducted that the strongest positions are held by the players in the market with the best political support and those that have the best and most effective products.

Effective business acumen is necessary in international business, with cooperation built on carefully weighed collaborative forms. This involves industrial collaboration, product deliveries that meet customers’ expectations, skills transfer to customer organisations, and at times, academic collaboration in various forms of joint research.

Industry

Industrial capacity has become essential for all large new development projects in the world, and this also applies to Saab. Working with various industrial partners in international collaboration is a prerequisite for success in both developing new products as well as winning new business.

Saab must constantly refine its industrial expertise. This entails continuous staff training and development. For development operations in particular, all engineers are on a skills ladder and are constantly honing their talents in one or more fields of technology. Working closely with partners, suppliers and academics is a prerequisite for attaining effective working procedures and being able to develop and produce products in a cost effective manner.

Close industrial collaboration with partners and suppliers also opens the way to developing new concepts and products with entirely new industrial capabilities, as well as new business opportunities. This has required participation in a number of international development projects to obtain the requisite experience for this type of collaboration. Cultural differences are important to respect and understand, at the same time as it is also important to retain the strong internal culture that enables work to be carried out in a non-bureaucratic and effective manner.

And this requires solid organisational capabilities. In this context, this refers to the way in which work is conducted with processes, methods and various types of tools for being able to develop and produce advanced products that can be continuously enhanced. This also entails that the working procedures, methods and tools must be simpler and more effective, and at the same time that all this must be possible to develop over time. This necessitates a prognostic and aggressive approach by senior management.

A Model

To briefly summarise A Journey of Change in the Aircraft Industry, it can be useful to describe it in a simple model.

The figure shows the primary components of organisational capabilities, with dependencies and the resulting benefits.

Connection between working procedures and product development

a) Modern working procedures and methods

Over the years, Saab has developed and implemented new and modern working procedures and methods to streamline operations throughout its organisation ①. Implementation of model-based working procedures has enabled substantial streamlining and rationalisation of the organisation. Modern working procedures and methods have resulted in an effective organisation ⑤.

b )Unique products

Saab has developed many unique products over the year’s ②. Fighter aircraft in particular have been the primary products. The current primary product is the Gripen and it has been produced in various versions. This has placed major demands on expertise and engineering capabilities, with a great many innovations that have resulted in products with unique properties ⑥. Broad expertise, but above all, specialist expertise within all the 14 fields of technology that constitute the foundation for the capabilities needed to develop modern and effective products. Unique product-level integration capabilities are a Saab hallmark.

c) Improvements through model-based working procedures

Modern model-based working procedures ① enable customers, the development organisation and subcontractors to efficiently collaborate throughout the development of a product. By using modern model-based working procedures and methods, lead times can be shortened for product development and many tasks can be eliminated. This has been an important prerequisite for developing unique products ③.

An example of simplification is that many simulations can be performed of various properties and of overall operational capacity in simulators instead of conducting a wide range of test flights. Operational capacity can be tested with a number of different scenarios for a complete fighter aircraft system in a relatively simple manner.

d) Demands on value streams provide simplified product development

To be able to develop new and unique products it is necessary to develop engineering capabilities and utilise experience, as well as to continually work with skills development ②. But this is not enough. New working procedures and methods must also be continually developed to achieve efficiency in operations throughout the value stream ④. Moreover, all engineering must be conducted based on a life-cycle perspective. This applies both with regard to system development environments and the products themselves.

e) Collaboration improves working procedures and products

To attain the desired properties and operational capacities that a customer needs, it is important that work is performed in close collaboration with the customer and the suppliers, which are the chief participants in product refinement. Moving forward, work will be carried out entirely with model-based concepts. In early conceptual phases, it can then be determined how a product will perform in various combat scenarios.

Though close collaboration between customers, Saab and suppliers, information can be exchanged throughout the development process in a very efficient manner. This contributes to being better able to predict both costs and capabilities ⑦. This creates innovative and proactive expertise exchange. In this way information and knowledge feedback is made available both to improve working procedures ① and to provide new capabilities and properties to products ②.

In the future, there will be virtual, model-based collaboration between customers, Saab and suppliers, and with this, a very effective working procedure will be gained for predicting final results as early as the initial phase of a development project ⑧.

Trends

Within the next 5–10 years, the focus will be on working more with multi-disciplinary analysis. This will provide engineering teams with a multitude of different solutions, enabling them to create many alternative operative scenarios for customers to choose among. This approach is based on a model-based working procedure in which models can be used to create different types of products that match one or more operative scenarios.

Even in the future however, it will be necessary analyse and process the information gathered from open source intelligence. This not only concerns pure technology monitoring, but also monitoring of other areas that influence how people work together to solve problems.

Product development strategy

Based on the conditions above, Saab has developed its own strategy for product development. Instead of offering mid-life upgrades, Saab gives customers the opportunity to choose continuous upgrades. In this way an aircraft can be constantly developed in accordance with the operative requirements. The basis for Saab's strategy is that the aircraft system's capabilities shall be assured in a cost effective manner for countering evolving threats and satisfying new requirements in the coming decades.

In the figure, Gripen's various development stages are referred to as editions. These can vary somewhat in scope, but are always based on consistent development.

Saab's fundamental capabilities

The circumstances and factors that have been essential for Saab and that have affected Saab through four different phases can be summarised with three fundamental capabilities – adaptability, system thinking and innovation capability. The following description provides a brief résumé and a basis for understanding the content of the publication.

The figure shows correlation between Saab's fundamental capabilities and the areas that have a decisive effect on Saab's operations.

Saab has developed the adaptability to deal with all the various changes that have occurred over a period of several years. Sweden has modified its defence orientation, from defence against invasion to operational defence with participation in international peacekeeping missions. Saab thus needed to adapt to the Swedish Defence Materiel Administration’s new situation and needs.

This adaptability has influenced Saab's capabilities for finding the right business model in dealing with the following:

  1. International security

Developments in international security, and in particular factors that more directly affect Sweden.

  1. Operational capacity and customer benefits

By adapting Saab’s portfolio and satisfying the changed needs for operational capacity as defined by the Swedish Defence Materiel Administration, customer benefits could be increased and needs satisfied.

Saab has the necessary system thinking resources for designing unique products, as well as for developing and using modern working procedures. This system thinking also entails that Saab can produce system solutions that give customers the requisite operational capacity when they use Saab's products.

System thinking is necessary for determining needs and requirements per the following:

  1. Operational capacity and customer benefits

By analysing and understanding the customer's needs and requirements, operational capacity can be jointly developed with the Swedish Defence Materiel Administration. This permits customer benefits to be increased, and needs and requirements to be satisfied.

  1. Unique products and modern working procedures

By producing various technology demonstrators for testing and developing pioneering systems and products, paired with the establishment of effective and modern working procedures, Saab has been able to streamline system development. This has entailed a radical decrease in cost development in the production of advanced fighter aircraft systems.

Saab has developed an innovation capability for producing model-based working procedures both for system engineering (MBSE) as well as structure development and production (MBD). This has resulted in rational and cost-effective working procedures. Through effective working procedures, innovation capability is also stimulated during product development. The Gripen system is a result of this approach. Saab has also shown considerable innovation capability in producing technology demonstrators.

Innovation capability is necessary for determining needs and requirements per the following:

  1. Unique products and modern working procedures

By producing various technology demonstrators for testing and developing pioneering systems and products, paired with the establishment of effective and modern working procedures, Saab has been able to streamline system development. This has entailed that cost development for producing advanced fighter aircraft systems could be radically reduced.

  1. New business model through partnerships

Through close collaboration with strategic suppliers, a number of partnerships have been established between Saab and its suppliers for integrating product development. Moreover, these partnerships have generated new strategic business collaboration arrangements. In this way industrial capabilities have been further developed. Collaboration has also been established with customers through the transfer of knowledge and experience.

Technological development for advanced military aircraft has been enormous since the 1950s. Back then, it was all about the aircraft. But in today's market, the focus is on fully integrated, network-based, defence systems.

 

In the figure, technological development is illustrated for the various aircraft generations with regard to structural design, auxiliary power systems and material technology.

 

In the figure, technological development is illustrated for the various aircraft generations with regard to system development, computer science development, sensor technology, communications, etc.

 

Development of trends and factors

The following is a very brief description of the trends and factors that have affected Sweden and Saab since the 1980s.

PHASE 1 – 1980s

In the 1980s during the Cold War, Saab focused on development of the Gripen A/B to meet Swedish needs. The critical decisions at this time were as follows:

International security

  • Sweden was to have independent defence capabilities.
  • Sweden would not ally itself with other countries, but would remain neutral.

There was consensus in the Swedish Parliament on this orientation for many years.

Industrial policy orientation

  • Saab was to invest in civil aircraft development (which later resulted in the Saab 340/2000).
  • The State wanted to see an initiative to strengthen industrial capabilities in Sweden.

There was a change of governments in Sweden during the 1980s and this had direct consequences for the stability of defence decisions. This also had a major impact on Saab and was decisive for the company’s future.

State demands

  • The State demanded more flexibility on the part of the aircraft industry to create new jobs and increase industrial capabilities in the civil market.
  • The State wanted to survey the usefulness of the acquired defence materiel. “Earn value” was to be measured, which in this case entailed an orientation to life-cycle costs and operational capacity.

The State demanded dramatically decreased costs if the Gripen system was to be developed.

Market and system selection

  • Maintainability with low life-cycle costs that utilises the compulsory military service system.
  • The highway landing strip system for flexibility and maximum protection with focus on operational capacity.

The Gripen system was an adaptation to the Swedish need for a multi-role aircraft for effectively meeting all the various threats.

Capability development

The focus was on developing systems for requirement break-down of life-cycle costs, and developing systems and working procedures that could contribute to radically reduce operational and maintenance costs for the customer in comparison to previous aircraft generations.

PHASE 2 – 1990s

After the Cold War in the 1990s, Saab's focus was on development of the Gripen C/D for Swedish needs and with an orientation to export. The critical factors at this time were as follows:

International security

  • Sweden began to change orientation from defence against invasion to operational defence.
  • Sweden would collaborate with other nations within the framework of the UN.

Requirements were defined for joint operations with other countries’ air combat forces.

Industrial policy orientation

  • Saab was to collaborate with other manufacturers of fighter aircraft. This led to partnership with BAE Systems.
  • Saab developed a new version of the Gripen for export – the Gripen C/D.

Through agreements with BAE Systems, Saab could both gain experience for export initiatives and collaborate in system development.

State demands

  • Saab's programme for export of the Gripen would assure development capabilities and share development costs with several countries. The first export contract was signed with South Africa.
  • Saab was to work with other entities, both in Sweden and abroad, including research institutes and other industrial companies.

There were demands on reducing Swedish costs for the Gripen system, and this was to be accomplished through exports. This would permit the Swedish state to share development costs with several countries.

Market and system selection

  • The Swedish Defence Materiel Administration (FMV) and the Swedish Armed Forces had requirements for increased operational capacity.
  • Requirements for unmanned aerial vehicles that could interoperate with the Gripen system. This started the development of flying technology demonstrators, such as the Shark and Filur.

To execute export programmes, Saab and BAE Systems were needed to develop the Gripen system for full NATO interoperability.

Capability development

The focus was on producing new processes for streamlining the entire organisation’s working procedures. Streamlining and rationalisation of IT operations were initiated with consolidation of various types of data processing facilities. In IT operations, a number of initiatives were also started on platform-independent, system development environments.

PHASE 3 – 2000s

During the 2000s, after Sweden became a member of the EU, Saab’s focus was on export programmes for the Gripen C/D, and the company worked with technology demonstrators for the next generation’s Gripen system in the form of the Gripen Demo. The strategic orientation at this time was as follows:

International security

  • Sweden was fully focused on participation in international peacekeeping missions conducted by the EU and UN. Participation in international peacekeeping missions was within the framework of Partnership for Peace.
  • The government and Parliament assessed that the threat against Sweden was negligible and there was subsequently a major downscaling of the Swedish Armed Forces with substantial consequences for the country’s defence capabilities.

There was no political agenda regarding larger future defence investments.

Industrial policy orientation

  • Saab committed to participation in both Swedish and international research projects to increase its industrial capabilities.
  • A strategically oriented initiative was also conducted to streamline internal organisational capabilities for the purpose of becoming world leading in effective working procedures.

Development was directed towards being able to collaborate with other European countries’ aircraft industries.

State demands

  • The State was focused on retaining the Gripen C/D system and only conducting minor development for the future.
  • The State supported Saab's efforts in product development within the framework of civil security.

The State wanted to interact with other countries within the framework of larger alliances in peacekeeping and aid missions.

Market and system selection

  • The customer Swedish Defence Materiel Administration (FMV) and the Swedish Armed Forces were focused on being able to participate in international missions and joint exercises with NATO.
  • Saab developed several strategically important technology demonstrators. In the international development programme Neuron, Saab participated in producing an unmanned military aerial vehicle, UMAV. A technology demonstrator in the form of the Gripen Demo was produced to show the Gripen's future development potential to the market.

Armed forces increasingly outsource entire training, operational and support activities. This development also increases demands training, support and maintenance.

Capability development

The most important initiatives were oriented to model-based working procedures such as MBD and MBSE. Ground-breaking rationalisation programmes were conducted throughout the organisation with the focus on streamlining and rationalisation for the purpose of reducing all costs to permanently lower levels. The focus was on initiatives to lower costs in budgets, on balance sheets, in contracts and for projects.

PHASE 4 – 2010s

During the 2010s, after Russian military operations in Georgia and Ukraine, the Swedish security situation has significantly worsened. Saab's focus is on delivering the Gripen E to Sweden and export activities for the Gripen NG. Strategic development can be assessed as follows:

International security

  • Sweden again began focusing on protection of Swedish territory, but at the same time, was also prepared to participate in international peacekeeping missions within the framework of the EU’s and FN’s mandates.
  • The government and Parliament have assessed that there is an increased threat of more conflict's in Sweden's immediate area. The State has now focused on increased investments in military aviation and in a modernised submarine fleet.

The various conflicts in the world are producing a new security situation. Escalating terrorist activities are creating new security problems. Conflicts in Sweden's immediate area, such as in Georgia in 2008 and in Ukraine in 2014, have influenced political developments in the Swedish Parliament.

Industrial policy orientation

  • Saab is investing in partnerships in future export programmes. Collaboration with Brazil is an example of this.
  • Partnerships are being formed with certain strategic suppliers for joint investments in product development and for increased business collaboration.

Partnerships with various countries’ defence industries is decisive for exports. Beyond this, collaboration in research and education are also necessary to succeed.

State demands

  • The State has studied a number of alternative development levels for the Gripen system in order to keep the system at the leading edge until 2040.
  • The State is now investing in increased operational capacity for military fighter aircraft. The order for the Gripen E, which is the next generation’s fighter aircraft system, is a confirmation of this.

The prerequisite for an order of a new generation of the Gripen system was that development costs could be shared with at least one other nation.

Market and system selection

  • The Swedish Defence Materiel Administration and the Swedish Armed Forces conducted an evaluation project to analyse the requirements for the future operational capabilities that needed to be developed.
  • Saab is conducting capability enhancement work for the future fighter aircraft systems that could be developed in partnerships with other states and fighter aircraft manufacturers.

The market is characterised by an exceedingly high level of competition where the financial recovery from the downturn in the global economy is still a major factor.

Capability development

The focus is on long-term strategic capacity development that supports both present deliveries but that also allows for development of future products. Planning is conducted on the operative level via budgets, on the tactical level via roadmaps specifying needs for the coming 5 years and strategically from a 10–20-year perspective.

The developments achieved by Saab on its journey of change have resulted in the capability to develop an advanced military fighter aircraft in the Gripen at a significantly lower cost than for the aircraft systems from previous generations.

 

The figure illustrates cost developments for the various generations of military fighter aircraft systems that Saab has developed.

Saab’s core capabilities

The publication provides a general description of how security policy changes have affected Saab’s operations and placed major demands on adaptability, system thinking and innovation capability. These areas represent a constant theme in the story of Saab's journey.

Adaptability is necessary for being able to deal with changes to customer requirements, market needs, and financial realities as well as for developing and adopting new modern working procedures. Adaptability is necessary not the least for being able to have an attractive portfolio of products and services, and a robust business model. Adaptability is also required in the development of products that provide international security for different countries and that are in agreement with political levels of ambition and financial frameworks.

System thinking is necessary for understanding customer and market needs and requirements, as well as how the “State” (government agencies and politicians) intends to utilise the defence-related products. System thinking is required to create working procedures based on customer requirements for operational capabilities and to develop usable products. System thinking is also necessary in developing products with an architecture and the flexibility to provide good operative properties and product robustness at low life-cycle costs.

Innovation capability is required in developing the effective system solutions that customers want, which is necessary from the business standpoint. Innovation capability is a prerequisite for developing smart working procedures with effective methods and tools. Innovation capability is necessary for understanding how technologies and techniques can be developed and be utilised in producing advanced products that are modular and feasible to develop.

Saab has succeeded in maintaining development capabilities within all 14 of the fields of technology necessary for manufacturing military fighter aircraft despite limited defence orders in recent years. This has required long-term and sustainable change management that has both altered internal working procedures at Saab and created added value in interaction with partners and suppliers.

It is through Saab’s overall abilities to adapt and innovative, and the company’s broad system thinking in understanding customers’ needs and requirements, that Saab has been able to develop and produce entire weapon systems of world class.

The publication also provides examples of the importance of role expertise, collaborative capabilities, understanding and acceptance of cultural differences in attaining optimal business practices, as well as collaboration in all areas and on all levels.

Författarens reflektioner