01 srp 2022
The New Era of Aerospace and Defence, Part Two: Europe and the Middle East
In part two of our aerospace and defence industry analysis, our global experts take a deep dive into these two regions and explain how developments are impacting leadership acquisition.
The war in Ukraine has fundamentally changed the strategic priorities of every European country, disrupting the aerospace and defence industry as we know it. But while it’s easy to see this theatre as the sole catalyst of change, the industry in the Middle East has its own unique challenges and is undergoing its own transformations.
If you haven’t read part one, covering the accelerated trends already emerging in the market in the US and what this means for means leadership acquisition within the industry, you can read it here.
Europe and the Middle East
For the past thirty years, Europe’s defence policy has been one of deterrence. Now the ‘evil is at the door’, this has taken a complete U-turn. Aerospace and defence spending has shot up, budgets have been re-aligned to the military, and the industry has dramatically sped up R&D and the delivery of equipment and services to meet the new demand.
Yet the transformation has been far from seamless. Within EU countries, cooperation between industry and MoD agencies has historically been overly bureaucratic, fraught with constant design changes, and delays. For many products, the time from concept to delivery can be as much as 25 years. In the current environment, it is generally agreed by all parties involved, that this is far too long.
At the same time, aerospace and defence has not been the most attractive industry to work for. Particularly in Germany, where historical events still run deep, working in defence has been akin to working for tobacco companies; there’s the perception that working in defence may hinder future career prospects outside of the industry. It’s led to a severe shortage of engineers – a job role that has always been in demand even just to replace retiring generations.
Now, aerospace and defence companies have the challenge of not only replacing this skillset but also filling additional engineering posts, created as a result of the current climate.
As we’re seeing with the U.S. this environment has led to a booming defence start-up sector. Many of these newer companies are developing specialised, high-quality products that fill specific niches in shorter time frames. Due to the very immediate needs of MoD agencies, we’re seeing military departments turn to start-ups to meet their specific needs, whether it’s armaments, equipment, or technology. New procurement relationships between government and industry are forming as a result, particularly in cyber security, electronic warfare, and sensor technology.
Where board requirements of new leaders are concerned, these trends are having a significant impact.
Established players are looking for CEOs who have an understanding of complex technical systems, an ability to sell these to military departments, and fresh ideas for speeding up R&D and streamlining the supply chain.
Combined with technical acumen, they also need people skills. Attracting new generations of talent (particularly engineers) means building a sense of purpose within a company, clearly defining the mission and aligning this with societal values. Traditional companies in the industry are in direct competition for talent with start-ups, who are perceived to be more innovative and less bureaucratic. CEOs need to be able to develop a compelling story around the company to compete with these emerging organisations.
That’s not to say start-ups in the industry don’t have their own leadership challenges. Most are evolving fast and have limited senior management capability to handle the demands of a rapidly expanding organisation. Senior function roles are therefore in high demand, particularly for individuals who have a blend of experience in both high-growth and aerospace and defence companies. At the same time, these companies are looking for leaders who have relationships with MoDs.
They want individuals who understand military procurement processes and who can open doors to specific departments and agencies.
Advisory boards are increasing as a result; for the defence start-up community, appointing individuals with proven relationships with governments, who have a depth of industry knowledge, and work on a consultative basis at board level is a very attractive prospect.
The Middle East
Aerospace and defence in the Middle East is very much a case of business as usual with a renewed appetite for procurement given the recovery of the oil price, but also with an eye to the war in Ukraine. The direction of travel has not really changed significantly; government defence procurement policy across the region has clear localisation goals, both for industry and supply chain. The Saudi military, for example, want at least 50% of their supply chain to be localised by 2030, rather than relying on North American or European companies. The aim for several GCC governments is to build their own capabilities and thus become self-sufficient, achieving this through lasting industry partnerships with major multi-national businesses, joint ventures, and the transfer of technologies and skills.
Aside from the slowdown in defence spending in the last few years due to a fluctuating oil price, the only influence to this has been the style of warfare being fought in Ukraine. For the past twenty years, training and doctrine for Western forces, and to an extent for the Middle East defence end-user, has focused on counter terrorism, force protection, and countering IED and bomb threats. But the war in Ukraine has shown that UAVs are also of critical importance. With this in mind, militaries in the region are increasingly focused on developing drone and counter drone technologies.
With governments looking to localise the defence industry, it should come as no surprise that the localisation of talent is also a major trend.
Military industries now require specific skillsets – individuals who know how to build strategic alliances and co-ventures between business and government.
Leaders will need experience in managing hugely complex critical infrastructure programmes with multi-national teams. Furthermore, they need to bring excellence in programme delivery, combined with an understanding of the nuances of doing business in the Middle East. Gone are the days of expats coming in with no experience of dealing with local militaries and end-users. The local leadership talent pool has matured and at least two thirds of leaders are now GGC locals or non-local Arab speakers from within the GCC. The final third is international talent that fills specific skills gaps, often coming from the States, Canada or Central Europe.
Within this broader trend of localisation, we’re seeing specific demands for leadership in cyber warfare, asymmetric warfare, space warfare, secure communications and data collection for target surveillance. Oil production sites and other prominent giga-projects also play a role in the types of skillsets asked for by local military industries. Refineries are regularly targeted, increasingly by drone strikes, and the protection of such critical infrastructure plays into the direction taken by the local defence industry.
For certain types of leaders, the opportunities in the region are numerous.
Those who have experience of Middle Eastern industry, who have a deep understanding of the region’s operational requirements, and who are adept at streamlining programme capabilities in co-developed projects, are now highly sought after. As a global organisation with regional partners, we have both the far-reaching network and ‘on-the-ground’ knowledge to find these leaders and help support governments and industry with their localisation goals.
To discuss the requirements of leadership acquisition and your own organisational needs, please get in touch with the authors or your local Odgers Berndtson contact.
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