Pressured by declining investment budgets and urgent wartime needs, the U.S. Department of Defense (DoD) has adopted a new acquisition philosophy that favors “affordable” weapons systems that can be deployed quickly to meet near-term warfighting requirements. The steady decrease in investment spending will continue for the foreseeable future, as will the Pentagon’s increasing desire for affordable systems and solutions. Nontraditional defense companies are already making inroads with low-cost alternatives that are supplanting the exquisite systems produced by traditional defense firms.
To better compete in this new environment, traditional companies should look beyond simple cost-cutting measures to a more comprehensive “next-generation affordability” approach that transforms cost structures and refocuses capabilities on the new market requirements. The basic components of this approach are the following:
- Market requirements analysis: Offer products and solutions aimed at the specific affordability requirements of each market segment.
- Capabilities-driven strategy: Focus on aligning operational and organizational resources to build market differentiating capabilities.
- Industry cost comparisons: Leverage industry best practices to identify and target specific cost categories.
Next-generation affordability helps companies strengthen capabilities as well as address structural costs. Implementation requires careful planning, persistence, and strong leadership to stay the course, but adopting this approach will enable traditional defense companies to reduce costs intelligently, hone capabilities valued by customers, and reassert their right to win in an evolving defense market.