US aerospace manufacturer’s new chief executive aims for sharper, customer-focused business structure
After six months as president and chief executive of Honeywell Aerospace, Rob Gillette is confident of one thing: the company is too complicated. So the US avionics, engines and systems manufacturer is ditching its decades-old product-based structure in favour of customer-focused business units.
Equally significantly, the previously site-specific engineering, marketing and supply-chain operations are being integrated into company-wide functional organisations to increase efficiency – and to allow investment to be prioritised across Honeywell’s broad portfolio of products and services.
“Over the last five to six months I’ve seen a good cut of our customers of all types – whether they build, fly or fix things. I have also been to half of our sites,” says Gillette. “They all say the same thing: we like your technology, we like what you do, but we’d like you to be a heck of a lot easier to deal with.”
Despite repeated reorganisations since the parent companies of Bendix and Garrett merged in 1983 and the resulting AlliedSignal merged with Honeywell in 1999, the company had retained a “product-centric” business structure built around sites that were profit centres. “They never really focused on a strategy solely for aerospace,” Gillette says.
This month, Honeywell’s aerospace business will be reshaped into three “customer-facing” sectors – air transport and regional, business and general aviation, and defence and space – each providing equipment and services to their specific market segments, and replacing the product-based Aircraft Landing Systems, Aviation Electronics Services and Engines, Systems and Services business units.
The need to restructure has been accepted within Honeywell, says Gillette, despite the inevitable job losses. “People recognise the need for the company to change. They know the market conditions are more challenging,” he says. “We simply have to work with each other, and with the customer.” Gillette expects to see positive results quickly – “before the end of the year, and probably sooner”.
Honeywell has struggled to regain momentum lost working its abortive merger with General Electric, which was blocked by the European Commission in 2001. Since then, the company has faced mounting competition. Its avionics business is under pressure from manufacturers like Garmin offering new-generation integrated systems at much lower prices. Its propulsion business has lost ground as Pratt & Whitney Canada has launched a succession of new engines. And its systems business has lost market share on key programmes like the Boeing 787 to Goodrich and Hamilton Sundstrand.
Gillette took over the $9.8 billion-a-year aerospace business in January, having previously led Honeywell’s $4.3 billion automotive-related Transportation Systems sector. But, like the architects of the AlliedSignal/Honeywell merger Larry Bossidy and David Cote, his successor as Honeywell’s chief executive, as well as many other change-oriented managers in the aerospace industry, Gillette previously worked for General Electric.
The concept behind the restructuring is that “one person will represent the customer to Honeywell Aerospace, for all products”, says Gillette. As a key part of the plan, the customer-facing business units are backed by cross-company functional operations. These include supply-chain management, which has been site-centric, with individual businesses buying locally, but needs to become more efficient.
On the engineering side, Gillette says, “individual businesses are replicating skills and capabilities. We have to put the right people in the right places to drive speed to market, to be more efficient.” The company is creating centres of excellence, and plans to bring engineers together from different disciplines. “We have a lot of experience on the electronics side, and on the mechanical side. These are starting to merge in the market, and we can bring them together to do electro-mechanical integration,” he says.
The new engineering function is also intended to enable more cross-fertilisation between company-funded civil and government-funded military product development. “There is a lot of paid-for engineering on the defence and space side. We need make sure we have good ties to apply that capability to the commercial side,” Gillette says.
The new marketing organisation, meanwhile, will combine key product managers with the company’s assessment and analytical arms. “There will be one set of information they all work from, instead of multiple sets. They will have the analytical data research and technology knowledge to work horizontally across the business segments to prioritise investments for the future,” says Gillette.
Gillette’s focus is on creating a more efficient organisation that can do more with the resources available. “If we execute on programmes in a more efficient way, we can increase our capacity to do more, and invest in other things we would like to do,” he says.
GRAHAM WARWICK/WASHINGTON DC
Source: Flight International