TOP 100: BAE shakes off uncertainty with focus on the future

In uncertain times, BAE Systems created its own certainty by cutting costs, adopting a shared services model and keeping a focus on where its customers future needs are.

BAE Systems looked at the tough times of 2013 and saw an opportunity to rebalance, reinvest and look to the future.

“Everyone will say this, but the uncertainty that swirled around the defense budget really created a problem with business planning,” said Doug Belair, senior vice president of strategy and planning at BAE, the No. 20 company on the 2014 Top 100 with $1.4 billion in prime contracts in fiscal 2013.

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“There was the biggest figure I’ve ever seen in the category of ‘bid submitted, not yet awarded’ – customers just weren’t sure where funds would be allocated, or if they would be allocated,” he said.

Amid the turmoil, some contractors pulled out all the stops to scramble for awards. “Everything is being protested now,” Belair said. “It’s getting quite litigious.”

How did BAE respond?

“We’ve built all of that into the business flow,” Belair said. “We’ve built in these delays as a reflection of reality.”

BAE pursued cost-cutting measure, adopted a shared services model and worked to consolidate facilities both within and across organizations. “In the absence of certainty,” Belair said, “we built our own certainty.”

His prediction for the near future isn’t bright – “I don’t see (the delays and tight budgets) changing all that soon” – but Belair was far from strictly pessimistic.

The issue, Belair maintained, is predicting which missions customers will protect going forward.

“It’s bigger than the pivot to the Pacific,” Belair argued. “It’s about power projection, reassuring allies, ensuring access to the global commons of cyberspace and shipping lanes.”

As part of positioning for the future, BAE picked up General Dynamics veteran Jerry Demuro in January as its new CEO, replacing Linda Hudson, who retired.

“Jerry is very much the right leader,” Belair said. “He’s got a lot of operational savvy – he can get us properly sized and shaped for the future.”

And that’s the linchpin of BAE’s strategy: staying future-focused.

“We’re asking ourselves, ‘What does BAE systems look like in 2017, and how do we get on the front edge of that?’”

What does BAE look like in 2017, indeed?

“I think we’re growing in 2017,” Belair said. “We’ll be robust in the electronic warfare space, strong in the intelligence space, strong in combat vehicles, and we’ll be a much more international company.”

In 2009, roughly 10 percent of BAE North America’s contracts were international, but in 2017, Belair predicted, that figure would be closer to 20 percent.

Belair cited contract wins serving foreign countries, including South Korea and Malaysia, as among BAE’s key wins from last year, while also citing the importance of wins on the homefront, including the $535 million Minuteman III support contract that cemented BAE’s leadership in the nuclear missile space.

At the end of the day, Belair said getting through the industry-wide rough patch will require a combination of grit and vision.

“We have to keep grinding it out on a daily basis,” Belair said, “while we’re also thinking, ‘What’s over the next hill?’”