Avionics News February 2012 - 44

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ECONOMIC RECOVERY

Paula Derks said in a press release when the results were announced. Given the economic downturn’s duration and depth, it’s no surprise a majority of survey respondents believe economic conditions are negatively impacting their business. The 2011 AEA survey found 5 percent of respondents expect a decrease in business during the near term, compared to 15 percent in 2009 and 8 percent in 2010. Also, business increases in the current economy are associated with manufacturers releasing innovative new products – thereby stimulating dormant demand – enhanced strategic marketing efforts among members and constant activity in the used aircraft market. The good news in 2011 was relative. While the majority of repair stations still believe economic conditions are negatively impacting their business, the numbers dropped from 79 percent in 2010 to 70 percent in 2011. Meanwhile, 49 percent of those responding to the survey said they expect their business to increase this year; 46 percent expected flat results. “The growth outlook we had in 2010 has tempered some in 2011, but members remain positive that new products and new markets – along with aircraft transaction activity – will drive growth into 2012,” Derks said. And, what about aircraft transaction activity, specifically used aircraft? The General Aviation Manufacturers Association annually examines sales of both new and used aircraft. Its 2010 Statistical Databook & Industry Outlook, the most recent available, notes the “used business jet inventory in December 2010” of 14.8 percent of the active fleet was 1.5 percentage points lower than a year earlier, but was “still above the historical average.” Similarthough-better results were recorded within the turboprop fleet in 2010, according to the association. Meanwhile, GAMA’s Outlook noted “average asking prices for both business jets and turboprops remained depressed during 2010, and the average time to sell was up for both segments.” While we’re at it, here’s another dispiriting observation from GAMA: “In years past, the piston market has reacted positively to an improving economy ahead of the other two sectors (jets and turboprops). It is too early to determine if this will hold true for the current economic downturn, but the piston segment continued to suffer in 2010.” The association tallied worldwide shipments of new piston aircraft at 889 units in 2010, a drop of 7.7 percent from 963 units in 2009.
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Recalibrating, Realigning and Innovating That’s where we have been and where we are today. Where are we going? How long will it take to get there? The short answers are no one knows. The longer answers involve what many consider to be an ongoing, large-scale economic realignment, featuring national economies and fundamental changes in demand. How one responds to the coming realignments will dictate how and when one’s own economy recovers. Cowen put it another way, “When it comes to understanding our macroeconomic predicament, we often seem to be missing the point.” The point, according to Cowen, is the pace of innovation has slowed. The so-called “low-hanging” fruit of innovation generating economic growth have all been picked, and businesses are being forced to expend more effort and investment for similar results. An excellent and timely example of Cowen’s low-hanging fruit theory would be China’s recent and rapid economic expansion, which can be viewed as based primarily on adopting Western ideas, technologies and products, and manufacturing them more inexpensively than their originators. Eventually, of course, the Chinese “miracle” also will stagnate as the flow of innovative products and technologies lending themselves to low-cost manufacturing slows to a trickle, but that doesn’t address immediate economic problems. Thus, sustainable activity is one key to economic recovery on a micro level, and Cowen’s yearning for additional innovation is another. So, how can business develop sustainable innovations allowing it to prosper and grow, even as demand for its services remains flat and developing new products and technologies is beyond its capabilities? Put another way, how can an avionics business leverage its understanding of the large-scale economic changes into small-scale profitability? Waiting for a large-scale economic upturn certainly is one answer to these questions. How long you will need to wait and what demand there will be for your goods and services at that time are huge unknowns. But, instead of waiting for something that may never return – what we have been told and come to accept as “normal” – and putting faith in a long and growing series of failed and broken solutions, institutions and policies, one could reinvent his or her business and accept the new economics as the new norm. Business writer, consultant and Forbes magazine columnist Steve Denning has coined a phrase for what he believes are the changes business people must implement in these economic times: radical management. After distilling others’ writings, Denning synthesized five principles he believes are critical to modern management, which can be summarized as:
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Avionics News February 2012

Table of Contents for the Digital Edition of Avionics News February 2012