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Final Report - Acare

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THE NEED<br />

for innovation<br />

II.<br />

challenges that need to be addressed and the<br />

mechanisms for addressing them appear to be<br />

lacking, or at least struggling.<br />

One area of innovation was an exception to<br />

this general slowing down of change. It was<br />

both possible and spectacularly successful –<br />

deregulation and the rise of the Low Cost<br />

Carriers. This was in no sense a technologically<br />

driven innovation but one driven by a different<br />

vision of the business and the market. The<br />

equipment was virtually unaltered but the<br />

consequences that flowed from a vision of<br />

a basic, no frills, pay-for-what-you-want<br />

airline operation were immense. The vision<br />

immediately appealed straight to the pocket<br />

books of the leisure traveller and they<br />

continue to book tickets on LCC in droves.<br />

In general, however, most change in the<br />

aviation world has been evolutionary rather<br />

than fundamental. This trend towards slowing<br />

system innovation has also been influenced<br />

by two other factors; regulation and<br />

defence shifts. Regulation (including safety<br />

regulation) will always be something of a<br />

brake on innovation. Changes in international<br />

regulation must be considered carefully and<br />

must recognise, although not necessarily be<br />

servants of, the business situation and the<br />

effect of change upon operators. Changes<br />

in regulation have to be technologically<br />

possible and may need to be applied over a<br />

period. This pattern is not usually conducive<br />

to the introduction of innovative ideas which,<br />

in the first consideration, must deal with<br />

the regulations then in force. Changing the<br />

regulations to accommodate an innovative<br />

concept will inevitably take time, create<br />

uncertainty of outcome and will slow the pace<br />

of innovation.<br />

Changes in the defence field have been<br />

profound in their effect on civil aviation.<br />

Defence aerospace manufacturers have<br />

commonly also been civil aerospace providers.<br />

There has been a natural and beneficial<br />

flow of technology application experience<br />

that has mainly been from defence to civil<br />

applications, especially around periods of<br />

wartime emergency. With the international<br />

changes to defence spending, both in quantum<br />

and focus, this steady flow of technology<br />

that crept, decade by decade, from defence<br />

into civil use is now nowhere near its former<br />

level of importance. Aerospace has become<br />

an importer of technology from a former<br />

position of being a great engine of technology<br />

development in the economy. This makes the<br />

exploration of novel concepts involving new<br />

technologies even less likely to occur.<br />

What this leaves is a pattern of air transport<br />

that seems a modernised version of the<br />

model that operated in the 1950’s. There is no<br />

fundamental difference between operations<br />

today and those of 50 and 60 years ago even<br />

though the challenges are new. They demand<br />

change. There is no benefit in change for the<br />

sake of change but it appears very difficult even<br />

to consider different models of innovation at<br />

the higher level i.e. above the changes that<br />

are still being made in components, materials,<br />

aircraft etc. Yet, by fragmenting innovation<br />

into separate sector responses, we are at the<br />

same time limiting its potential. Considering<br />

any of the major new challenges to aviation<br />

immediately highlights the need for cross sector<br />

collaboration in innovation.<br />

Without doubt, major innovative steps carry<br />

great risk. Individual items of investment<br />

continue to escalate in cost. Investment in their<br />

successors continues over many years, the cost<br />

of financing this and the slow rate of return<br />

on the investment places even the most certain<br />

of investments at some risk if anything should<br />

go wrong. The development programme for a<br />

major new airliner is estimated by the aviation<br />

press to be over €10B.<br />

As cross-sector solutions feature in facing the<br />

new challenges the position is even riskier.<br />

Technical, business and political risks increase<br />

sharply. Potential differences of alignment<br />

between the parties are clearly much greater<br />

and carry substantial risks for the project.<br />

For larger innovative concepts the risks are<br />

even further extended. The investment<br />

period is longer and allows other changes in<br />

the operating context to occur and perhaps<br />

to cause major changes in the strategic<br />

assessment of the groups concerned. These<br />

changes may not be confined to their own<br />

area of operations but may be global external<br />

changes over which they have no control<br />

but which have serious impact on their<br />

forecasts. In extreme cases the viability of the<br />

project may be prejudiced even though large<br />

investments may already have been made.<br />

3. The Pressing Need<br />

For all of these reasons, significant innovation<br />

involving multiple sectors is now effectively<br />

impossible to fund from within the firms or<br />

enterprises themselves. The risks of failure<br />

15

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