by Luis Miguel Ochoa Comments (17)

Strategic Planning at a Defense Contractor: Top Exit Opportunity, or a “Plan B” for Consultants?

Strategic Planning

Say the word “strategy” and you’ll attract management consultants like flies to honey, and for good reason: you really have to like Porter’s Five Forces and a whole lot of PowerPoint to get ahead in both fields.

(Plus, a good share of mining for gold in Saskatchewan… maybe).

Bankers, of course, tend to go into roles such as corporate development and corporate finance once their 2-3 years are up – you still leverage those Excel and M&A skills, but get to leave the 80-100 hour workweeks.

And then there are roles that combine elements of both these options.

One example is strategic planning, where you get to plot and execute expansion strategies for companies, whether they’re M&A-related, organic, or even responding to the competition and developing new marketing tactics.

Our interviewee today is Carl Pascale, who’s worked in the industrials sector at a large defense contractor doing exactly this: strategy and marketing.

If you’re looking to get out of a pure finance role and move into more of a “jack of all trades” position, his story will resonate with you:

Defense Planning: Where War Meets Strategy

Q: Many people in your role have had prior banking or consulting experience.

How did you get first started in this role, and in the defense industry specifically?

A: Early in my career, I joined an industry trade group and became the go-to point of contact for all things data-related. I would field calls from reporters, government officials, and sometimes equity research analysts looking for the ingredients to a great story.

One day one of these callers (who worked in a similar role at a large defense contractor) and I had a good conversation – I not only provided data insight, but I also got to know my clients and those who reached out to me as well.

I didn’t want to be just the “data expert,” but also the right guy to guide a story into actionable intelligence.

So on this day, this contact happened to leave his post and mentioned it to me in passing.

I immediately expressed interest in joining the firm.  My contact was surprised and told me: “I didn’t know you would be interested in something like this.”

I didn’t get the role, but several months later I was recruited to join the strategy team at a well-known defense contractor that you’ve definitely heard of.

There was definitely some luck involved, but it was also due to all the networking I had done and some of the other groups I met through this one contact.

Q: And what interested you in aerospace & defense specifically?

A: I’ve always been interested in aerospace – the technology and how it drives innovation in other sectors.

You see this in how aerospace and defense products often end up in the consumer sector.

Q: You networked your way in by being a sort of “reporter,” but what are the traditional ways of getting into strategy roles at large firms?

A: For large defense contractors (or really, large companies in any industry), you would do some time in a leadership rotational program, and, during the process, reach out and connect with the departments you’re particularly interested in.

Another option is to work in investment banking or management consulting (or even strategy consulting) at a dedicated firm first and then join after 2-3 years. A fair number of my team members have done that.

But there isn’t a “right” way to get here – unlike, say, private equity or hedge funds, we are not looking for super-specific backgrounds and experience.

Strategic Planning: Tops Down and Bottoms Up

Q: So what exactly is strategic planning?

A: From a broad, mile-high perspective… strategic planning means identifying strategic (long-term) priorities that fit with the company’s identity and mission statement, writing a how-to on accomplishing these priorities, and finally guiding the execution of your plan.

That sounds like a lot of jargon, so here’s a concrete example of what it means:

Let’s say that you’re analyzing growth opportunities, and you realize that a very small percentage of the company’s revenue comes from markets outside the US.

You might then research overseas expansion as a growth opportunity, look at many different markets, size them, and figure out which one is best to tackle first: What are the barriers to entry? How much will it cost? What’s the total market opportunity?

Then you would present your findings, win “buy-in,” or agreement, at the company, and get started on executing the plan.

Then, years later, you might come back to that same project and figure out ways to grow the company’s market share or respond to competitive developments, such as lower-priced products or services from start-ups.

It’s similar to what you do in consulting, but with one major difference: you spend a lot more time on the execution / implementation side.

The biggest challenge is to create something that is not easily replicated, which you might do with networked and interlocking elements that support one another (Michael Porter from Harvard Business School is a guru in this area).

Q: Great, I know you’re going to give more examples in a bit so let’s move onto the hierarchy for now. How is your team divided?

A: Most strategy departments are pretty lean; it’s the whole “small firm feel in a large multinational organization” setting.

That said, my team has been 5-6 people at any given time. Here’s what it looks like:

2-3 Levels of Analysts: The front line that gathers and analyzes competitive developments, trends, and, of course, disruptive forces.

You could also write competitor profiles or summaries of potential acquisition opportunities in these roles – sound familiar? Now you see why former bankers end up here…

You also read periodicals, quarterly earnings reports, press releases, and external research reports to do everything above and figure out key trends.

You collaborate with the corporate finance department to get projections on sales, costs, earnings, and so on – you need to know all of those to come up with these “strategic plans” in the first place.

Senior Manager: Combines data analysis with actionable intelligence. In this role, you elevate items to the top of the priority list and communicate in a way that facilitates “buy-in” (when people take your side and vouch for your judgment calls).

The last thing you want is for your recommendation to get shelved and gather dust for all eternity, so building relationships with the team is critical in this role.

Director: In my group, this role screens for international expansion opportunities, evaluates partnerships, and monitors the pulse of the overall sector.

On the business development side of things, the Director leads prospecting and lays the groundwork for developing rapport to convert prospects into clients (read: he spends a lot of time on the phone, in meetings, and at conferences building relationships with everyone in the industry).

Vice President: The Vice President in a strategy department tackles overall strategy, interfaces with other organizations, and leads the evolution of a company’s strategic direction. It’s similar to the Director role, but even higher-level.

Real-Time Strategy: A Different Kind of Pitch Book

Q: Great, thanks for sharing all that.

What does an average day in your life look like?

A: There are 3 main components to the job: evaluating new business opportunities, identifying and pursuing international partnerships, and contributing to the strategic plan. So I’ll talk about each one:

New Business: You’ll want to know who the major players are, what their market shares are like, what products/services they sell, and at what price points.

You need to define your scope carefully, because no defense company competes in every single vertical imaginable (ex: Raytheon-branded thin mints).

The main decision you make here is: “Should we start this from scratch? Or collaborate via a partnership or joint venture? If we do collaborate, what firm should we work with?”

Partnerships: Similar to what you would learn in an engineering economy class, you would take stock of what you’re good at, and review who else might have complementary strengths.

So you might see partnerships based on geography, customer segment, product/service, or even regulatory hurdles.

A lot of this is also about evaluating cultural issues: some firms may be very results-oriented, while others can be very process-driven – and you may never understand each other with that kind of mismatch.

Strategic Plan: This document spells out what an organization will achieve over a specified time period, such as 5 years.

Just as people in the FP&A (Financial Planning and Analysis) division have to present a multi-year financial plan, you do the same thing here but on broader, more qualitative issues; you add in analysis and sector commentary as well.

Q: Is culture really that important? Aren’t all these large organizations the same, except with different logos?

A: Surprisingly, no, they’re more different than you’d think. And people can fight over the silliest of details.

One example: A few years ago, one big company here acquired a network of revenue-generating offices and once the deal had closed, the acquirer wanted all the offices to use the same flag.

Some offices didn’t like this and the ones that did NOT comply found themselves with a grand total of 0 customers waiting out the door.

Q: Right… have to be careful with flags, I suppose.

So after all this analysis is performed, what do the deliverables look like?

A: Usually you write up your work in PowerPoint, the senior person presents it, and then you get on with your next task. Throughout this process, you work pretty closely with operations research.

For the slides themselves, here’s an example from one task I was staffed on: evaluating market share and market size in one segment. Some of the slides contained market share and government spending stats and possible future trends, as you’d expect.

But then we also looked at “What if?” scenarios, such as how an increase or decrease in government spending would impact the sector.

In this analysis, the interesting part was that the percentage of the defense budget allocated to procurement didn’t change regardless of budget cuts or increases.

On a micro level, let’s say you look at the age distribution for a fleet of aircraft. Each customer shapes the demand curve for defense products, and you would predict when upgrades, repairs, or even outright replacements would take place.

This analysis doesn’t exist in a vacuum, but must instead be combined with details on a company’s budget and historical spending for the particular market you are looking to expand into.

This information would be passed onto the business development team as actionable intelligence.

Market Movers, Shakers and… Battleship?

Q: Great, so what are some of the specific factors you look at in these market trends?

What moves the market for defense contractors?

A: Geopolitical conflict. Defense spending is incredibly conflict-dependent.

Take, for example, the fictitious battle between the US Navy and the robots in the movie Battleship: a large foe will require a lot of firepower to defeat.

Back to reality: you saw improvised explosive devices used in the Afghanistan and Iraq campaigns, which led to a natural development of products to protect the underside of transport vehicles themselves and brand-new platforms that could withstand the blasts of these devices and similar weapons.

The requirements for these new platforms are sketched out and finalized long in advance.

But the problem is that these defense contractors face feature creep, so you have to factor that into production schedules as well.

If a company is developing a jet fighter and the customers suddenly ask for a jet bomber, well, the company is probably not going to hit its initial deadline.

Q: Props for the Battleship reference.

What about the drivers for M&A activity?

A: There was a time when the larger defense contractors were almost completely vertically integrated, so that drove a lot of deals (e.g. acquiring companies responsible for every step in the process of manufacturing a jet fighter); now, the focus is on system integration and final assembly.

A firm may choose to outsource production of key aerospace assemblies or just produce them on its own.

The point is to make the segment’s operations as affordable as possible, without sacrificing quality – so some M&A activity is motivated by these “cost saving” factors.

How to Make First Class and Where to Go Next

Q: Where do strategic planning professionals turn to after spending time in the strategy department?

A: In some firms, the strategy role is pretty transient. You spend a little time here, and then you move onto one of the core functions: finance, human resources, marketing, operations, etc.

I’ve seen people move between corporate development and strategy, and sometimes into a particular business unit’s acquisitions group.

Some places also combine strategy and corporate development, which explains the overlap.

A few people move into an industry vertical within the consulting space, but normally when you move into an in-house role such as strategic planning, you tend to stay in this area – and away from the advisory type roles such as M&A at an investment bank or strategy at a management consulting firm.

Part of it is the preference for work-life balance you gain.

Finally, I’ve also seen a few cases where professionals start hedge funds or join established ones in the hedge fund recruiting process.

Q: What should our readers take a look at if they want to join a strategy department or interview for these types of roles?

A: Read up on Case in Point by Marc Cosentino. You will mostly likely get case-type interview questions, though they may not be as intense or as tightly structured as management consulting case interviews.

Other reading material: check out the various business school case books online and practice with those.

Q: What about networking with other professionals in your function? Any tips?

A: The strategy function is pretty different from investment banking, so there isn’t a set organization such as the New York Society of Security Analysts.

But here are a couple groups I’d start with – you can join these groups on LinkedIn and start attending their events and meet-ups:

Q: Thanks for your time! Any parting words?

A: Defense and aerospace offer great opportunities if you want to tackle challenging problems.

The industry is likely to change substantially as national security problems evolve and the products evolve to solve those problems.

And you can’t beat strategic planning if you want broad exposure and input into growth strategies, M&A, market analysis, and more.

M&I - Luis

About the Author

Luis Miguel Ochoa has facilitated a variety of strategic initiatives from corporate acquisitions to new market development. He earned his B.A. in economics from Stanford University where he was a member of the varsity fencing team.

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  1. Thanks for helping me learn more about strategic planning. it’s good to know that it looks at long-term priorities that work with a company’s mission statement. It sounds like a good, lengthy discussion with the company is needed, especially to establish priorities that will surely benefit everyone.

  2. What are the hours like for this role?

  3. Since people only stay in corp strategy for a year or two before moving into a line function (finance, marketing etc.) do you think it would help to have a CFA before joining a corporate strategy team?

    1. It depends on what you want to move into afterward… potentially, yes, but more so if you want to do something finance-related after.

  4. Great reading! Could you please help provide more articles on the topic of strategic planning like this one? Thank you so much!

    1. Avatar
      M&I - Nicole

      We will keep that in mind.

  5. Happy Thanksgiving all! Any chance of a Black Friday sale on BIWS or any courses Brian?

    1. Thanks! We generally don’t run holiday-linked promotions (and Black Friday has started already, so we’re a bit late), but may do a promotion or sale in January.

  6. What is the pay like compared to corporate finance/investment bank.

    1. Pay is closer to corporate finance rates, but is likely a discount to that as well. I’ll see if we can get more specific numbers from the interviewee, but he’s quite senior so not sure what he knows of pay at the junior levels.

      1. I’m very curious regarding pay (Base and Bonus) in this field as well!

        1. Thanks, I’m following up to see what we can find on that one.

          1. I will say pay is likely affected by the industry involved.  Pay scales at aerospace/defense companies are higher than average.  My guess is that the engineering/high tech talent probably boosts the pay for the entire population.

  7. Is it possible to move into a career in strategic planning straight from undergrad?

    1. It’s possible, but generally they want former bankers/consultants/others with at least a few years of full-time work experience.

      To have a good shot, you would probably have to complete a rotational internship program at the company and then move in from there afterward.

  8. What would be a strategic planning team in investment bank like?

    1. It would be similar, but probably more of a focus on M&A since organic expansion is tougher for (most of) them. We’re running another feature on someone who works in corporate development/strategy at a bank within the next few weeks as well.

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