This proprietary document and all information contained therein is the property of Esterline CMC Electronics (CMC), its divisions and subsidiaries.It may not be used, copied, reproduced or otherwise dealt with, nor may its contents be communicated to others in whole or in part, without the express written consent of CMC. It may not be used directly or indirectly for purposes other than those expressly granted in writing by CMC.

Innovation at CMC Electronics: Challenges and Solutions

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Esterline CMC Electronics – Company confidential and proprietary data

Contents• Overview of CMC

– Products / Solutions– Markets

• Competitive Environment• Competitive Challenges• Innovation Strategies• Conclusions

2

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CMC Overview

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CMC’s Product Lines

4

Cockpits

Aviation Products

Custom Electronics

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Custom Electronics

5

Cockpits

Aviation Products

Custom Electronics

Microelectronics

CustomDisplays

SpecializedSub-systems

JSF

Apache

A400M

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Aviation Products

6

Cockpits

Aviation Products

Custom Electronics

ElectronicFlight Bags

Head-Up Displays

UH-60

Satellite Communications

Antennas

Enhanced Vision

Systems

A310

Global 7000

PC 21

EC-145

FMS/GPS

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CMC’s Cockpits

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Cockpits

Aviation Products

Custom Electronics

SmartDeck

C-130

T-6B

C-130 KT-1

T-6BKing Air 350

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Business by Sector

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Canada15%

United States50%

International35%

Commercial45%

Military55%

OEM40%

Retrofit60%

Highly Diversified, Balanced Customer Base — Export Oriented

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Esterline CMC Electronics – Company confidential and proprietary data

Competitive Environment

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Esterline CMC Electronics – Company confidential and proprietary data

Aviation Products

10

Cockpits

Aviation Products

Custom Electronics

ElectronicFlight Bags

Head-Up Displays

UH-60

Satellite Communications

Antennas

Enhanced Vision

Systems

A310

Global 7000

PC 21

EC-145

FMS/GPS

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Competition• Broadly diversified• Typically large• Typically vertically integrated, using their own products

• Rockwell-Collins• Honeywell• Thales• Elbit• GE• Garmin

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CMC’s Cockpits

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Cockpits

Aviation Products

Custom Electronics

SmartDeck

C-130

T-6B

C-130 KT-1

T-6BKing Air 350

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Esterline CMC Electronics – Company confidential and proprietary data

Competition• For transport aircraft retrofits:

– Aircraft manufacturers: Boeing, Lockheed-Martin– Other systems integrators: Rockwell-Collins, Lockheed-Martin,

Northop-Grunman– Small, local integrators: ASB, DERCO

• For trainers and light attack– Aircraft manufacturers: BAE– Integrators and Tier 1: Elbit, IAI– General aviation suppliers: Garmin

• For general aviation forward fit and retrofit– Other suppliers: Garmin, Avidyne, IS & S, Honeywell, Rockwell-

Collins

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Competitive Challenges

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Challenges• Supporting very diversified product portfolio• Keeping a leadership position in diversified markets• Competing with large, vertically-integrated, global

competitors• Managing a multi-site organization

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Innovation Strategies

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Multiple Strategies Needed – Why?• Need for ideas

– How to get the differentiators?

– How to understand the operational environment of our products?

– How to trigger new ideas and turn them into marketable solutions

• Need for funding– How to do more with less investment?

• Need for the right Highly Qualified Personnel– How to get, develop and maintain the required personnel?

• Need for strong supply-chain– How to get the right partners/suppliers?

– How to flow down innovation down to suppliers?

– How to flow up innovation from suppliers?

– How to create innovative partners?

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Multiple Strategies Needed• Leveraging customer funding

– Because of the niche markets and some customization, CMC is able to get customer funding

– Leading to a zig-zag product evolution; generally consistent with product roadmap, but addressing very specific customer requirements

– Good source of product differentiation due to closeness to key customer needs

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Multiple Strategies Needed• Maximizing re-use

– Developing solutions for multiple applications– Forcing solutions with commonality and design for multiple

applications– Challenging with to do concurrently with a customer-funded

strategy

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Multiple Strategies Needed• Pre-competitive collaboration

– Working with different partners towards complementary goals– Access typically to unknown approaches or needs

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Sourcing• CMC does not have the complete solution• Acquiring innovation as part of supply agreements• Selecting innovative companies as partners in systems

solutions• « Risk-sharing »; we invest, they invest

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Multiple Strategies Needed• Research and Innovation Consortia

– Member of the Consortium for Research and Innovation in Québec (CRIAQ) from the beginning

– Founding member of GARDN– Member of SA2GE

• Project: IMA for Cockpit Applications

– Support the development of technologies from Technology Readiness Levels 1 to 6

– Connects to the university researchers• Allows access to a different network

• Allows access to future employees

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Multiple Strategies Needed• Standards Committees

– Attend committees of key emerging standards, create and promote new ideas, or at the very least influence them

• GPS/SBAS(RTCA)

• Cockpits (ARINC)

• NextGen/SESAR

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Multiple Strategies Needed• Leveraging Technologies

– Technology watch and technology roadmaps– Integration of technologies yield different levels of innovation

• A simple new technology added to a product can expand its life– New touchscreen to an old display, wireless connection, etc

– Importing technologies from other fields – aerospace is NOT where Electronics evolve

– Military infrared sensors led to Enhanced Vision Systems sold in Business Aviation

– Ethernet led to AFDX network used on A380

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Multiple Strategies Needed• Processes and Culture

– SCRUM / Agile Software Development– Rapid Prototyping: hardware and software

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Conclusion

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Conclusion• Innovation is key to survival and growth with our

diversified markets and products• Multiple innovation strategies operating in parallel are

essential• Strategies need to cover all Technology Readiness

Levels, and reach beyond our industry