How the Aerospace Firm Embraer is Pursuing Disruptive Innovation

By Scott Kirsner |  August 10, 2018

When Embraer inaugurated a new innovation group two years ago, the Brazilian aerospace and defense firm made its mandate clear. It wasn’t looking for a new-and-improved tray table or a more durable windshield material. The new Embraer X team would focus on “solutions that have the potential to reinvent not only Embraer’s current businesses, but the transportation industry itself,” according to the team’s website.

That’s an ambitious goal for the $5.8 billion company, which builds both commercial and military aircrafts.

“We have an internal innovation team that’s focused on more incremental innovations within the business units,” explains David Rottblatt, Director of Business Development at Embraer X, which has team members based at the company’s São Paolo headquarters, as well as in Silicon Valley, Boston, and two locations in Florida. But Embraer X was created to look outside of the company’s existing businesses and product lines. “That’s our mandate — to look a little beyond the incremental and focus more on wholehearted, disruptive exponential innovation,” Rottblatt says.

In July, Embraer announced a major deal with Boeing. It plans to sell 80 percent of its commercial aviation business to Boeing for about $3.8 billion. That transaction isn’t expected to close until sometime in 2019, but Rottblatt says that Embraer X is not included in it.

Embraer X’s first announced project is working with the ride-sharing service Uber on the design of an electric-powered air taxi for short trips around congested cities.

Rottblatt described Embraer X’s goals and discussed its work with Boeing on a recent IL Live conference call. An edited transcript and audio are below. Click play to hear the complete conversation, or click the down arrow at right to get the MP3 version for later listening.

The Mission Behind Embraer X

While Embraer has been a recognized brand in the aerospace industry, we want to help Embraer prepare itself for the next generation of business trends, customer needs, and market forces. Embraer X was created to help facilitate that transition as well as to deliver new products and solutions for the market.

It’s been about two years that we’ve been up and running, and we’ve got a few exciting projects in the pipeline. … My role on the team is to identify new disruptive businesses, and make a data-driven recommendation to our board for investment.

We have an office in Silicon Valley that is managed by our innovation director, Peter Berger. We have an office in Boston that’s managed by our director of innovation, Alex Slawsby. We have an office in Melbourne where we also have our executive jet manufacturing, in Fort Lauderdale, where we have our North American headquarters, and of course, São Paulo, Brazil.

… It was a strategic decision years ago to have a very strong presence in North America, considering the amount of innovation, start-ups, and exciting technology that’s being incubated throughout the United States.

Looking Past Horizon 1

We focus more on what’s commonly referred to as Horizon 2 or Horizon 3 [innovation], which is not so much related [to our core businesses today].

A good example of that is our eVTOL aircraft, which embraces the heritage and the aviation knowledge that we’ve been incubating for decades within Embraer and creates a new disruptive product from that.

We see that there is a convergence between technology maturation and evolving transportation trends. We’ve been investing over the last years to meet these market needs that lie at the intersection of these two powerful forces. The first project of Embraer X is what’s referred to as our electric vertical take-off and landing aircraft, or eVTOL.

It’s the very first aircraft of its kind that Embraer is designing and building. It’s being built for the urban air mobility industry. This serves to create two powerful outcomes. … One, of course, is time savings.

Concept art: Passengers boarding an eVTOL at a skyport.

We’re doing this, obviously, in very close collaboration with Uber. You can take an Uber to a vertiport or a skyport, and then from there, you can take one of the eVTOL aircraft that will exist in a few years from wherever you are to wherever you’d like to go — so let’s say San Jose to downtown San Francisco in a matter of minutes, instead of potentially hours.

For those on the phone that are familiar with São Paulo, going from downtown São Paulo to Guarulhos International Airport can take as many as four hours. This can be done in a matter of 8 to 10 minutes [with an eVTOL.]

You can now do other things with your time now besides driving [in] a car. Now once you’ve gotten to your destination that much faster, imagine all the other things you can do. It addresses a common pain point that many people share across cultures, languages, religions, nationalities, etc., which is traffic. It’s something that everybody can identify with.

In mapping customer needs and pain points, we understood very early on that there’s an opportunity here for us to use all of the knowledge that we’ve gathered in aviation from our small executive jets all the way to our intercontinental-capable aircraft. We’re using that to build our very first vertical take-off and landing aircraft.

The Composition of Our Team

Embraer X is composed of a fantastic team of highly-skilled innovation directors, UX expertise, world-class engineers, and strategic leaders that are all coming together in this broader working group, where we are taking advantage of the different disciplines that we have inside Embraer to bring this idea to market and to fruition.

All of the doers [who will work on designing and executing the eVTOL project are] within Embraer. Of course, there are some new technologies that we’ll be adding to this vehicle that are new to the market, not just to Embraer.

We’re currently in the process of evaluating the partnerships and where that will come from, but the design, the concept, the engineering, it’s all coming from within Embraer.

Working with Regulators

Embraer X very much appreciates and involves all stakeholders — at the regulatory, government, and community levels — to ensure that what we’re building is very much inline with current regulations and expectations, but also to exceed those expectations so that we’re creating a very comfortable, trusted experience that people can be very happy to enjoy and to take.

We’ve been working very closely with the Federal Aviation Administration. We’ve been working very closely with unions such as the General Aviation Manufacturers Association to make sure that in this kind of pre-competitive phase, organizations are communicating and sharing with each other so we can start establishing the basic fundamentals of how this industry ought to work.

Today, for example, the way that the FAA regulates and certifies aircraft for helicopters is the initial expectation that we’ll be using. The FAA has told all of industry, not just Embraer, that the existing infrastructure both in the sky as well as in regulation exists for you to launch this business today. They are very much under the belief that the existing rules for certifying helicopter operations, for example, and how helicopters fly, how they’re managed, governed and communicated with will apply to this new industry.

How the Program Ties to Uber

Uber has done a great job of facilitating the platform [on] which this business will be built upon. I certainly would not call it a competition [between rival aircraft manufacturers] at all. I think everyone is very much excited to be sharing what is going to be … a very large opportunity for many players to engage in.

The way that it works is very similar to how the automobile portion of Uber’s platform works today. You have operators with vehicles that are on a platform, and they can fly as much as they’d like or not. They can drive as much as they’d like or not.

The aircraft manufacturers are certainly partnering with Uber to make sure that we understand how the left and the right hands are going to be working together — from managing the aircraft and the business of running an air transportation organization, to how the platform itself would run.

It’s very much complementary, and certainly not designed for aircraft manufacturers to compete with each other.

I think that the value proposition of the eVTOL technology is that it’s going to be a lot cheaper to operate, and those savings are going to be passed on to the customers. So it’s going to be much more affordable than what a conventional helicopter would cost. Initially, we’re targeting a price point … along the lines of Uber Black. Eventually, [we’ll graduate] to a much more affordable price point of Uber X, assuming that the industry scales, of course.

We want this to be a solution for the world. We don’t want it to be a solution for just a very small demographic of society.

The second point [of the eVTOL value proposition] is, because it’s electric, aside from time savings and cost reduction, [there is] noise reduction. The amount of noise that helicopters generate today, both [due to] the spinning rotors as well as the engine itself, is prohibitive for a lot of communities.

I think [eVTOLs will prove] a very attractive model for short-commute travel. The initial technology and battery power density that [we expect to be] available over the next few years will [support] anything from 25- to 60-mile flights, for example.

A Renter-ship Model

The future model of how we will get around is a subscription service to something like a eVTOL aircraft, where you will purchase X amount of hours a month, or X amount of rides a month, and that will be how you get to and from work, or to and from wherever you need to go.

The model of owning something as opposed to renting something has been changing. This paradigm will continue to change, and I think that the eVTOL industry presents a unique new way for people to buy access to a shared service and have that be their mode of transportation so that they can continue to be asset light and embrace individual experiences, as opposed to always having to have the burden of owning what would be an expense asset otherwise.

Our Process for Building Disruptive Businesses

Embraer X approaches building disruptive businesses essentially in four phases. We have a strategy phase where we’re [scouting the landscape], identifying opportunities, and prioritizing. An ideation phase where we are validating and interviewing and making sure that we’ve got a solid minimally viable product that we can continue to get feedback on.

We incubate that, and then we leap into a business. We either turn that into its own independent business, perhaps give it into one of our additional Embraer business units for them to own, or we’ll turn it into a joint venture.

Step one [for that initial strategy phase] is we listen, we learn. We go out and we talk to people and collect ideas. What pain points or opportunities exist in the market? Again, the shared economy is a great example of a new business model that adapted to changes in consumer behavior. I want to focus on this for a moment.

The shift from being asset heavy to asset light will continue to disrupt major businesses, just as Uber and Airbnb have done to the taxi and hotel industry. Similarly, with the platform-based model, we saw the effects that online retailers had with Toys “R” Us. This reflects a meaningful change in consumer behavior.

Buyers today want experiences, not a heavy balance sheet. They want to be flexible and uncommitted. If companies can pivot to meet the new expectation of connecting renter and provider instead of buyer and seller, we’ll be successful.

This kind of Darwinian adaptation to evolving market needs is precisely what Embraer X is pursuing today, to evolve and disrupt by mapping industry trends and community needs to create solutions when and where they’re needed most.

From here, I focus on really disruptive [and] not incremental value-add opportunities. To assess this, I ask some critical questions. Is this going to create a new value chain or a supply chain that we can nurture, and we can grow? Is this going to be sustainable, viable, and desirable? Will we be able to create new partnerships and technologies out of this?

… If my team can deliver an outcome that didn’t exist before, like peace of mind and time savings and safety, and positively answer these aforementioned questions, then I believe we will have found a new disruptive business.

We [then] prioritize the prospects that we’ve scouted for, and then we assess that against our own internal capabilities, technology, and intellectual property.

By going through a capability assessment of understanding what do we have and what do we need in order to bring the vision to market, we’ll be able to make that build, buy, or partner decision to fill any gap areas that we’ll have.

… This really helps us also avoid us building a solution that’s looking for a problem. By being able to make that data-driven recommendation that shows the market really needs this, there’s a gap, there’s an opportunity, we know that we’ll be building something that the market is looking for.

… By developing that type of commercial muscle to see around corners and make educated bets on how the evolution of the business, the world, and customer needs will evolve, we’ll be in a position to succeed and build disruptive businesses.

What We Look for On Our Team

Regarding talent, we’re looking for people that have grit. We’re looking for people that have the ability to create value in an organization and find success, and that’s ultimately based on your ability to navigate ambiguity.

When starting a new project, many times I feel like I have been dropped in a jungle armed with a machete, and I have to find my way home. This ability to chart a path forward — especially when the path to success is not evident — can be the most challenging yet rewarding part of innovating and, therefore, what we’re looking for in talent.

If you can be comfortable in these kinds of ambiguous environments; incorporate the feedback that you get from your stakeholders; and you know how to be comfortable being uncomfortable, we’re looking for you. That’s what Embraer X looked for when they scouted for members of our team.

Advice for Other Corporate Innovators

Embrace customer feedback, quick feedback loops, and [make] sure you and your team [are] comfortable in uncomfortable environments.