HII’s Tech Transformation Is Making It Much More Than America’s Biggest Shipbuilder

Huntington Ingalls Industries recently decided to stop spelling out its name in communications and instead refer to itself by its stock symbol—HII.

One reason is that the phrase “Huntington Ingalls” is synonymous with shipbuilding—it is by far the biggest builder of warships in the Western Hemisphere—but the company is transforming itself into something more than a shipbuilder.

The company’s Mission Technologies unit is growing so fast that its portfolio of synthetic training, cyber, artificial intelligence and sustainment programs will soon outstrip the revenues generated Ingalls Shipbuilding—builder of all the Navy’s amphibious warships and most of its surface combatants.

By 2025, Mission Technologies may be providing over a quarter of all the company’s sales.

What’s striking about that trend is that many of the company’s traditional customers are barely aware the business unit exists.

Management has transformed the company with little fanfare, making it not only a designer and builder of the world’s most complex vessels, but also operator of the defense department’s largest virtual training enterprise, the biggest aggregator of military cyber data, and an industry leader in fifth-generation electronic warfare.

The spectrum of advanced technology projects in which HII is now engaged makes it sound like a national security version of GoogleGOOG
, chasing more emerging markets than most people can keep track of, much less understand.

I recently was briefed by company executives on the fields in which the Mission Technologies unit is working—HII is a longtime contributor to my think tank—and I came away realizing that I would have to reimagine what the enterprise formerly known as Huntington Ingalls is all about.

Before I attempt to describe the novel opportunities HII is pursuing, I should begin by stressing that it intends to remain the dominant player in naval shipbuilding.

The company’s Newport News and Ingalls shipbuilding units this year will contribute nearly 80% of corporate revenues, and their operating margins will be appreciably better than those of Mission Technologies.

However, naval shipbuilding is a mature market, and the federal customer isn’t likely to welcome HII claiming more market share than it already enjoys.

So, in order to continue increasing revenues and returns, management needed to develop “white space” opportunities where there was room to grow.

It has succeeded with a vengeance, establishing competitive positions in some of the fastest-growing areas of digital innovation.

This was not a leap into the unknown, because under CEO Chris Kastner and predecessor Mike Petters, the company had already implemented a digital transformation of its shipyards, and thus had become intimately acquainted with disciplines like model-based, paperless design.

Some of the new markets in which HII now competes are adjacencies to its traditional shipbuilding and refueling markets, but they are growing faster and the skills involved are fungible to a much broader array of future opportunities.

Mission Technologies as currently organized consists of six business units.

The C5ISR business is named for a catchall piece of military jargon that means command, control, computers, communications, cyber, intelligence, surveillance and reconnaissance. The phrase is suggestive of the diverse activities in which its 1700 employees are engaged. It works with five combatant commands and several service offices in areas such as multi-domain operations, intelligence collection and analysis, and the application of AI/machine learning to military missions.

The Cyber, EW & Space business, with 1300 employees, is involved in fifth-generation electronic warfare solutions, hardening of military networks against cyberattack, enterprise Big Data architectures, cloud migration, and space-based systems. Its customers include U.S. Cyber Command, the Air Force Research Lab, the Army Futures Command, the Missile Defense Agency and NASA.

The Unmanned Systems business has delivered over 600 autonomous maritime vehicles, both surface and undersea systems, making HII the market leader in that field. With 350 employees, it designs, builds and supports unmanned systems used for reconnaissance, mine countermeasures, hydrographic surveys and area search. Autonomous systems are especially useful in performing routinized or high-risk missions.

The Live, Virtual, Constructive Solutions business employs 1500 technical personnel in developing and supporting synthetic training environments that use simulation and gaming technology to mimic real-world operational conditions. HII operates the nation’s biggest synthetic training environment. The business unit’s customers include the Joint Chiefs of Staff, the Naval Sea Systems Command, the Naval Air Systems Command, and various Air Force entities.

The Nuclear & Environmental business supports the nation’s triad of strategic weapons and the operation of critical facilities. It is also engaged in work on small, modular reactors that are expected to win growing support in the future as an alternative energy source.

The Fleet Sustainment business provides digital engineering, life-cycle sustainment, and resilient logistics solutions in support of the fielded military force. This business did not grow out of HII’s legacy shipbuilding franchises, but is a logical add-on to that business in mining the full array of maritime opportunities during a period of intellectual ferment in the fleet.

As these capsule descriptions of the Mission Technologies business portfolio demonstrate, HII is now involved in an array of high-tech markets that stretch far beyond its traditional shipbuilding activities. Shipbuilding will remain at the core of what HII does, but Mission Technologies is where the fastest rates of growth will occur.

So HII will remain the nation’s biggest builder of warships, but it will become much more.

As noted above, HII contributes to my think tank.