May 14th, 2019

Thales current strategy : a master piece of art ?

Thales group (66 000 employees, sales 16 billions Euro in 2018) is headed since 3 years by Patrice Cain. And what he has done in term of strategy over these 3 years in Thales is astonishing.

Thales Group provides services for the aerospace, defense, transportation and security markets. In each activity, the company has secured a key technical asset over the past few years.

Big data and predictive maintenance :

Predictive maintenance techniques are designed to help determine the condition of in-service equipment in order to estimate when maintenance should be performed. This approach prevents unexpected equipment failures as well as promises cost savings over time-based preventive maintenance, because tasks are performed only when warranted ie  by estimations of the degradation state of an item thru some equipment sensor measures.

On April 2017, Thales bought for a mere 200 M€ the US company named Guavus, being one of the few enterprise with deep expertise on big data treatment and predictive maintenance. When all governments and all big manufacturers are heavily looking for this kind of scarce expertise and ready to buy for it..

Cybersecurity and identification

On April 2019, Thales has finalized after 15 months the acquisition of Gemalto for €4.8 billion, specialized in identifying people and objects. Combining Thales and Gemalto strengths will create a new giant in digital security solutions based on technologies such as digital identity, biometry, data protection, and, more broadly, cybersecurity. With Gemalto, Thales will become N°2 in the world on cybersecurity after Symantec. More importantly, Thales will provide a seamless response to customers, including critical infrastructure providers such as banks, telecom operators, government agencies, utilities and other industries as they step up to the challenges of identifying people and objects and keeping data secure.

Artificial Intelligence (AI)

Since 1989, Thales has been developing its own Artificial Intelligence  capabilities with today about 200 AI experts working  in Paris and Montreal where is located  MILA (Montreal Institute of Learning Algorithms)  and where more than 1200 IA experts are working for Facebook, Google, Microsoft, Samsung. “Deep learning” or “machine learning” methodology for AI cannot be fully trusted as it is leading to some results difficult to explain / understand and sometimes even wrong. Deep learning methodology is often compared to a “black box” treatment : you enter data you understand and you get a result which is very often valid (not always) but which you cannot explain.  For this reason, the next frontier in AI is the “explainable AI” (XAI) , where the AI result can be explained and possibly understood by a human. This is a necessary requirement for decisions made by AI where safety or security is involved. And being able to explain the result is also a necessary requirement for any certification linked to safety or security.

What are the application about AI ?  Potentially everywhere as soon as a decision is required. For Cybersecurity AI not only enhances existing detection and response capabilities but also enables new abilities in preventive defense. For autonomous vehicle decision process, AI will be at the heart of the system. For weather forecast or medical diagnosis, AI is a key enabler. For heavy maintenance checks, AI can schedule the tasks in the most efficient way taking into account multiple parameters such as parts availability, working hours, exclusive tasks preventing other simultaneous tasks, etc.

In short AI is or will be almost everywhere and this is why the GAFAM (Google, Amazon, Facebook, Apple, Microsoft) are investing so much in it as well as their Chinese counterparts Baidu, Alibaba, Tencent and Xiaomi or Huawei.

Each of these 3 technological pillars  such as big data treatment, identification/cybersecurity, Artificial Intelligence is helping the other ones  and overall makes Thales able to master the complete critical chain from the sensors up to the decision in real time, ensuring security over the whole chain.

Let’s have a look now on which applications Thales may use its talent and knowledge. It can be applied on :

• Connectivity and Internet of Thing which are promised to a bright future with all the satellites constellation being currently put in Low Earth Orbit (LEO) to allow direct Internet connection between ground and satellites. 
  • Airplanes with autonomous flying and associated Air Traffic Management  network. This one could also rely on satellites where Thales Alenia Space is a key player.
  • Fighters communicating with drones, satellites and ground in a complex network designed to optimize the overall mission,
  • Governments, Banks, large companies network with Cybersecurity,

If we have a look on GAFAM strategy, they have huge amount of money and master big data and AI.  Thus several ones are trying to leverage this knowledge into entering in Aerospace activities thru development of drones able to autonomously carry packages and possibly passengers : Amazon with Prime Air, Google with Wing, etc.

Forth the Chinese, they have their own Chinese GAFAM with also significant expertise in big data, AI and cybersecurity. And there is a clear national intent to penetrate the airplane/ drone market even if it takes time, making use of these new technologies where they are on par with western world..

For Dassault, they have always privileged internal development of some key differentiating technologies. Catia design software is a good example replaced now by 3D Experience software chosen by Boeing and Airbus to streamline their development process from design to production to support. And with 24.7% of the Thales Group and current Thales strategy, Dassault is continuing to build, indirectly, its development on mastering some key technologies such a big data, cybersecurity and AI.

In a few years, Patrice Caine strategy has brought Thales at the heart of the worldwide recognized strategic technical domains, making his company in a unique position to possibly secure further contracts worldwide, in a very competitive market. With this unique positioning, no wonder Thales EBIT in 2018 is at 10% and share price has doubled since 3 years ago.

Nadia Didelot

Editor in Chief AeroMorning (Toulouse Web SN)