TOP 100: Inside the L3Harris push to put its 2 big pieces together

Over the summer, L3Harris Technologies marked the one-year anniversary of two longstanding market players. L3Harris' chief operating officer gives us an update on the integration, plus how the new company is managing through COVID-19 and thinking about the future of work.

L3 Technologies and Harris Corp. were both on paths to growth by themselves before the companies decided nearly two years ago to come together and present what they see as the defense sector’s “Sixth Prime.”

Why again did they create what is now L3Harris Technologies? Flash back to Oct. 15, 2018, and how then Harris Corp. CEO Bill Brown explained the rationale to investors in a conference call:

“You look at Harris’ expertise in communications in wave forms with L3 in SATCOM and data links, wave form capabilities, optical (communications), the ISR platforms. There’s really no other company that can match us in terms of the broad capabilities across C4ISR. Our positions in electronic warfare really make the combined company a much stronger competitor in spectrum warfare, network battlefield.”

L3Harris certainly has more resources to bear as a now $18 billion-revenue company with 48,000 employees that now sits at No. 10 in the 2020 Top 100  with $3.9 million in prime contracts.

How does L3Harris make that vision happen? Executing well on a three-year integration plan, in which President and Chief Operating Officer Chris Kubasik meets with Brown every Monday for several hours to discuss progress and work on next steps.

“We’re about one year ahead of schedule relative to achieving the $500 million” of cost synergies, Kubasik told me during a Zoom interview.

Those savings are “coming from the supply chain, coming from consolidating headquarters, consolidating the segments” and facilities, Kubasik added from L3Harris’ office in Arlington, Virginia.

Key item number two in making L3Harris a success story is identifying revenue synergies, or opportunities that neither company felt they could pursue on their own but now can together.

“We’ve turned in 23 proposals so far, we’ve won 13 of those 23,” Kubasik said.

Those 13 contain a mix of relatively smaller wins with the Defense Advanced Research Projects Agency and others still in a downselect process. But Kubasik characterized the pipeline of opportunities for them as being in multi-billion dollar range.

L3Harris also can tout a few wins that have come in since the merger’s close in July of last year -- this $1.2 billion Space Force contract, a $900 million Air Force training technology award and the Navy’s Medium Unmanned Surface Vehicle prototype program.

Bids for those contracts were due before the merger closed, but they do give L3Harris visibility into future growth. Another part of L3Harris’ look toward the future is how it allocates resources for internal research-and-development.

Kubasik said the company puts around 4 percent of its annual revenue toward internal R&D efforts, or around $700 million of spend each year. L3Harris also identified areas of R&D overlap across both legacy organizations and from there narrowed the number of projects by around 30 percent, though the total spend remained the same.

“We talk about our main categories of spectrum superiority, actionable intelligence and warfighter effectiveness,” Kubasik said. “A lot of that deals with ISR capabilities, electronic warfare capabilities, space-based assets -- those types of areas are where we’re spending our money.”

Overlaying many items L3Harris’ to-do list for integration is the bigger idea of taking what Kubasik termed the “best of the best” regarding what each side brings to the equation, whether that be internal or customer-facing.

For example, one of the legacy companies had a shared services function to manage financial and human resources functions along with indirect procurement. That means the other legacy company is migrating payables and payroll into that shared service.

L3Harris’ international business is one area where the blending of both legacy business’ approaches is seen, according to Kubasik.

“One company had in-country executives in key countries, the other company had sales representatives, and our new go-to-market strategy is a combination of in-country execs in addition to sales reps,” Kubasik said.

There is also the matter of reshaping L3Harris’ portfolio and the company has identified between 8 and 10 percent to divest, or around $1 billion.

L3Harris is about one-third of the way through selling those non-core businesses, of which the largest deal has been to sell the security detection and automation businesses to Leidos.

Work to continue on that front has not been slowed by the coronavirus pandemic for either side of the potential deals.

“Even pre-COVID, a lot of the divestitures and mergers relied on virtual data rooms, so that’s not a new concept,” Kubasik said. “Management meetings can be conducted via video. I’m pleased with the progress we’ve made and we’re still tracking to our plan.”

Work for L3Harris’ government customers has not slowed either during the COVID-19 situation, but it certainly looks different now and the company is assuming that will be the same once the pandemic passes.

Neither has hiring. Kubasik said L3Harris has added 3,000 employees so far this year and honored all 800 of its internships for the summer period.

L3Harris stood up a COVID leadership team in February that initially focused on the supply chain and partners in it, an effort that includes accelerating payments to those suppliers.

One month later, the group’s focus turned to the workforce. Half of L3Harris’ employees are working remotely, while those in manufacturing or other secured facilities are on a shift schedule.

Those who work in the facilities wear personal protective equipment and some are separated by plexiglass -- all the while standing at least 6 feet apart.

That is how today looks. L3Harris is not alone in at least thinking about the future of work.

One potential scenario sees anywhere between 5 and 10 percent of L3Harris employees work remotely on a permanent basis. Other potential scenarios could have engineers go in facilities part of the time to access systems when needed, particularly regarding classified work. A hoteling concept is also on the drawing board, where employees would register to go to a facility ahead of time.

Customer engagement is also looking different with video meetings being the norm as travel is curtailed and the in-person event circuit has evaporated, particularly the trade shows.

Such meetings with international partners have been “just as effective or maybe more effective” than at air shows in some instances, Kubasik said.

Even if the future seems unclear, one point of clarity has emerged for L3Harris’ leadership team as Kubasik put it.

“We talk a lot about reimagining the future work environment and we’ve said, ‘If we go back to the way we were pre-COVID, we’ve missed a great opportunity to learn from this unfortunate situation.’”