If you Google the phrase “Boeing Stock Price and the 787”, you will find 1.7 million references. Now I would have to say that I did not review every one, but all of the references on the first three pages were negative and critical of the company, its leaders, or the product. Several bordered on being “alarmist”.
As reported in the article by Brad Stone and Susanna Ray, the Boeing 787 Dreamliner’s carbon-fiber body and new electrical system give it a reduced weight, which allows it to burn 20 percent less fuel than the 767 midsize airplanes it’s meant to replace. The interior cabin features cathedral-like archways to reduce the sense of claustrophobia and enlarged windows that dim at the touch of a button. Because of the new, stronger composite materials, the cabin can also be maintained at higher pressure and humidity, so travelers feel fresher at landing. A remarkable piece of technology. But this apparently isn’t what we like to read about.
After a battery caught fire after landing in Boston, and another one triggered a fault on a plane bound for Tokyo, the FAA grounded the entire fleet, casing Boeing and their customers some serious heartache.
The behavior by regulators, reactions by Wall Street analysts, and reporting by the world press just makes it that much easier to see how today’s CEO’s should act with more reserve, be less tolerant of risk, and more inclined to narrower visions. There are considerable forces that seem to conspire to punish those who push the envelope.
I was thinking about Boeing this week after making a stop at Sarasota International Airport where the organization Freedom Flight landed three beautiful WWII bombers and fighters so that people like me could walk through them. Events like this also brought out a number of veterans, many former pilots during that war, who were there with their hats on – pictures in hand – proud to tell their stories to the people they met.
I had the extreme pleasure to be standing in line with one of these veterans. When he was 18 years old he was stationed in the Pacific as a part of the ground crew responsible for patching up the bombers after they returned from a mission – shot up, broken and limping. He told me how excited they were in 1942 to receive the first of the new B29 Super fortresses from Boeing. They were bigger, carried heavier bomb loads, were more heavily armed and flew farther than the B24’s, and B17’s they were built to replace.
On one Sunday, he recalled vividly, we were all awakened at 0300 hours (that’s early) because of a crisis. On one of the early missions, the hydraulic lines were found to be freezing so that the bombers could not retract their bomb-bay doors. If you were ever a bomber pilot, you know how serious a problem this could be. It turns out that Boeing had not anticipated that our pilots would fly these planes routinely at such high altitudes (which I imagine we all would do to avoid enemy anti-aircraft fire). In the days when the cabins were not insulated or pressurized, the temperatures could drop below freezing pretty fast.
The maintenance crews worked around the clock to convert the hydraulic actuators to electrical ones far more impervious to the cold. In this case, while the oversight by the aircraft engineers was serious, the attention of everyone was on “how to fix it” and move on. That was the environment.
I don’t know for sure, but I imagine that was not the only engineering SNAFU to have happened on the various new versions of planes that were introduced during the Second World War. Each one was introduced as an improvement on the ones that came before. We always sought to learn from our prior air combat experiences and bombing runs so that we could innovate and improve on prior models. In this way we steadily came to fly higher, faster, farther, and safer than ever before.
One thing is true about innovation. Whenever you try something that you never have before, things do not always work as planned. Innovation has risk, and without the acceptance of some risk, no innovation is likely. Yes, we made mistakes, but we learned from them, quickly. We fixed the defects and built onward from there.
In today’s world where we report on your mistakes, globally, within minutes, it is no wonder that CEO’s and their Boards get skittish. This was especially so in 2003 for Boeing when the Dreamliner project was born. The company had just been eclipsed by Airbus as the largest airplane manufacturer on the planet. After the 2001 terrorist attacks in New York, airlines were reluctant to make massive new investments in airplanes. So perhaps while Boeings execs and their Board needed something big, they couldn’t stomach the risks associated with such a massive undertaking. If they stumbled, so too would their stock price.
So, in addition to all the exciting new technologies introduced on the Boeing 787 Dreamliner, the company also conducted a bold experiment with regard to its business model. Designing and introducing a new generation airliner is a big task, costing billions of dollars. To reduce their own risk, Boeing decided to partner with key external suppliers who would be asked to take responsibility for large subsections of the plane which could be built by them and then shipped to Everett, Washington for final assembly. The suppliers took on a share of the overall project risk and in return were entitled to a share of the net profits. In total, Boeing outsourced about 70% of the components and systems comprising the Dreamliner – something never before attempted.
Coordinating the manufacture of the more than 6 million parts was no small task even if it is all happening in your own back yard. Doing so on a global scale proved massively challenging. Coordinating design and manufacturing in this way proved extremely complex and the project was fraught with cost overruns, technical problems, and delays.
To many this whole story is symptomatic of a larger problem – – how to create innovation in mature economies – as most Western ones are. Venture capitalist Peter Thiel is one who has seen it coming. In the Stone and Ray article, he is quoted as saying “There is so much incrementalism now. Even back in the ’90s there were companies like Amazon (AMZN) that were willing to do big things. That has gone out of fashion now.” Thiel points to SpaceX and the electric car company Tesla Motors (TSLA), both run by Elon Musk, as the rare examples of recent attempts to leap forward boldly. Yet Musk often gets portrayed as a quixotic dreamer. “I think this reflects the insanity of our country, that anything non-incremental is seen as insane,” Thiel says.
. . . . . . . . . . .
This situation at Boeing in 2013 all seems far removed (both physically and philosophically) from the bases in the Mariana Islands in 1943 where my veteran colleague spent his later teen age years fixing what needed to be fixed in order that we could do what needed to be done. It didn’t matter who was to blame, only what needed to be done to fix it. Too bad we are forgetting where we came from.
Leading into the headwind
Standing up against the kind of public pressure faced by Boeing can be a challenge, but research is now revealing that innovative companies are typically led by innovative CEO’s (see the reference article by Hal Gregersen). These are people who have the courage to ignore the noise and act in a hands-on way that demonstrates to their organization that bold ideas are indeed welcomed and anticipated.
Innovative CEO’s are innovation researchers. They read, go to TED conferences, visit supplier and competitor companies and venture out into the front lines where customers and employees live. They ask provocative questions, and are always making surprising observations. They network with other creative thinkers who think it is fun to speculate about the future. They encourage idea generators inside their own businesses. They encourage experimentation and are genuinely excited to learn the outcomes.
Maybe Elon Musk is a California nut-job dreamer. But without people like him, would we ever take steps forward?
Do you want to be an innovator CEO?
First, stop talking—start doing. Pick a problem that matters to you. Start asking better questions about it. Make surprising observations, build on the ideas of others, build prototypes and see if you can make them work. Get your hands dirty in invention.
You just might surprise yourself by how far your organization can go.
Stanford Study Finds Going Public Hurts Innovation,by Bernhard Warner on January 17, 2013, Businessweek.com
Boeing’s 787 Dreamliner and the Decline of Innovation, by Brad Stone and Susanna Ray on January 24, 2013, Businessweek.com