At Boeing, Innovation Means Small Steps, Not Giant
Leaps
Company’s shift reflects how the
industry has changed
By Jon Ostrower in the Wall Street Journal
The 99-year-old aerospace giant long
has focused on developing new technologies that it reserved for big projects
every 15 years or so to craft the fastest—and farthest-flying jetliners—such as
its 787 Dreamliner.
Today, Boeing is centering
innovation on incremental improvements that it can deliver more quickly to
airlines with greater reliability and at a lower price, said Ray Conner, chief
executive of Boeing’s commercial airplane unit, in an interview.
Mr. Conner is overseeing the
development of seven models to upgrade Boeing’s portfolio of jets with
capacities from 125 seats to just over 400 seats, plus a new military refueling
tanker. The updated products are adapting some of the technologically advanced features
of the Dreamliner to models that have long been in production.
“It’s not to say you don’t
innovate,” said Mr. Conner. He wants engineers “innovating more on how to
[design jets] more simplistically, as opposed to driving more complexity,” he
said. “How do you innovate to make it more producible? How do you innovate to
make it more reliable?”
The shift reflects how sharply the
industry has changed. Boeing Chief Executive Jim McNerney last year
declared its era of technological boundary-pushing “moon shots” over. Airlines, he concluded, don’t want to pay more for
advanced technology.
Saving up a host of advanced
technologies for a single new project has proved too expensive and disruptive.
Mr. Conner likened the current
landscape for selling jetliners to Apple
Inc.’s iPhone. The smartphone’s starting retail price of $199 with a cellular
contract has remained relatively consistent since its second model in 2008,
even as each iteration is more capable.
Boeing’s formula is aimed in part at
reversing market-share losses to rival Airbus
Group NV. Both companies have experienced
a boom, as fast-growing airlines in Asia, the Middle East and South America and
carriers with aging fleets in the U.S. and Europe have driven orders for some
5,800 jets worth $440 billion at contract prices. However, Airbus, which has
generally had a more incremental approach to new planes, has eroded Boeing’s
share of the high-volume market for single-aisle jets.
Few are more familiar with Boeing’s
approach to jet making than Mr. Conner, 59 years old. He started as a unionized
machinist in 1977 not far from his current corner office here and held a range
of jobs before taking over the commercial airplanes operation in 2012.
With the Dreamliner, Boeing revamped
not only the design of a modern jetliner, but how it’s built. The plane boasted
a mostly carbon-fiber structure and advanced electrical system that replaced
many pneumatic and mechanical functions.
Design problems and an unprepared
supply chain caused huge cost overruns and a 3½-year delay before delivery of
the Dreamliner in September 2011. Boeing’s investment in the 787 program is now
approaching $50 billion, estimates Barclays Capital analyst Carter Copeland,
including research-and-development costs, new facilities as well as
acquisitions of struggling suppliers. Boeing isn’t expected to start making
money on a per-unit basis until next year, though the aerospace company reports
the program as profitable based on its accounting method, which spreads the high
early costs over many years.
“Don’t judge our future by what’s
happened on the 787,” said Mr. Conner.
Boeing’s new approach extends to
every corner of its operations. It is aggressively trying to renegotiate
contracts with suppliers, which account for about 65% of its jets’ costs. Its
push toward faster, better and cheaper production led Boeing in 2013 to tap
Walter Odisho, a former head of Toyota Motor Corp.’s U.S. auto production to
run manufacturing. The company has long looked to the Japanese auto maker for
improving its processes, which are becoming increasingly automated. Both
efforts helped the company save $1 billion last year, Boeing said.
Research-and-development spending by
Boeing’s commercial unit ticked up slightly last year to $1.88 billion, or
about 3.1% of the unit’s revenue—below the nearly 16% in 2009 when R&D
spending increased as it struggled with the Dreamliner and a revamp of its
747-8 jumbo jet.
Boeing’s more pragmatic approach
also comes as it ramps up jetliner production to unprecedented levels. It
expects to deliver 750 to 755 jets in 2015, topping last year’s record, and
that number could climb to more than 900 late in the decade if demand holds. A
decade ago, by comparison, it delivered 290 planes a year.
Mr. Conner said Boeing’s priority
now is completing its current slate of projects on time and on budget. The
seven projects include a new version of its 777 with composite wings, and
upgrades of its single-aisle 737s with new engines.
That doesn’t mean the company has
given up on the idea of creating an all-new model.
Mr. Conner said Boeing is polling
customers to help conceive a new jet that seats more people than its
single-aisle 737s, but doesn’t have the long range—and resulting extra weight
to carry fuel—of the Dreamliner.
Mr. Conner said the company isn’t
likely to repeat the business model that created the Dreamliner, but is open to
a large strategic partner to share the development costs.
“These are things I think about all
the time,” he said.
One goal, he said, would be to
design any new jetliner so its technology and production system could be scaled
to eventually create a second family of planes, like its 737, which has been in
continuous production for nearly a half century.
“I think our job is make sure we
totally understand what the customers are looking for and working on our
ability to go execute” on a viable business case, said Mr. Conner. “And we will
do that. We will flip the switch when it needs to happen.”
John Biderbost 1 hour ago
If when launching the 787 Mr.
McNerney had paid more heed to some of his experienced engineers rather than
the slick powerpoint presentations of his finance people, perhaps the 787 would
not have been 3.5 years late and its development cost ballooned to $50 billion.
While I was not involved in any high level meetings at the time the
program started, I am sure that if one of his top managers had even suggested
to him that such might be the ultimate fate of the program, such a manager
would have been given a one-way ticket to the mail room with some angry comment
that "you're not a team player".
Basically, once your boss has
"drunk the cool-aide" you have no choice but to hoist a tankard as
well. "Do I think this will work....? Yes Sir!" It
may be completely different than anything we have ever attempted, so much so
that we cannot even make any quantitative estimate of the chance of failure,
but "yes, I am sure it will work.... Can I please have my raise
now?"
John Biderbost 1 hour ago
Actually, this "new"
philosophy of incremental rather than drastic change was traditional Boeing
development philosphy until around the time that the current CEO, Mr. McNerney,
arrived. Every "new" Boeing airplane between the 747 and the
787 incorporated rather modest changes in design from earlier models. The
standard cliche is that airplane design is an "evolutionary" rather
than "revolutionary" process.
Basically, an airplane is just too
large and complex to make a good business case for "revolutionary"
changes. If a major component is delayed for whatever reason, the delay
cascades through all the other following parts. With so many parts and
complexity the risks of program delays grow exponentially.
Rather than Boeing changing, what
this article really shows is that the CEO, whose background is not in
airplanes, has finally come round to the traditional Boeing philosophy.
As a nervous flyer, I avoid flying
unless I can snag a seat on a 2 aisle plane.
I would fly more often and take
longer trips if they made their 737 or others with 2 aisles.
The two aisle planes are much more
comfortable; load- unload passengers much faster; it doesn't seem like I'm a
sardine trapped like a rat in a small tube.
And with some low cost airlines I
feel like I'm riding in my uncles outhouse for hours on end.
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