Pontifications: A fresh perspective at Boeing Commercial is sorely needed

Hamilton ATR

By Scott Hamilton

Nov. 28, 2016, © Leeham Co.: Boeing last week named an outsider, Kevin McAllister, as the chief executive officer of Boeing Commercial Aircraft (BCA).

I think this has the potential to be an invigorating move.

McAllister comes to BCA from his position as CEO of GE Aviation Services.

I don’t know McAllister and have no opinion whether he will be good, bad or mediocre. But I do like the idea of bringing an outsider in to run BCA. (My insider favorites were Stan Deal and Beverly Wyse.)

Here’s why.

Stagnant, NIH culture

For years, people I’ve talked with inside Boeing Longacres (BCA’s headquarters) on a candid basis complained, sometimes bitterly, of the stagnant, Not-Invented-Here culture that, in their words, permeates the thinking in marketing and product development today.

Those I’ve talked with complain that contrary views to the ingrained thinking not only were discouraged but the contrary thinkers often were isolated. There’s been a talent drain as a result, they say.

Aerospace analyst Doug Harned of Bernstein Research, one of the most positive ones toward Boeing on Wall Street, put it this way in his note last Tuesday, following McAllister’s appointment:

“We see this decision as an important positive step for Boeing. We have long viewed the BCA organization as too insular, with senior positions almost always filled by managers with 20+ years of experience in the company. The problem is that Boeing’s views of its competitors and the market become too Boeing-centric.”

Dedicated lifer

Ray Conner was a dedicated life-time employee and a cracker-jack salesman. He understood the challenges Boeing has with its product line, most particularly the 737-900ER/9, and the growing product gap in the Middle of the Market.

But it is obvious he wasn’t getting any traction in Chicago on these points. Nor was he CEO Dennis Muilenburg’s “man.”

Although Muilenburg was effusive in his praise of Conner last Monday on the media call, analysts and consultants I talked with before and after the announcement believe there was tension between Conner and Muilenburg.

Whether there was or wasn’t, to me, is beside the point.

Outsider Perspective
mcallister_kevin-photo

Kevin McAllister

McAllister is Muilenburg’s choice and with him comes a fresh perspective and fresh ideas, two reasons Muilenburg cited on the media call for going outside BCA. Muilenburg went to great pains to claim McAllister wasn’t totally an outsider. He pointed out that over his 27 years at GE, McAllister interacted with Boeing. McAllister may well be familiar with Boeing, but there’s no getting around he is an outsider.

McAllister’s biggest challenge will be to break up the stagnant, NIH culture and bring fresh thinking through the executive ranks at BCA. Muilenburg gave a clear signal that the latter is pending. He said there will be more leadership changes in the months to come. McAllister’s personnel moves will be interesting to see.

Boeing vs Airbus

Among the inbred thinking within BCA leadership is that it can do no wrong. Market share loss is only through dastardly Airbus cheating, low-ball pricing and those illegal subsidies. (Stay tuned on this one.)

The fact is that Boeing’s once industry-leading narrow-body product strategy has been eclipsed by Airbus. Even though Airbus continues to have weakness in its wide-body product line, the sales numbers over the last 10 years clearly show Airbus reached parity.

The proposed 737-10 is a bad idea that doesn’t fix the problem vis-à-vis the A321neo. The prospect of a 777-10 is dubious at best. A Middle of the Market airplane is sorely needed; Boeing must figure out how to make the numbers work.

McAllister faces these questions in his first months as CEO of BCA.

It’s not an envious position to be coming into.

Thinking cap
Controlling a plane by thought, not hands. Clint Eastwood in the movie Firefox. Photo via Google images.

Controlling a plane by thought, not hands. Clint Eastwood in the movie Firefox. Photo via Google images.

Remember the movie Firefox? It’s a 1982 Clint Eastwood movie about a US pilot (Eastwood) who steals an advanced Soviet fighter that is flown by mind rather than physical control.

Fast forward to 2016. Wired magazine just published a story in which the writer flew a Beech King Air using mind control.

 

 

31 Comments on “Pontifications: A fresh perspective at Boeing Commercial is sorely needed

  1. Early in the move to privatization of “Deutsche Bahn” and after instantiation of a “New Broom” announcing the need for deep Changes mainstream TV did interviews with the workforce asking about what the new boss could possibly mean with “Changes”. The majority responded with a (more or less well cloaked) blank stare.
    More than 20 years later productive change still lingers in the aisles. ( one hopes )

    Reorientation is astonishingly difficult.

    • May I mention the “Stuttgart 21” fiasko?

      By selling the area of the railway station for about 500 Million Euro in 2001 right ahead of the once planed stock market launch the balance was nicely tuned.

      The plan is to reduce the main railway station from 18 platforms to just 8 underground platforms. The expected costs are just 10 Billion Euro (estimation by federal agency of finance – “Bundesrechnungshof”).

      The problem for the rail riders are strange. The trains can move faster but the majority of the passengers will get later to their destination due to missing connections… ( revealed by a study originally thought to show the enhancements by the new rail way station).

      • The “problem” is that, in Germany, conventional and high-speed trains always run from traditional stations in the heart of cities. Unlike, say, Hamburg Hbf and Berlin Hbf , the current Stuttgart Hbf is a terminus (i.e. Kopfbahnhof/Sackbahnhof) where trains that are arriving have to end their journeys or reverse out of the station. Hence, it makes a lot of sense IMHO to upgrade Stuttgart Hbf with an underground 8-track through station when you’ve got a high speed rail system in operation. Even though there are a number of high-speed rail lines in Germany, they are very much integrated into the conventional rail system as the ICE-3s (etc.) always travel from one city centre and on to the next city centre on either a conventional line or on a high speed line.

        In contrast, the French lignes à grande vitesse system (LGV) is completely separate from the conventional network. Where necessary, a specially designed station is located outside a town/city in order to provide access to the LGV system. For example, if you travel on a train à grande vitesse (TGV) from, say, Paris-Gare de Lyon to Marseilles, there are no TGV services from Paris-Gare de Lyon stopping at both Gare de Lyon-Perrache and Gare de Marseille-Saint-Charles — services to stations south of Lyon bypass Lyon in the east. TGVs from Paris to Lyon are usually non-stop and run hourly throughout the day with additional services at peak times.

        Hence, if Germany had followed the French practice of building LGVs, Stuttgart 21 would probably not have been required. Perhaps Deutsche Bahn (DB) suffers from the same type of NIH culture that seems to long since have infected Boeing. 😉

        • Ok guys, I am reading this with interest as a sub text, but I only vaguely see a Boeing connection.

          You will have to define all those people etc for the rest of us non Euro types to get it.

  2. Boeing (like Airbus) has properly walled itself in behind a juridical Faraday Cage the purpose of which is to protect its rejuvenation process from being tainted by outsider IP. Somehow for some (historical ?) reason Boeing have developed a Paranoïa against ideas created outside the realm of their own Engineering Department. Wetted cat fears water ? Try offering new ideas to Boeing and see what happens : their Counsels step into action, talking Lawish jargon full to the brim of words of five or more syllabus, meaning in short layman-speak : your ideas are not welcome here, boy, take them elsewhere, and Good Luck !

  3. Janne Carlzon parodied Georges Clemenceau’s famous citation with his “aircraft design is too important a matter to be left to Aeronautical Engineers”. Boeing’s rejuvenation process requires new blood to be tapped from non-engineering spheres : what about people with airline marketing training, LCC revenue management experience plus insight into air cargo operations and airport ground turn-around management, CRS pricing module piloting plus IFEC revenue generation : try someone really an outsider, such as eg Josep Piqué i Camps or Dame Marilyn McCall or Scott Kirby … ? A General Electric engineering longtimer seems rather a waste, probably prone to monofocused (OPR or BPR etc ?) bias in what is essentially a multiple-skills-dependant BCA theater ?

    • Problem with layers is they don’t grasp the difference between negotiated laws of the legal sphere and the observed regularness of the physical world written down in laws of nature.

      Scientific personnel in management doesn’t have all that bad a track record.

      • We want the BCA executive to understand the “egg and omelette” metaphore. Aircraft operations is basically a YIELD issue, not a cost issue. Scientific or Engineering people are trained to solve the cost paradigm, forgetting about the Revenue Ansatz. The BCA executive decides what intermediate goods at what prices are best for airline service to the End Users (those who pay for the air fare and those whose working place are aircraft or airports). To make an omelette you need to break some eggs. The Engineer will concentrate on what and how much oil you need in the frying pan, regulate the flame and the timer, whereas the Marketing man will serve omelettes, fried eggs, oeufs brouillés, hard-cooked egg, all of them delicately spiced, peppered, salted, nicely presented with some tasty vegetables/bread, in Sèvres china on a nicely set table with damasquinated napkin and serviette … Product Differentiation oblige ! …

        • Never have I read such an amount of tripe in my life….

          (Well, actually, that’s probably a lie. I’ve seen worse, but its still tripe.)

          By far the best person to balance cost vs. capability is the person who understands the nuances the most. That person will not be a powerpoint ranger.

          Unfortunately the world is full of folks who have the slick suit, the overbearing confidence and the brass-neck to “game-change” their way into decision making positions – where they proceed to make an utter balls of things.

          If the world was run by engineers, everyone would be an awful lot better off. Apart from lawyers. But sure who (worth listening to) cares about them?

          • I think it takes a mix, but the bean counters should be 2nd, never first.

            I know its a bit of topic but I think it exemplifies the point.

            In the US for rifles, triggers had gotten to be garbagte to meet the laywer requirmens for safety (you need a winch to get that thing to fire)

            Along comes a new Owner at Savage Rifles and he has his engineers design a safe trigger (uses an interlock) that you can adjust down to a couple of pounds.

            They made a target type that adjusts to ounces (it has a RED blade) Problem solved.

            Best factory trigger ever, before or since.

            He never consulted the company lawyers.

            Bean counters (accountants) and lawyers should advice, they should never run things.

          • TransWorld, Did he use the new rifles to shoot the lawyers?

            Otherwise it all seems an unfortunate wasted opportunity….

          • I have posted a few times that I think one of Boeing´s problems is the disconnect between marketing and engineering. Nobody seems able to take what the customer wants, cut out enought of the wishfull thinking, and build an airplane that covers enought of the customers needs at the customers price. Sort of like they are all living in little boxes. Engineering nees some more say in what is offered.

            I´ve always felt Boeing managers need stop reading their press releases as well, they seem to think that if a PR guy says it then they must be able to do it, at the right price.

          • The decision to build the 707 prototype(367-80) was made by the tax lawyer in charge of Boeing at the time ( Bill Allen), which made sense because the money would have otherwise had to go back to the Federal government in Korean war excess profit taxes.

          • Bill Allen was a rare and unusual person.

            What we have to snuff is the typical and not the once in history exception!

          • To get to the top leadership of any part of Boeing would mean that you are a rare and exceptional person. Its often the support team they have around them that leads to the business itself becoming exceptional as well.

  4. “Those I’ve talked with complain that contrary views to the ingrained thinking not only were discouraged but the contrary thinkers often were isolated. There’s been a talent drain as a result, they say.”

    Similar feedback here. Never underestimate the fall out/ fear / mobility after perceived good guys get escorted to the exit.

  5. The point of a compliance-based culture is to comply. If you want to change a compliance-based culture, you might want to start higher in the hierarchy than BCA President.

  6. How about some real “outside the box”, aggressive change–hire away Leahy! If it’s a minimum of $20MM per year for a decent, NFL starting quarterback, how about at least that for him–guaranteed for three years. And make him a BA vice chairman, fully running the commercial side. Give him use of a 777 or 787-8I whitetail–named the John Leahy during his three year employment, and a similarly named Gulfstream–for his private use–for three years during his retirement! Pitch him that it’s time to “come home, and play for the home team” as a New Yorker. Have the Donald call him with a patriotic pitch on this. ( You never know till you ask! And wouldn’t BA at least get credit for making a run at him, and trying to “turn the world upside down”!)

    • The Randy wouldn’t be happy at all. 🙂

      In other words:
      Leahy at Boeing would be a tour de force
      and not the synergistic success we saw with Airbus.

    • I think we have to credit Leahy for being able to survive and build networks and confidence in the European minefield of the last 25 years. Expanding a US, European Asian and demanding Arab customers base. He apparently knows how to reach out but also when / how to step back.

  7. Now that PIA seems to be looking at A330/A350 or 777x aircraft, and not 787s, Ray Conner’s letter that was addressed to the prime minister of Pakistan may be viewed as too humiliating for Boeing by Mr. Muilenburg — perhaps enough of a reason for Mr. Conner being prematurely retired? 😉


    Ray Conner letter:
    http://seekingalpha.com/article/4002551-boeing-one-letter-tells

    http://www.reuters.com/article/pakistan-aircraft-idUSD5N1CO041

    Pakistan International Airlines is looking at Boeing’s 777X and Airbus’s A330 and and A350 models as it evaluates options for new aircraft orders, an airline executive told reporters on Tuesday.

    As part of its evaluation of potential aircraft orders, the airline was not considering Airbus’s A380 or Boeing’s 787 aircraft, the latter of which has “some technical issues,” said Raheel Ahmed, executive director of human resources and works at the airline.

  8. Whose job would it be to put a stop to the expensive, foot shooting WTO nonsense?

  9. Scott: Thank you for the well thought out perspective.

    Funny but it seems that’s exactly what Mullaly did at Ford!

    Curious if you think he could have pulled it off at BCA (the difference being Ford was sunk and wrote him a blank check which he used to blow open the entire organization, will McAllister have that open check for BCA?)

    Do we really need a German in there with a good solid name like Shultz?

    I thought Connor was an odd choice, I don’t think sales is the key to dealing with BCA. Critically important yes, but the engineering is the key along with vision. I don’t see sales guys with vision. Engineers oddly despite their reputation do have it though they need to be reigned into reality as well. A balance there.

    As a mechanic I can say I don’t have a lot of vision. I just keep things running. Line guy like Connor that went into Sales?

    Ok, stay tuned and see where this goes.

  10. BCA accounts for 70% of Boeing revenue.

    It is troubling that the #1 executive Muilenburg is from the defense side and now the #2 McAllister is from outside the company.

    McNerney’s legacy with unprecedented program cost overrun should have debunked the GE makes great managers myth.

  11. Pingback: » Daily Aviation Brief – 29/11/2016

  12. It seems to me that it doesn’t make much sense to find the “right” CEO for BCA if the Boeing CEO as well as the board all have a non-investment, non-innovation mindset.

    i.e. The Trouble seems to be at the top, not in the middle or the bottom.

    • Aero Ninja put his finger where the shoe hurts : Boeing keeps a drawer somewhere in the cellar of its Engineering Department labelled “Trade Secrets”, full of innovative designs of varying merits, which were all turned down by the Decision-Maker(s) at the top, whatever their motivation(s) at the time … For sure, there will be numerous MOM proposals hidden therein, whether clean sheet designs or MAX 10 variants or 757 MAX re-engining projects (and retrofits), all of them left in sad oblivion because those at the top failed to have kept their belts sufficiently tight around their stomacks … Creativity YES, harnessing and channelling creativity into Product Strategy, probably NOT SO MUCH ?! Here we feel the touch of the BeanCounters and Lawyers, plus the frustration of musseled Marketing people …

        • There is “archive.org” around 🙂

          Quite useful for lost information and
          some rewrites of the 1984 kind.

          Wikipedia page histories can on occasion
          expose some “interesting” changes.

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