Boeing vs Boeing’s Stakeholders

The Boeing corporation has had a special place in my heart since I was young, even though I have spent much of my career working for their European rival. As my last assignment on the Sloan programme I was very happy to cover Boeing, delve a little into its current problems, and offer some insight into how it might recover. I enjoyed the research on this topic so much that I decided to share it with you. Unfortunately a lot of it doesn’t make pretty reading, as you might expect..

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A brief history of Boeing

Boeing came into prominence as a commercial aircraft manufacturer in the mid-1950s when it saw a market opportunity to leverage its expertise and create commercial jet powered airliners. At the time this was considered a bold move; several European manufacturers had already tried and failed, some with catastrophic results. However, perhaps more importantly, key customers were very sceptical. C.R. Smith, CEO of American Airlines stated that “the time was not yet ripe for jets, and that nobody would ever buy a Boeing jet” (Leonard, n.d.). The CEO of United Airlines went one step further and placed an order with the then market leader; Douglas, that was purposely large enough to incentivise them to delay jet engine development in favour of maintaining the production of piston engine airliners.

Boeing’s gamble paid off, which resulted in a prolonged period of market domination, effectively monopolising the airline industry and holding a market share of over 90% well into the mid 1980’s (Thomson Reuters, 2012). During this time, Boeing gained an unparalleled reputation for building the best aircraft in the world, which reflected its core focus on engineering excellence (Kay, 2004).

Airbus v Boeing

Figure 1: Boeing vs Airbus market share, 1973 to 2010 (Thomson Reuters, 2012)

Since the 1980’s, Boeing has seen its market share slowly eaten away by Airbus (Refer to Figure 1 above) and the two organisations now share a market duopoly. In March 2019 Boeing entered perhaps the most difficult period of its celebrated history when the latest version of its 1960’s designed 737 ‘MAX’ aircraft was deemed unsafe to fly. There is a strong argument that Boeing’s current predicament has been brought about from an approach of prolonged radical shareholder primacy. A profoundly accurate warning against this approach was given by fortune magazine some 19 years ago:

doesn’t Condit (Boeing’s then CEO) ever worry that 20 years from now people will be writing about the big bet (the next new aircraft) Boeing failed to make? Does he ever wonder what his legendary forebears, who famously scorned bean-counting, would think of a company whose stock price flashes incessantly on the desktops of its executives and the walls of its leadership centre?” (Useem, 2000).

Boeing’s Shareholder Value

Despite relinquishing half of its market share to Airbus, between 2003 and 2018 Boeing’s stock price both outperformed its European competitor and significantly outperformed the S&P 500 (Refer to Figure 2 below). As of 7/3/19, Boeing CEO; Dennis Muilenburg, was credited with increasing market cap from $90bn to $243.9bn. Since he became CEO in 2015 shares had gained 210% (Siesluk, 2019). Most of the improvements were attributed to reducing costs (Siesluk, 2019), and minimising costs to maximise profits has been Boeing’s typical approach since the late 1990s (Irving, 2019).

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Figure 2: Share price performance of Boeing and Airbus vs the S&P 500 (McBride, 2019)

March 10th 2019

Suddenly cracks started to appear, the house of Boeing was not all that it seemed. The product that made up 72% of Boeing’s 2018 aircraft production (Statista, 2019) was ruled as unsafe to fly. The 737 MAX was quickly grounded by airlines all across the world, and current predictions are that it will remain grounded until February 2020 (Finley, 2019). Boeing has set aside $5bn in compensation to cover the costs of these grounded aircraft (Isodore, 2019), which is more than the $2bn-$3bn cost to develop the entire aircraft (Ostrower, 2012). This event caused an immediate 18% drop in Boeing’s share price, and as of Q3 2019 the Boeing group’s top line was down 19% compared to the previous year. Boeing may now be “facing the worst crisis in its 103-year history” (Hemmerdinger et al., 2019).

Cause and Effect

There is strong evidence that by focusing only on shareholder value Boeing have mastered their own downfall. It is noteworthy that just one year after Boeing’s 1998 announcement that shareholder value is “the principle measure of our success” (Boeing, 1998), Airbus had its first year where it enjoyed more aircraft orders than Boeing (Spiegel, 2019). 20 years have passed since this watershed moment and looking at Boeing’s R&D investment over the last 10 years shows that they still haven’t been willing to invest to counter this now well-established rivalry. Boeing’s R&D spend as a percentage of sales has been less than half of it’s European rival since 2010 (Refer Figure 3 below).

R&D

Figure 3: R&D spend as percentage of group revenues for Boeing and Airbus (Statista, 2019)

Boeing’s lower R&D spend correlates when comparing the price and performance characteristics of the two organisations’ current single aisle aircraft. Even without the safety concerns surrounding the 737 MAX aircraft, for the same price you can purchase an Airbus A321 that can carry more passengers for a longer distance (Refer Figure 4 below). The 737 is the most popular aircraft in history; but chasing shareholder value has resulted in Boeing having an inferior product to its main rival in its most important market segment. Although being bridled with an inferior product is certainly problematic for Boeing, this is by far their only problem. As the next section illustrates, it is Boeing’s mismanagement of stakeholder relations that now needs fixing perhaps even more so than its aircraft.

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Figure 4: Boeing and Airbus’ current single aisle aircraft specifications (Cummins, 2019)

20 Years of Stakeholder Mismanagement

There are many aerospace protagonists that attribute the origins of Boeing’s current crisis to an event that occurred over 20 years ago; Boeing’s 1997 acquisition of McDonnell Douglas. The rationale behind the deal was sound; McDonnell Douglas was a specialist in military aircraft, Boeing was the commercial aircraft market leader. Combining the two organisations offered the corporation a capability to shift its operations to match the fluctuations in demand from one sector to the other, which tend to be counter cyclical. Additionally, Boeing had recently been shortlisted by the U.S government (at the expense of McDonnel Douglas) to provide their next generation military aircraft, McDonnel Douglas’ expertise with such products would assist Boeing’s aspirations to win this lucrative contract.

Another consideration was the low purchase price; McDonnel Douglas was struggling to remain solvent following the U.S government’s decision to not short list their proposal for their next generation aircraft. However, this is also the biggest point of contention for the commentators of the era. The fact that Boeing; a civil aircraft specialist, had been selected ahead of McDonnel Douglas to potentially supply a military aircraft indicated how just how much McDonnel Douglas had lost its way. This is even more pertinent when considering that the same commentators also attributed McDonnel Douglas’ decline to cost cutting and improving the bottom line at the expense of longevity. Thus, a business renowned for engineering excellence and courageous decision making (Boeing) was married to a business that was risk averse, focussed on operational efficiency and struggling to survive.

Ultimately, this marriage created a business that increasingly mirrored the McDonnel Douglas mantra “to maximize short-term shareholder value—at the expense of what’s good for nearly everyone but the shareholder” (Georgescu, 2019), culminating in the situation as described below from the perspective of Boeing’s relevant non-shareholder stakeholders.

Employees

“For many decades of Boeing’s history, most employees were immensely proud of where they worked” (Spiegel, 2019). If you consider that every commercial aircraft currently sold by Boeing, except the 787 models, was originally developed during Boeing’s ‘golden era’ of market domination, Boeing is still heavily reliant upon the historic achievements of its workforce during this period. However, this reliance on historic achievements is also what created the flawed 737 MAX aircraft. Perhaps more worryingly, a once celebrated working culture is now replaced by an environment where employees fear for their jobs if they raise concerns (Edmondson, 2019), these conditions are not conducive of innovation and creativity, at a time when Boeing needs it most.

The culture clash between Boeing’s traditions and those of McDonnell Douglas likely contributed to this change, as did the protracted conflict between Dennis Muilenburg’s predecessors; and Boeing’s unions (Spiegel, 2019). The Boeing union members “were fighting to save Boeing” (Useem, 2000), while the Boeing leadership moved the HQ out of the Boeing heartland of Seattle to Chicago, and half of the 787 production to North Carolina. North Carolina had no qualified mechanics and engineers in the region, but it also had the lowest union membership in the entire U.S.A (Spiegel, 2019).

Boeing used to count on its staff as a key organisational capability that offered it a strategic advantage. Much of Boeing’s brand identity came from the engineers within the organisation. Today Boeing is used as an example of what impact a toxic culture can have on a business (Edmondson, 2019).

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Competition

There is an argument that the commercial aircraft sector is large enough that both Boeing and Airbus could happily operate alongside one another without hostilities, collaboration could in fact benefit both companies. However, when Airbus emerged Boeing instead opted to go to war with them, using pricing, complaints to the WTO and public shows of one upmanship to fight their battles (Spiegel, 2019). What Boeing failed to do however was invest heavily in its R&D so that its products were superior to its bitter rival’s. The result is an ultra-competitive environment where Boeing are relying upon power to coerce stakeholders, rather than product quality, in order to secure their market share.

This approach has backfired recently. Boeing attempted to prevent Bombardier from selling its new aircraft into the U.S market, seeking 300% import trade tariffs to be imposed against them for alleged dumping. This ended up pushing Bombardier into the arms of Airbus. Bombardier was likely to sell 300 of its new Aircraft, but now Airbus plans to sell 6,000 (The Economist, 2019). This action has also had a negative impact upon some key customer and government relationships, as covered below.

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Customers

Considering Boeing’s original brave move into the jet airliner market, it is somewhat ironic that at least part of the reason for persisting with upgrading the venerable 737 rather than producing a new aircraft was from the insistence of its customers. Keeping with the 737 was preferred by customers as it negates pilot training costs. However, it was similar short-termist pandering to customers that got Boeing’s main competitor into trouble in the 1950’s and enabled Boeing to seize a near monopoly. History seems to be repeating itself, but this time to Boeing’s detriment.

A combination of Boeing’s 737 safety issues plus its actions against Bombardier means that it is now facing loss of sales from many key customers, as concerns for both Boeing’s products and behaviour have provoked worldwide negative reactions. This has contributed to Boeing receiving orders for only 170 aircraft in 2019 compared to 603 aircraft ordered from Airbus (Katz, 2019).

Governments

Boeing has publicly aligned itself with the Donald Trump administration, backing Trump’s ‘America first’ rhetoric, while also having him unveil their 787 Dreamliner. Not surprising when considering that Boeing has received $14bn in subsidies from the government over the last 20 years (Helmy, 2018), however being so publicly aligned to protectionist policies is also harmful for a company that relies on exports for 66% of its sales volume (Statista, 2019).

The U.S vs China trade war, combined with the Chinese airline Lion Air 737 MAX crash in 2018 have  placed a serious dent into new orders for Boeing in a market that accounted for 25% of its sales volume in 2018 (Statista, 2019). Conversely Chinese Airlines alone currently accounts for 50% of Airbus’ aircraft orders in 2019 (Adams, 2019). Additionally, Boeing has alienated the Canadian and British governments through its treatment of Bombardier, both of whom have vested interests in the company. This has resulted in Canada cancelling a $5bn order with Boeing for military aircraft, choosing instead to purchase older alternatives from the Australian government (Pugliese, 2018). Comments given in the same press conference from the Canadian prime minister; “We won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business” and the UK’s defence secretary:  This is not the behaviour we expect from Boeing, and it could indeed jeopardize our future relationship with them”(Aleem, 2017) shows their united dissatisfaction with Boeing.

Regulatory

As the 737 MAX saga continues to unravel, there are numerous reports that Boeing’s management were aware of the potential safety issues but failed to notify the Federal Aircraft Administration (FAA) as they were so desperate to get the upgraded aircraft onto the market. The integrity of the FAA is now being questioned along with that of Boeing. Regardless of blame, the FAA will be very keen to prevent any similar issues in the future, and thus it is unlikely Boeing will enjoy the freedom and trust that they have previously enjoyed (Reynolds, 2019).

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Stakeholder management

Just as Boeing’s focus on shareholder value is starting to show serious flaws, the U.S’ business roundtable; an organisation that represents the leaders of the U.S’ largest businesses, has made a statement of intent to move away from shareholder primacy (Business Roundtable, 2019). This is a very different sentiment to the statement that it released in 1997: “The principle objective of a business enterprise is to generate economic returns to its owners.” (Crilly, 2019).

Boeing is well advised to follow suit, moving away from radical shareholder primacy approach and towards a stakeholder capitalism approach. Using the criteria shown in the stakeholder assessment model in Figure 5 below it is possible to assess the importance of each stakeholder, helping with prioritisation. A proposal for Boeing’s priorities and approach with regards to their stakeholders is given below.

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Figure 5: Stakeholder attributes (Crilly, 2019)

Priority 1. Regulators. Power: High. Legitimacy: High. Urgency: High

Boeing’s number one priority is to restore trust in the certification authorities, without their co-operation they stand to lose 72% of their aircraft sales. This can only be done by being voluntarily transparent, which will require a measure of psychological safety provided to Boeing’s staff.

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Priority 2. Suppliers. Power: High. Legitimacy: High. Urgency: High

Although Boeing are part of a duopoly in the aircraft market, aircraft production is limited by the availability of key components, such as engines and high-performance materials. This is a critical time for Boeing as they have had to lower their 737 production to 26% below forecasts (Youn and Kaji, 2019). If Boeing’s suppliers opt to re-channel deliveries to Airbus, then this will offer the European firm the opportunity to increase its production volume and thus market share. It is in the suppliers’ long-term interests that neither Boeing or Airbus gain enough market share to get monopolistic control of the market. Boeing need to use this to gain support from its suppliers during its current tough times.

Priority 3. Employees. Power: High. Legitimacy: High. Urgency: Medium

Boeing’s fall from innovation leader due to questionable integrity and product quality mirrors the worsening relationship between its leaders and employees. Aerospace engineers the world over still aspire to work in the U.S. (ECORYS, 2009). Boeing should take advantage of this, becoming an empowering place to work, and regaining the internal brand identity that previously brought success.

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Priority 4. Competitors. Power: High. Legitimacy: High. Urgency: Medium

Airbus and Boeing would benefit from more collaboration rather than higher competition, and Boeing should be strong advocates of this, not least considering the imminent market entry of the Chinese and others. A good example to follow is the German automobile industry; participants have collaborated with one another to improve their capabilities, becoming stronger both together and in their own right.

Priority 5. Governments. Power: High. Legitimacy: High. Urgency: Low

A balance needs to be set by ensuring the U.S government is engaged enough to provide Boeing the support it needs, but without alienating foreign governments, and thus jeopardising exports. Boeing’s defence division may depend increasingly more upon exports for revenue, as the U.S government is moving away from the Boeing F-18 aircraft, replacing many with Lockheed Martin’s F-35.

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Priority 6 Customers. Power: Medium. Legitimacy: High. Urgency: Low

In a market of low elasticity of supply and high demand, customers have little choice but to purchase from Boeing unless they choose to wait several years for an Airbus aircraft (Pfeifer and Spero, 2019). With this considered, Boeing need to recapture their visionary spirit with which they once transformed the aircraft industry, rather than cater to customers short term requirements. History has shown that airlines will ultimately pick superior performance and efficiency over short term convenience.

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Priority 7 Shareholders. Power: High. Legitimacy: High. Urgency: High

Shareholder value is likely to be high on the Boeing management’s agenda, and it is also likely that the board are having to answer some very difficult questions asked of them. However, as the four largest shareholders sit upon the Boeing board (Maveric, 2019), they should use their influence to gain confidence from other shareholders, offering assurences that their long term interests are aligned. The key will be convincing investors that short-term pain may be needed for long term gains, but never in Boeing’s history has there been a stronger case for change. It is up to the board to sell how important rebuilding Boeing’s brand image and cultivating strong bonds with the other stakeholders will be for their recovery.

Conclusion

Boeing is facing many challenges. There is strong evidence that attributes these challenges to their change in philosophy over 20 years ago; away from excellent products, and more towards cutting costs and providing shareholder value. This philosophy change can in part be justified; Boeing have seen intensified competition in the years since, due to becoming one half of a fiercely contested duopoly. However, there is a difference between saving costs through operational excellence and gaining profits and enterprise value for shareholders at the expense of all else.

To recover from this crisis, Boeing will need to convince more than just the financial analysts that they are making meaningful changes. Once again, they will need to change their philosophy, this time to one that considers all stakeholders. Such changes will not be easy, and will not be quick, due to the time lag in product lifecycles it could once again be 20 years before these changes fully take effect.

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References

Adams, C., 2019. AIRBUS INKS MULTIBILLION DOLLAR ORDER WITH CHINA [WWW Document]. Independent. URL https://www.independent.co.uk/travel/news-and-advice/airbus-aircraft-boeing-china-chinese-airlines-737-max-a8840096.html (accessed 11.6.19).

Aleem, Z., 2017. The US just picked a nasty trade fight with Canada — and it’s likely to backfire [WWW Document]. Vox. URL https://www.vox.com/world/2017/9/27/16373156/boeing-tariff-bombardier-canada (accessed 10.30.19).

Boeing, 1998. Boeing Adopts Measures for Attaining Increased Shareholder Value [WWW Document]. Boeing. URL https://boeing.mediaroom.com/1998-07-23-Boeing-Adopts-Measures-for-Attaining-Increased-Shareholder-Value (accessed 11.11.19).

Business Roundtable, 2019. Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’ [WWW Document]. Business Roundtable. URL https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans (accessed 11.6.19).

Crilly, D., 2019. Corporate Governance and Stakeholder Relations.

Cummins, N., 2019. The Boeing 797 Could Transform Low Cost Carriers In Ways The 787 Can’t [WWW Document]. Simple Flying. URL https://simpleflying.com/boeing-797-low-cost-travel/ (accessed 10.30.19).

ECORYS, 2009. Competitiveness of the EU Aerospace Industry (No. Ares(2015)2205905-). European Commision.

Edmondson, A., 2019. Boeing and the Importance of Encouraging Employees to Speak Up. HBR.

Finley, M., 2019. Boeing 737 MAX Expected To Fly Again In Europe By Feb 2020 [WWW Document]. Simple Flying. URL https://simpleflying.com/boeing-737-max-expected-to-fly-again-in-europe-by-feb-2020/#:~:text=Boeings%20grounded%20737%20MAX%20is,the%20air%20by%20February%202020. (accessed 11.5.19).

Georgescu, P., 2019. Boeing and Business Governance [WWW Document]. Forbes. URL https://www.forbes.com/sites/petergeorgescu/2019/04/17/boeing-and-business-governance/#3e17f2977d98 (accessed 11.6.19).

Helmy, S., 2018. Airbus Bites Boeing By Advancing On Alabama A220 Assembly Line [WWW Document]. Simple Flying. URL https://simpleflying.com/airbus-bites-boeing-by-advancing-on-alabama-a220-assembly-line/ (accessed 10.29.19).

Hemmerdinger, J., Wolfsteller, P., Reim, G., 2019. Why Boeing faces its worst crisis in its 103 year history [WWW Document]. Flight Global. URL https://www.flightglobal.com/news/articles/analysis-why-boeing-faces-worst-crisis-in-its-his-461748/ (accessed 11.5.19).

Irving, C., 2019. How Boeing’s Bean-Counters Courted the 737 MAX Disaster [WWW Document]. The Daily Beast. URL https://www.thedailybeast.com/how-boeing-bean-counters-courted-the-737-max-disaster (accessed 11.6.19).

Isodore, C., 2019. 737 Max grounding will cost American and Southwest Airlines more than $1 billion [WWW Document]. CNN. URL https://edition.cnn.com/2019/10/24/business/american-airlines-southwest-boeing-737-max-costs/index.html#:~:text=New%20York%20(CNN%20Business)%20The,through%20the%20end%20of%20September. (accessed 11.5.19).

Katz, B., 2019. Airbus Pulls Far Ahead of Boeing in New Jet Orders, Deliveries [WWW Document]. Wall Street Journal. URL https://www.wsj.com/articles/airbus-pulls-far-ahead-of-boeing-in-new-jet-orders-deliveries-11572369091 (accessed 11.6.19).

Kay, J., 2004. Obliquity.

Leonard, J., n.d. Overwhelmed by Success: What Killed Douglas Aircraft. Haas School of Business.

Maveric, J.B., 2019. The Top 4 Boeing Shareholders [WWW Document]. Investopedia. URL https://www.investopedia.com/articles/insights/052116/top-3-boeing-shareholders-ba.asp (accessed 11.6.19).

McBride, S., 2019. How We’ll “Get Rich Slowly” from the China Trade War [WWW Document]. Risk Hedge. URL https://www.riskhedge.com/post/how-well-get-rich-slowly-china-trade-war (accessed 11.4.19).

Ostrower, J., 2012. Boeing Disputes 737 MAX Cost Estimates [WWW Document]. FlightGlobal. URL https://www.flightglobal.com/news/articles/boeing-disputes-737-max-development-cost-report-367504/ (accessed 11.5.19).

Pfeifer, S., Spero, J., 2019. Airbus cannot build fast enough to replace Boeing’s 737 Max [WWW Document]. Financial Times. URL https://www.ft.com/content/a495bc06-49a6-11e9-bbc9-6917dce3dc62 (accessed 11.6.19).

Pugliese, D., 2018. First used Australian fighter jets now flying in RCAF colours with more to come [WWW Document]. National Post. URL https://nationalpost.com/news/canada/first-used-australian-fighter-jets-now-flying-in-canadian-colours-plans-underway-to-extend-jet-fleet-to-2032 (accessed 10.30.19).

Reynolds, M., 2019. Boeing had too much sway vetting its own planes, FAA was warned [WWW Document]. Bloomberg. URL https://www.latimes.com/business/la-fi-boeing-faa-warnings-20190317-story.html16/11/19

Siesluk, K., 2019. We Examine Boeing CEO Dennis Muilenburg’s Strategy For Improving Profitability [WWW Document]. Simple Flying. URL https://simpleflying.com/we-examine-boeing-ceo-dennis-muilenburgs-strategy-for-improving-profitability/ (accessed 10.29.19).

Spiegel, 2019. Boeing’s Crashes Expose Systemic Failings [WWW Document]. Spiegel. URL https://www.spiegel.de/international/business/737-max-boeing-s-crashes-expose-systemic-failings-a-1282869-2.html (accessed 11.6.19).

Statista, 2019. Airbus and Boeing Dossier (Dossier No. did-9503-1). Statista.

The Economist, 2019. Why Airbus’s tie-up with Bombardier is so damaging for Boeing [WWW Document]. The Economist. URL https://www.economist.com/business/2017/10/19/why-airbuss-tie-up-with-bombardier-is-so-damaging-for-boeing (accessed 11.6.19).

Thomson Reuters, 2012. Airbus market share pitted against Boeing [WWW Document]. Thomson Reuters. URL https://blogs.thomsonreuters.com/answerson/airbus-market-share-comparison-boeing/ (accessed 10.30.19).

Useem, J., 2000. Boeing VS. Boeing America’s export champion is going head-to-head with a company even tougher than Airbus: itself. Fortune.

Youn, S., Kaji, M., 2019. Boeing may halt 737 MAX production if planes stay grounded through 2019 [WWW Document]. ABC News. URL https://abcnews.go.com/Business/boeing-halt-737-max-production-planes-stay-grounded/story?id=64536463#:~:targetText=Boeing%20may%20halt%20737%20MAX%20production%20if%20planes%20stay%20grounded%20through%202019,-By&targetText=Aerospace%20company%20Boeing%20has%20not,CEO%20Dennis%20Muilenburg%20said%20Wednesday. (accessed 11.7.19).

 

Digital transformation in the aerospace industry… Really??

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A brief post to offer some musings to my comrades in the Aerospace industry. Hopefully you’ll find this helpful, and if not immediately helpful, then at least it will offer some food for thought…

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One of my first subjects on the LBS Sloan programme has been ‘Leading the Market Driven Organisation’. I won’t shy away from the fact that I didn’t get much exposure to the principles of marketing while in the aerospace industry; most clients are either government or large multi-national organisations. You don’t often find people wanting to buy an aeroplane, or an aeroplane  component, because they have just seen an advert on SkySports, or because someone dropped a leaflet through their letterbox.

Considering the above, you can forgive my initial response to the recommendation to “transform my industry through digitisation”, as stated in my course text book. I’m sure many of you currently in the industry would agree; this sort of thing doesn’t apply to aerospace… Or does it…

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…It was only a little later in the day when I started to think about pain points and problem areas when I had a Eureka! moment. For my last client, on my last project, by far the biggest pain point was managing suppliers and late delivery of purchase orders. Unfortunately there are suppliers out there who seem very intent on winning orders and making promises, but not so good at delivering parts. One particular supplier we used had promised some components within 10 weeks, but we were still pulling our hair out due to non-delivery way beyond this time.

In the business to consumer world there are simple tools available to prevent poor supplier performance. For individual consumers, consider the ratings systems put in place by organisations such as Amazon and Ebay. For suppliers offering loans and mortgages, consider credit rating platforms such as Experian and Noddle.

This is when the penny dropped. Why isn’t there a business to business rating system? Even better, a transparent tracking system that links to each business’ MRP system and shows what orders are overdue. If banks and financial institutions can do it with individuals’ bill payments for credit ratings, then it must be possible for other industries. This application would have a profound affect; as businesses that were unable to fulfill their orders as promised would not likely win future work. This would reward productive and well run organisations and encourage other businesses to follow suit. I predict that over time this system would improve productivity of the entire industry value chain…

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…After all, we can put man made objects into space, and fly objects around the globe heavier than  double-decker buses, with an unparalleled safety record. So  surely we can  create a simple system that protects buyers, and drives all suppliers to improve productivity?

This problem is crying out for a solution that could completely transform the aerospace industry; and through the simple use of tech that has been readily available in everyday life for over a decade. Maybe this is a business venture that I will explore once I am finished with my studies…

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So thinking a little smaller and immediate, how can the ‘individual’ take advantage of this ‘problem’ right now? Well while the industry waits for an encompassing platform to arrive, there will be demand for small consultancy services that organisations can use to provide supplier due diligence prior to placing critical purchase orders. This process happens already, but it usually happens in-house and is focused on how solvent a supplier is – will they go bust before they produce my parts? We should also concentrate on how many of a supplier’s current orders with other clients are overdue – if they can’t fulfill current orders, then they will not likely fulfill ours either. The key to this challenge is where do you gain access to such information? The fact that sourcing this information is not easy means that organisations will be willing to pay for it.

Finally, a low hanging fruit to consider when you are writing proposals and responding to client’s request for quotes: If you are a well run productive business; why not place some data at the back of your next proposal that shows your historic delivery performance? I have never seen this in a bid for work from a supplier, yet when I am mid project with muck and bullets flying all around me, time is the most important consideration. Why not try this approach? If you win more work, feel free to buy me a beer!

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The above is all a brief brain dump of my thoughts. I would be really happy to talk further on the topic, or discuss any similar ideas that you readers may have in relation to this. Do you think you could help make any of the above a reality? Then please drop me a message.

My time after Airbus Defense and Space: Aerospace!

Following on from my post earlier in the week, this post covers a brief run down of my thoughts and feelings of my time since I left the Space Industry and joined the world of short term contracting as a project manager within the similar but oh so different Aerospace Industry.

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Although many of the engineering and manufacturing processes within the Space Industry are inherited from their lower flying cousins produced in the Aerospace industry, the business philosophies seem to differ significantly.  The Aerospace industry is in general much faster paced, there is a significantly more cut-throat mentality, and it contains many big egos (which belong to some very successful and effective personnel).

There also seems to be tangibly more chaos and fire fighting on most projects, staff turnover is higher (people float from company to company in search of better wage rates), and I have often witnessed many scenarios similar to children playing a football match – with everyone running around chasing the ball without much consideration for formation, or the ‘bigger plan’.

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I would say personally that I learned a lot of good practices and engineering judgement within the Space Industry. Within the Aerospace Industry I have really learned about people management and the art of ‘getting things done’ amongst and despite the reigning chaos.

So what do I prefer? I will always have a special place in my heart for the Space industry, and unlike many people, the thought of producing aircraft doesn’t excite me that much. However, the buzz of having to work at 100 miles an hour, making sure that everyone is bearing up against the pressure to do what they need to do, healing rifts between egos, spinning plates while maintaining relationships with stakeholders from all angles, really is tough to beat.

As I don’t naturally have a very commanding presence, working with many big egos, and with people who have inherently more experience and knowledge of the products than myself, I have been forced to develop my soft skills in order to manage my teams. I am now more than ever a strong advocate for empowering the people that I work with wherever I can, I take the time to show appreciation (a very rare thing from my own personal experience) and give praise for achievement, and I try wherever possible treat people like people; they (mostly) have an uncanny knack of doing the same in return. If you can let people do what they are good at, and guide them through doing things in a certain order that makes logical sense and minimizes risk of having to scrap their work and start again, most people will be grateful to have trust and confidence invested in them.

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The Aerospace industry certainly can be bad for your health; there are plenty of lost souls who have been completely consumed by their work to the detriment of their life as a whole, due to the demands it brings. But it does take you on one hell of a ride. I am unsure that I would like to commit to such a skewed work life balance for my whole career, but these last 7 years have been an incredible journey and learning curve that will stay with me forever.

It has allowed me to work in cities such as Manila and Madrid, simultaneously manage teams based in Europe, North America, and the Far East. It also gives me several ‘FFS’ moments each and every day I spend within it, often leaving me baffled as to how things so seemingly simple can go so horribly wrong. But this harsh mistress has kept me coming back for more.

My time at Airbus Defense and Space

I bring my post hiatus to a close with a brief summary of my career to date, starting with my extended (14 year) apprenticeship Airbus Defense and Space.

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Although I have submitted my CV as part of my admissions process, I am expecting to answer questions on my career to date, and my thoughts and feelings on my professional life so far. This post acts as a medium to commit my thoughts to print in order to help me articulate them when required during my interview at the end of this week.

I joined what was then Matra Marconi Space, soon to be Astrium, and is now Airbus Defense and Space, at the ripe old age of 18 in 1997. To this day I feel very blessed to have the opportunity to serve my 14 years at this company; I learned so much, met some cherished friends and colleagues who I still hold dear to me now, and most importantly from a professional perspective I was immersed into a very well run company that taught me many of the values and robust processes that I have taken with me throughout the rest of my career.

Immediately at interview stage I was offered the opportunity to study for a BEng degree part time, fully funded by the company, an opportunity beyond my wildest expectations, I would not have had the capital to afford to study otherwise, and has directly contributed to where I am today. I could not imagine where I would be now if this opportunity hadn’t have revealed itself to me.

In addition to this, I was exposed to the fast-paced culture change that was underway at that time within the organisation, as I describe at the end of my earlier post Notable Leaders #1: My early years. Looking back, many of the nuances and philosophies I learned I may have taken for granted at the time, it was not until later in life that I fully appreciated the value of what I was taught.

When considering the above, it doesn’t even factor in that it also enabled me to work within the fascinating space industry; something that in my young ignorance I didn’t even know existed within the U.K. I was a keen want-to-be astronomer as a child, and to fall into this company almost by accident was quite literally a dream come true.

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Throughout my time there I was given ample opportunities to change career within the organisation, something that contributed to me spending such a long period of my professional life there. I started within the manufacturing department, learned many of the new age philosophies introduced by companies such as Toyota that are now considered mandatory for any world class manufacturing facility. I then moved into operations and project management, before moving into mechanical engineering where I spent most of my time; working on mind boggling prototypes such as space telescopes and vehicles that are destined to orbit around the planet Mercury.

A few key take aways for me:

Innovation and Product development

Because the cost of failure in space is so severe, launch costs plus the almost impossibility of repair in service (the Hubble Telescope is one notable exception), the cost of qualifying new materials and processes is extremely high. I initially found this concept a little frustrating; to be working on the frontier of technical possibilities without introducing new technologies seems a bit of a paradox. What it breeds however is a very innovative use of tried and tested technologies in new ways – this in itself is innovative. A philosophy of ‘how can we use what we already know to solve a completely new problem’ is a valuable skill to have. It encourages a resourcefulness, encourages you to keep things simple – sexy isn’t always the best, practical solutions are engineering 101.

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Creating a social and pleasant working environment

This was approach was apparent across all sites and contributed to me making so many cherished acquaintances. It was especially apparent at the French sites that I visited. A philosophy of look after your staff, make them feel like they are members of a social club rather than an organisation has stuck with me. The exceptional canteen facilities, a beautiful working environment, modern working hours with flexible working, and a multitude of extra curricular activities gives staff a sense of pride and belonging which in turn cultivates a family atmosphere. I see parallels here with the likes of Google who are championing modern management philosophies, and such ‘soft’ benefits directly contribute to operational excellence.

Robust processes, and championing doing things right first time

This one may seem obvious but  It wasn’t until I left the organisation that I realised how well run this company manages to efficiently produce prototypes without (too much!) fuss. This is enabled by having very robust processes and practices, from configuration control, to risk management, to boring but important cost management techniques. People are encouraged to take the time to do things properly, this may be a luxury offered to few industries other than the space industry, but from my experience since I have moved on,; taking this approach almost always saves time in the long run – and it also breeds a technical pride from team members and employees.

So thanks to you Airbus Space, you were a charm!