Hello Readers,
In the once-clear skies of aviation dominance, ominous clouds gather over Boeing as its once-revered reputation faces turbulent times.
If you have watched the Netflix documentary on this, then you know about the severity of the downfall of Boeing in recent years along with the stiff competition it faces from Airbus, its fierce competitor.
For the ones unaware of it, “If it ain’t Boeing, I ain’t going” had become a common statement as jet aircraft became synonymous with the company, Boeing. Boeing made air travel cheap and safe.
Boeing started off its journey in the early 20th century with supplying military fighter planes (Model 18) for the US air force in the first world war in 1916 and that is how William Boeing and his coworkers got rich in the first place.
Then they saw an opportunity and ventured into the commercial airline business in 1933 with the Boeing 707. Boeing was way ahead of its competition and could carry more passengers as well as fly more miles with the passengers as compared to its competitors.
Here is the need to understand the working of a product driven business.
Product driven businesses are those whose primary focus is on the quality of the product which was delivered and after that came the profits, share prices and the stakeholder stuff.
Boeing was a highly product driven business run by engineering personnel who even took the company out of bankruptcy situation and that is why it made a name for itself in the 80 years of its operations before……
October 29, 2018, was the doomsday for Boeing as its Lion Air Flight 610 crashed leading to 189 passengers and crew members who were on board the flight. Then the blame game started with Boeing blaming the local pilots that they weren’t qualified enough to fly the plane in the first place and they had faked their qualifications and all that. The Blackbox recordings in the cabins showed otherwise, with the only con from the pilots side was that they weren’t aware of the MCAS system.
Still Boeing made people believe that travelling with them was as safe as ever.
5 months later, the same phenomenon again with another plane crash occurring in Ethiopia. The case of the second 737 Max crash had brought in more speculation. The design of the aircraft was questioned and discussed. The voice recording of the pilots who were flying the plane indicated that they followed the instruction that was demonstrated in the virtual training. Therefore, the question regarding the capability of the pilots could be dismissed hereinafter.
So how did this gargantuan company fail?
It all started in 1996 when Boeing executed a merger with McDonnel Douglas, and Mr. Harry became the CEO and started to outsource operations and contradictory to that, when you outsource you expect to save on costs, but Boeing ended up paying some 12 billion dollars extra to companies like Mitsubishi Kawasaki etc. and even companies from India and other countries in order to get clientele from those countries and eventually led to a mass layoff of over 5000 employees, mind you, these were some of the same employees who had helped the company out of bankruptcy. There was a time when 70% of the strategic design and formation was outsourced by Boeing.
All this led to the diversion of the company’s focus from the product-oriented business it once to a Wall Street loving business. So when American Airlines decided to buy airlines from Airbus instead as they were making more fuel efficient planes, Boeing got a wakeup call.
What is did was, it just tweaked the Boeing 737’s design to make the 737 modified and the catch here was, since the original 737 was already licensed and certified by the airline authorities, the new 737 did not have to wait for another 5 to 10 years before getting certified to fly in the skies again.
50 years ago, when Boeing was genuinely product driven, it had once spent more than 50% of its revenues (not profits!) just to build a single new product, had now, 50 years later, invested just $2.5 billion to get the 737 modified model.
So that is the reason behind the aforementioned crashes and the turbulence in the existence of Boeing.
So what key insights can we take away?
- Boeing’s tragic fall can be attributed to the shift from being a product-driven business, where product excellence is prioritized, to a business-driven business, where profits and shareholder value take precedence.
- Outsourcing operations and breaking down teams led to complications, engineering problems, and increased costs, as seen with Boeing’s 787 Dreamliner program.
- The decision to prioritize stock buybacks over investing in new products hindered innovation and compromised quality, contributing to Boeing’s downfall.
- The lack of communication and training regarding the changes made to the 737 Max’s Maneuvering Characteristics Augmentation System (MCAS) resulted in pilots being unaware of its existence, leading to the crashes.
- Boeing’s fall serves as a reminder of the importance of maintaining a strong company culture and ensuring close collaboration between management and product teams to avoid disconnect and compromise.
- Cost-cutting is necessary for business growth, but compromising on quality and product excellence can have severe consequences, as evidenced by Boeing’s experience.
- The story of Boeing highlights the need for companies to prioritize long-term success over short-term gains, focusing on building great products rather than solely pursuing profits.
So, thank you for reading till the end!
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Originally published at https://chroniclebrews.substack.com.
