AW&ST: You’re saying Boeing will no longer pursue “Moonshots” in developing new programs. That sounds like a shift in strategy.
McNerney: It’s a change in commercialization strategy, not technical strategy. I want to clear up any misperception that we want to be less innovative. We’re going to invest in and stay ahead on those technologies that will differentiate us in the marketplace. The only question is the timing of deployment. There has been a tendency in our industry to hoard technologies and then deploy them all at once in the pursuit of dramatically better performance—but often ignoring the risks. The 787 is a good example of that.
McNerney admits reaching beyond the status quo of aviation. Boeing was trailing Airbus in the perception category for its aircraft. In 2000 Boeing lacked commonality for its family of aircraft. Having a Boeing family back then created a steeper climb for airlines to cross-train its pilots for different Boeing models, since each aircraft is specific in its engineering nature. Airbus back then, had made all its family of aircraft with the same flying avionics and cabin orientation, making it easier for cross-training crews and maintenance from model to model. Boeing stubbornly maintained a individual engineering layout as each aircraft entered the market place. When the "787 Moon Shot" occurred, everything changed. It became the single most important foundation of Boeing, for all its family of aircraft. McNerney does not need another "Moon Shot". The 787 succeeded on so many levels, where other Boeing aircraft cannot absorb all that the 787 can offer from the parts bin . It leaped over Airbus in a one model stroke and shifted the paradigm towards Boeing. All Airbus could do is flinch and imitate at best, but it could not duplicate Boeing's fundamental leap over Airbus. The A350-800 is being dropped, an old A330 concept in being renewed and the A350-1000 is dumped on by the 777X family, which is also borrowing many of its features from the 787 project.
So you weren’t signaling a pullback in Boeing’s investment in technology?
We should work just as hard on technology and invest just as much in R&D and prototyping. But we should spiral programs with more of an eye toward the risk we’re taking and what our customers really need now, versus what they might need later. So it’s a sharper definition of the product, and a shortening of development timelines.
Boeing is now in the pole position since the 787 project, that it doesn't need a continuation of new technology that contains a high risk factor. It needs to refine everything it has just done during the 787 project and other projects from its vast array of development. I hear McNerney saying lets take plastic to the next level. The engines from our builders will keep improving, and other existing technologies that are proven but not yet applied for commercial aviation can come to the table when applications are identified. Risk must be taken into account before attempting a new way.
But the 787 wasn’t Boeing saying, ‘We want to build this.’ Customers were saying, ‘We need this amount of improvement over what we have.’
What I would like to have done is pursued 70 percent of the technology that still would have satisfied 95 percent of [customer desires]. It would have gotten to them quicker, and it would have cost us less. I can think of five or six specific examples of things we did that didn’t add much to the performance or the efficiency of the airplane. We’ve just got to be a little more careful.
Many of the lessons learned from the 787 project is felt by customers in the end game. Air India suffers each day with problems. I don't know why they seem to have a preponderance of the problems such as cracked wind shields, and other issues. They have multiple grounding on a given day. However, the "Moon Shot" went over the heads of many customers who are rooted in a more cautious approach. From Boeing's point of view they needed to get ahead of Airbus because Boeing had been hesitant to take its superior technology forward or were not willing to take risks to get ahead during the last decade of the century. As 2002 came and went you could see Airbus catching Boeing in sales where the customers were pleased with Airbus products in a continuous transition from model to model. Boeing's 767 flew different than the 737 or the 777. The 747 was a whole different type and needed time and money to train its crews. The "Moon Shot" was an exaggeration for the customers, but is exactly what Boeing needed to surpass its rival, Airbus. Customer will start reaping the benefits in great appreciation for ordering the 787-9. They will see the same improvement on the 777X but not over the top with electric driven systems. The 737 Max takes all the refinements found in metal aircraft and new engine technology where plastic bodies on the 737 would not gain enough of an advantage for a smaller aircraft.
McNerney is just restating the reality of Boeing that it finds itself in. This reality contains an immense aircraft playbook, where they can please the customer at any level that customer can relate with, and without adding the kitchen sink to get it done.
Does this philosophy stretch across to military products?
Yes. As more technology becomes available—tools that have promise, on paper, of reducing risks associated with development—the opportunity for self-inflicted wounds is greater. The [
Lockheed Martin]
F-35 and the 787 are examples of maybe too big an appetite at the beginning. The development took too long and cost more than it should have. Examples of where we’ve done it right include the F-18, with its two or three iterations, in which we did something doable at the beginning and spiraled in capability for the next 20 years. The 737 followed a similar path.
Boeing is going to avoid cost overrun like the plague when it comes to the military. The KC-46 project is a prime example. The military has gone to a new procurement format where it expects its contractor (Boeing) not to exceed cost during the development. There is a smaller room for error in its promised delivery for a tanker aircraft. Boeing will stick its neck a bit here, but is redeemed a little bit through its expertise, and the 767 air frame. The new Boeing attitude is to keep it to the plan in both financial costs and production accomplishment. No more Boeing blank checks on any projects, now and in the future.
So are you saying the 787 was a mistake?
That’s not the point I was trying to make—the 787 is a wild success. We built a very compelling airplane, but we could have gotten it into the field a couple of years earlier. It would have cost us less, and our customers would have had 95 percent of the performance sooner. You get excited about these projects, and things creep into the design and you lose discipline sometimes. We just need to be reminded about that.
As mentioned earlier or above it was the necessary leap to jump the competition.
How long do you think the 737 has left to run? Airbus is saying they don’t see a need for a new narrow body until 2030.
That’s probably about right. The 737 MAX and
A320neo represent a bigger step forward than each of us anticipated when we embarked on development. We seriously considered the NSA [new single aisle]—we had competing teams and were trying to assess it. But back to this Moonshot versus spiral, we thought our customers couldn’t wait for a long development on the NSA. We could get a significant percentage of benefit more quickly to them. So I don’t think 2030 is a bad call. That’s what the customers are telling us—they’re ordering [MAXes and neos] in droves.
A long Time is a good answer!
So you see ways of spiraling and further improving the 737?
There are some things we can do, yes. I’m not going to announce them here. The MAX would be the base airplane.
Tweaking The 737 is the continuous improvement model for Quality Management.
When is the market going to want a replacement for the 757?
You’re right to focus on that. I think it’s a matter of up-gauging the narrowbody family. All I can say is we’re keeping a close eye on that and we agree that it is a market that will strengthen over time. We’re trying to figure out exactly what we do about it. We’re looking at a number of options. I don’t want to discuss a timeframe.
Bingo, is the word, The 757 captures the core of my previous answers where Boeing takes its shelved technology and does not make a "moon shoot" out of a 757 redo effort. Boeing can make a 757 out of its new technology that will beat anything Airbus can do at this time. Boeing will wait until until Airbus is done playing around with its NEO stuff in the next couple of years and then precede to build better than what they are able to build in the 200 seat category. Savey!
Boeing is a competitor in NASA’s Commercial Crew vehicle program. If you don’t get it, do you just give up? It seems Boeing makes progress in space when the government is paying. SpaceX is getting government money too, but they have this ‘We’re going to do it anyway’ mentality. Can you look at being more aggressive?
It’s a good question. What [SpaceX CEO] Elon Musk is doing is great. We’ve been trying to figure out how to recapture the imagination of the American people, us stodgy old competitors. Musk has done it, and I give him full credit for that. There are four competitors for Commercial Crew. We don’t think we’re going to lose, but if we should we’ll take a hard look [at the commercial prospects]. It’s hard to build a business case without a pretty large chunk of business from
NASA, but we would evaluate it.
Space is a nebulous subject, so are the resources needed to get there. So McNerney is jettisoning around this subject by saying a business case has not been made for spending Boeing money and making more money off a nebulous investment. Boeing has not reached the point of "betting the farm" on a sketchy revenue producing model that only has a few billionaires willing to venture in this area.
You talk about trying to recapture imagination in space. Doesn’t ‘no more Moonshots’ send the wrong message?
That’s why I tried to differentiate between technical and commercial strategies in my previous answer. We’re investing in IR&D [independent R&D], we’re still trying to make innovative leaps. We are not backing off for a minute. The question is deploying them as they mature, not before, and against clear customer requirements. We’re in a more-for-less world now, and must be smarter [with] aggressive investment in technology and timely spiraling.
A measured approach is needed for every Boeing venture when using other peoples money. Boeing has established multiple bench marks with commercial aviation that will feed from for the next 30 years where Boeing can also make additional improvement for its line of aircraft. Using the literal application of "Moon Shot " for space ventures is placing a descriptive term to a different business model. Using imagination for this undefined business is important, but finding program footing from a customer need is equally important.
If you spiral faster, the innovations are fielded faster.
There’s some tension about the cost of the platform, but you’re right. There’s a case to be made that you can get into the marketplace faster this way. I should use a different terminology than ‘Moonshot.’ It’s the ‘hoard-and-build’ strategy, you know?
The 787 program was pulling Boeing up from the bootstraps from new and raw technology. It was a business incubation period, that would have consequential impact on Boeing's ability to stay ahead of its competition for years to come. The sleeping giant awakened and will continue to feed off its ability to innovate for years to-come as part of its business plan. The commercial aircraft leap with the 787 made Boeing a significant player and not a dead giant. There is no need for Boeing to do one technological transition after another (Moon Shots) when its customers can not keep up with these advances in its own investment for new aircraft. Another "Moon Shot" in succession would drown it customers as well as Boeing. A paced advancement is needed in keeping with its customers own advancements. Airbus has failed to answer Boeing significantly where Boeing can now keep pace with the market changes and still remain ahead of Airbus.
Boeing is uniquely positioned as a defense prime because you also have a robust commercial airplanes business. Is it time to leverage that to increase your IR&D investment in defense and build a commanding lead while the market is down?
We want our Defense, Space & Security business to stand on its own. But the financial strength of
Boeing Commercial Airplanes allows us to make rational decisions. If defense and space were just on its own, we might be tempted to make irrational decisions because it’s a tough time right now in defense. And the rational thing to do now in defense and space is to take down cost structure in the short- and medium-term, while maintaining or increasing the seed corn investment. We do not want to back off high levels of IR&D spending and we’re not. We think it will make us more competitive.
Institutional markets such as military acquisitions is more of a dance. The Government leads the dance out of identified needs and capital resources. Boeing must anticipate that need by speculating on a variety of military issues. One day it could be drones up for bid, the next day its the F-35 program. Boeing has to invest billions into its technology without a guarantee of an award. Even in the area of the Navy or Marines. Technology and skill level are developed in a wide spectrum for the event of a military opportunity rather built on certainty of gaining a contract. Technology on the shelf is a key element for making quickly and under cost what the military may exactly need. Hence, the 767 program for the KC-46 tanker program. Boeing took what it had and made a better product rather quickly.
Boeing is partnering on many defense bids—the U.S. Air Force’s Long-Range Strike bomber with Lockheed Martin, the T-X trainer with Saaband the Army-led Future Vertical Lift with Sikorsky. Does the fact that you haven’t done new programs for a while and want to spread the risk drive this strategy?
I suppose there would be some cases in a very robust defense and space environment—with growth rates that remind you of the 1980s—where you would be tempted to go on your own. But in environments where the timing and numbers associated with that are less sure, you take a harder look at partnering. Partnering [can be tough]. There has to be a true complement of capability and a shared view of how the money gets split. And you have to be convinced you’re going to build something better than you would on your own. If you don’t have those three elements you shouldn’t do it, even in a difficult environment.
Shared risks bring the best to the table.
What’s the plan beyond the C-17, F-15 and F-18? Will you be able to retain the ability to design and build next-generation aircraft as these platforms wind down?
Our strategy is twofold. One is to extend the life of the F-15 and F-18. We have a good shot with the Growler requirement—electronic suppression [attack], even in an F-35 world—and with sales opportunities outside the U.S. to keep those lines going for a number of years. Ultimately there will be a question [about the future] and I think our engineers and production workers are a pretty good match with Uclass [the U.S. Navy’s Unmanned Carrier-Launched Airborne Surveillance and Strike program], Long-Range Strike and even T-X. I am highly confident we’re going to win enough of those to keep it going. That’s the long-range plan.
Drones and Mores Drones
Some see Boeing’s Partnering for Success effort with its suppliers as a one-way street where you derive the majority of the benefit.
In many cases, they are getting more business from us. But they are going through what we experienced—we’ve had to make our factories dramatically more productive and our management structure much leaner. And so we are asking our supply base to do the same, particularly when we take a lot of risks as the systems integrator. Some of our suppliers have dramatically higher margins than we do. We’re not targeting them, we’re just saying that partnering with us means a competitive supply chain from top to bottom. We don’t think what we’re doing injects significantly more risk into the supply chain. We’re asking people to steadily improve their productivity and efficiency over reasonable timeframes.
Supply chain like its airline customers could not relate well in the beginning to the affects of making a "Moon Shot". They lagged behind the reality of the 787, but has gained significant appreciation for the value of that effort and are now making sizable amounts of profits of this partnering with Boeing. They, both the supplier and airlines have established a consistent level of performance with this leap in aviation. In time, the supply chain will exceed expectation and in most cases has already done so.
How serious was Boeing when you threatened to put 777X production outside of Washington state?
Very. We have moved production before. We put out requests for proposals, we risked our reputation. We evaluated about 23 sites, and it was great that it ended up in the Puget Sound area. We were able to restructure our arrangement with some of the best aerospace workers in the world. But would we have moved it if we had not been able to achieve that? Absolutely.
SEATTLE and Everett is not a sacred Cow.
Is Farnborough going to be your last major air show as CEO? Boeing has elevated Dennis Muilenburg to president and it’s pretty clear he’s being groomed to succeed you.
We haven’t made any decision yet. There’s no plan. I’ll be 65 this year but I am going strong. Dennis is being given an opportunity to work in a new job. But, you know, Ray Conner is also a vice chairman of this company. So we’ve got a broad capability around here.
Look, there is a bird flying by the window.
