2010 Speeches
W. James McNerney, Jr.

Jim McNerney

Chairman, President and Chief Executive Officer

The Boeing Company

"The Courage to Innovate"

Wings Club of New York

November 11, 2010

Thanks for that warm introduction, Jeff [Knittel]. It's great to see so many good friends and industry supporters this afternoon. And Allan [McArtor], let me offer my personal congratulations for the Wings Club Distinguished Achievement Award presented to you last month -- a well-deserved recognition of your years of service to the industry.

I'd also like to add to Jeff's comments a special recognition today for the courageous men and women who have served in our armed forces.

You know, courage has been called "the first of the virtues," because it is necessary for the protection and survival of all of the others, including the gentler virtues of being a peace- and freedom-loving people. Personally, I believe it is one of the most admirable of all human traits.

The United States' position as a world power is a tribute not only to democracy and diplomacy but also to the achievements of U.S. armed forces -- fighting alongside our friends and allies -- in a long list of conflicts, going all the way back to World War One. Powered by a strong military and an even stronger commitment to technological leadership (a point I'll come back to in a few minutes), we also prevailed under the threat of the Cold War. More recently, say over the past two decades, in a world brimming with traditional and non-traditional threats, our armed services have performed with great distinction -- and heroism -- in both military and humanitarian missions.

So, again, to all the veterans here today -- along with all of those who are currently serving in U.S. or allied armed forces and reserves -- thank you for your service!

Next, I must say that while it is a great honor and a privilege to be invited to speak here, it is also a bit humbling. Anyone who addresses the Wings Club in New York follows in the contrails of some of the great immortals in aviation. They range from famous pilots and astronauts, to inventors and scientists (Whittle and Von Braun come to mind), to a long list of brilliant and colorful airline executives, and a roll call of great military leaders.

Indeed, the long and fascinating history of this club reminds us of one of the great attractions of aviation and aerospace: While it does sound a little immodest, we do do impossible things (or at least what others consider impossible -- until we do them).

My company's founder, Bill Boeing, set the tone for us early on, when he said, and I quote: "We are embarked as pioneers upon a new science and industry in which our problems are so new and unusual that it behooves no one to dismiss any novel idea with the statement that 'It can't be done!'"

That enterprising spirit is part of our DNA yet today; it fuels our people's passion for innovation and achievement to this day.

And as everyone associated with this club knows, innovation in our industry -- particularly fundamental, game-changing innovation -- is not for the faint of heart. Therein lies the connection with the virtue I mentioned earlier. That is: whether you design, build or test airframes, engines, systems, satellites, or rockets, innovation in aerospace rarely occurs without a healthy dose of individual and/or organizational courage. And it is the courage to innovate that is the thread which ties the history of aerospace to its future.

Our industry stands in contrast to many others in this way. For instance, the personal computer really was "an insanely great idea." It's hard to imagine life without it. But Steve Jobs didn't put his own life at risk in inventing it, as the Wright brothers did in inventing the first powered airplanes. Or the way a man named Eugene Ely did when attempting the first takeoff of an airplane from an improvised aircraft-carrier deck -- an event, believe it or not, that took place only seven years after Wilbur and Orville flew for the first time.

Ely, by the way, couldn't swim and was deathly afraid of water. Nevertheless, 100 years ago this coming Sunday, he crisscrossed a pair of bicycle inner tubes across his chest as a flotation device and took off from a downwardly tilted deck placed aboard the USS Birmingham. His Curtiss bi-plane dove downward, actually skimming the surface of the water, before rising and flying to a successful landing on shore.

Another aerospace pioneer who exemplified the courage to innovate was Jimmy Doolittle. Doolittle is remembered by most people for his famous "raid" on Japan early in World War II -- leading an attack of 16 North American B-25 bombers from the aircraft carrier USS Hornet. A twin-engined, land-based medium bomber, the B-25 was never meant to fly off the deck of an aircraft carrier. But Doolittle was convinced that it could, and it did.

Two months later, he completed his demonstration with the first successful landing on a ship. And, yes, for all you naval aviators in the room, he recorded the first carrier "trap" because his airplane was equipped with the world's first-ever arresting gear. After the flight, Ely nonchalantly told a reporter, quote "It was easy enough. I think the trick could be successfully turned nine times out of ten!"

I'm happy to say that our industry (and particularly Boeing and its heritage companies) has improved the odds quite a bit since then, with continued innovation across a long line of storied carrier-capable aircraft -- including Boeing F4B bi-planes, Douglas SDB "Dauntless" dive bombers, McDonnell FH-1 Phantom I and F-4 Phantom II fighters, North American T-2 Buckeye and T-28 Trojan trainers, and today's F/A-18E/F Super Hornets and EA-18G Growlers -- just to name a few. I might also mention here that Boeing is proud to be the presenting sponsor of the year-long celebration of the Centennial of Naval and Marine Corps aviation in 2011 -- big deal for us.

What many people don't know is that Doolittle (who won the first Distinguished Achievement Award from the Wings Club, by the way) was willing to risk his career as well as his life in both the service of his country and the advancement of flight.

In the years between the two world wars, he became famous as a test pilot and an aeronautical engineer. He was among the first to recognize that the further advance of aviation required, among other things, that pilots be able to fly "blind" -- with the development of new instruments allowing them to control their aircraft regardless of the range of vision from the cockpit. In 1929, he became the first pilot to demonstrate it was possible to take off, fly and land an airplane using instruments alone.

Thanks to the contributions of Doolittle and countless others, all types of aircraft have become increasingly sophisticated, and increasingly reliable, over time. That has turned flying into the safest mode of travel today. In the United States, flying in a commercial jet, as we all know, is about 70 times safer than traveling by car.

Obviously, not all the advances in aerospace include the high drama of death-defying acts of heroism or piloting skill. Much of the progress that we as an industry make in building better, more capable flying machines comes as a result of small, regular deposits in the bank of technology. In fact, our industry has evolved over time through a dynamic combination of both incremental innovation and true game-changing invention.

For instance, incremental innovation was the dominant force in engine technology advances from the time of the Wright brothers through the building of the most advanced piston-engine airplanes in the 1940s and 50s. These advances, added up over time, led to tremendous improvements in performance and capability.

But, obviously, then came the turbojet -- which marked a sudden and enormous change in the power-to-weight output of airplane engines. It meant that airplanes could go farther, faster and higher than anyone had thought possible. And by capturing the advantage quickly with the 707 jetliner, Boeing stole a march on competitors who were slow to embrace this disruptive technology for commercial transports.

Equally transformative was an earlier shift from wood-and-fabric to metal airframes, which began in earnest following World War One. Terrific improvements in aircraft performance were made possible through new developments in metallurgy, which also enabled the pressurization of cabins. One of the door prizes today is a model of the Boeing 307 Stratoliner, the world's first high-altitude commercial transport and our first step on a continuous journey to bring greater comfort to commercial passengers.

The age of aluminum that airplane pioneered has lasted for more than 80 years now. It spans both piston-powered and jet engine aircraft, spacecraft that have taken men to the moon and back, and many other applications. And during that time, we have witnessed the rise of aerospace from near-infancy to its position today as a profoundly positive global force that touches hundreds of millions of people every day.

Commercial aviation, more specifically, has emerged as a fundamental enabler of global economic growth, moving people and goods quickly, efficiently and safely wherever they need or want to go.

Advances in military aircraft capabilities and related technologies have preserved the peace, reduced the loss of civilian life in war, and aided the rapid response to humanitarian crises across the far reaches of civilization.

Our command of space for communicating on earth -- and exploring the heavens -- has enriched our daily lives. It has helped fulfill our thirst for knowledge and understanding not only of the universe around us but also of our challenged environment here on earth.

Yes, our industry and the companies within it have changed the world in ways we could never have imagined. And we should all be proud of our achievements and the higher purpose they have served.

I think the key question today, nearly 107 years after the magic of Kitty Hawk, is: Can we sustain the pace of innovation ignited there -- and advanced courageously ever since? In other words, can we continue to grow our industry in the face of ongoing economic uncertainty, upstart global competitors, and substantial budget pressures at home?

My answer to that question is "yes." In fact, I believe we are in the early stages of yet another new age of innovation within the industry -- one that will lead to significant growth and expansion in commercial aviation, and exciting (but admittedly less sizeable) new opportunities in defense, space and security.

From a Boeing standpoint, our strategy for capturing this future growth (regardless of the market) is to drive increased competitiveness in our businesses today. We're doing that with an intense focus in two areas:

  • first, customer-based innovation (where we strive to provide our customers a substantial competitive advantage over their competitors) ...
  • and second, making continuous improvements in fundamental productivity in our own shop, not only to fund our investment in innovation but also to sustain it through its inevitable ups and downs. (Because as we all know, innovation doesn't always go as planned, and that's when financial strength becomes ever more important.)

I see this dual focus on innovation and productivity as the basis upon which all established companies like ours can -- and must -- compete against emerging challengers in global markets. It is crucial to business success in a world where globalization and information technology have level-set many other competitive advantages of the '90s and '00s like cost, capacity, and supply chain management.

It should come as no surprise that in our commercial airplanes business, we see the 787 as the flagship for both customer-inspired innovation and the new age of innovation I mentioned a moment ago. As the first truly new airplane of the 21st century, the 787's use of strong, lightweight carbon-fiber composites is no less significant a revolution in airplane design and construction than the change from wood-and-cloth to aluminum 80 years ago. This airplane is redefining the way airplanes will be built for decades to come.

It will also set new benchmarks for environmental performance, including fuel efficiency, reduced emissions, and low community noise. It will use about 20 percent less fuel and be about 30 percent less expensive to maintain than the airplanes it will replace. And it will provide passengers with an unmatched travel experience, including higher humidity and lower cabin pressure for a more comfortable flight.

All in all, the 787 will bring a tremendous improvement in productivity for the airlines that fly it. And that, in itself, will help to spur the future growth of airline traffic for the mutual benefit of the traveling public, the airlines and the global team that builds the Dreamliner.

This was all inspired through collaboration with our customers, who told us they would rather see the 787's technology set applied for greater efficiency and environmental performance (remember the "E" in 7-E-7?) rather than speed in the concept airplane we had called the Sonic Cruiser. That was a very fundamental choice.

Now, the difficulties we have had on the development of the 787 are something we take very seriously. While game-changing innovation of this magnitude is never easy, we've seen more of the bleeding edge of innovation than we'd ever care to see again. So we are adjusting our approach for future programs accordingly with aggressive application of the lessons we've learned -- in many cases the hard way.

In retrospect, our 787 game plan may have been overly ambitious, incorporating too many "firsts" all at once -- in the application of new technologies, in revolutionary design-and-build processes, and in increased global sourcing of engineering and manufacturing content. However, while we clearly stumbled on the execution, we remain steadfastly confident in the innovative achievements of the airplane and the benefits it will bring to our customers and their customers. Our chief test pilot, Mike Carriker, likes to say that this airplane just loves to fly. If you've seen it in the air, you know what that means. And with approximately 850 orders from 55 customers, a lot of people are going to get to love the experience.

At the end of the day, I believe the 787 will be every bit as important, and maybe even more important, to the future of this company than the 707 was to Boeing at the beginning of the jet age.

Opportunities for growth through innovation in our defense, space and security worlds have shifted of late as the Pentagon moves funding away from more traditional programs to the areas of intelligence and surveillance, cyber security, homeland security and unmanned systems. In response to these shifting customer needs, we are expanding our existing portfolio of products and services to align with these priorities, both through internal growth and selective acquisitions.

Over the course of the last 24 months, we have made nine acquisitions to increase our capabilities in these areas -- while also taking even more aggressive action on productivity improvements to ensure the affordability and extend the life of our very capable existing product lines.

In a notable break from the past, we are also investing aggressively in rapid prototyping within our reinvigorated Phantom Works organization. In unmanned systems, for example, we've got several near-operational prototypes whose missions could include intelligence, surveillance and reconnaissance; suppression of enemy air defenses; electronic attack; strike; and autonomous aerial refueling. We're demonstrating systems that span a spectrum from sea to space, and autonomous to remotely piloted vehicles that use petroleum-based fuels, hydrogen and solar power. Earlier this year, our X-51 WaveRider, in its first flight attempt, completed the longest supersonic combustion ramjet-powered flight in history. Next year we plan to fly our hydrogen-powered Phantom Eye high-altitude long-endurance demonstrator, which we think ultimately will be able to stay airborne for up to five years. We'll also fly our sleek Phantom Ray unmanned test bed.

In markets outside the U.S., a significant number of international defense customers are modernizing their inventories, and we see great growth potential in several highly competitive markets such as India, the Middle East and Asia. So we are vigorously pursuing those international opportunities to extend the base of our existing programs, including recently announced potential deals for the U.S. to supply Saudi Arabia with our F-15 fighters and Apache helicopters, the United Arab Emirates with Apaches, and India with our C-17 airlifters. Ultimately, we expect our share of total defense revenues that come from outside the United States to increase from around 15 percent today (and only 7 percent a few years ago), to 25 percent within the next five years.

Looking to the longer term, I am, as I have already indicated, very upbeat about the prospects for the aviation and aerospace industry as a whole. As long as the global economy grows, we can expect world aviation to grow -- and at a faster rate than overall GDP growth. That is a pretty well established pattern.

But I am troubled about how well positioned the United States is to compete in an increasingly integrated and globally competitive economy. We don't have enough time to get into a full discussion of many of my concerns, but I do want to mention a couple of them. Those are: a shrinking U.S. defense industrial base (which circles back to my earlier point about our commitment as a country to technological leadership), and an even-faster shrinking pool of U.S. workers who are skilled in the problem-solving fields of science, technology, engineering and math.

The defense industrial base historically has been one of the United States' greatest strategic assets. Yet for the first time in a century there is no U.S. team actively working on a major new DoD airplane development program. In addition, there is no active new rotorcraft development program, nor is there a new NASA human space flight program.

Now, we know that the U.S. defense budget is likely to get smaller, rather than larger. As that happens, we think it is absolutely critical that DoD, in setting its strategy and identifying which programs to cut, seriously considers the industrial base impact as a factor in making these decisions.  As a result of recent government budget reductions and program terminations (and those expected to come) the U.S. defense and space industry is in danger of atrophying our ability to do development work -- at a time when global competitors are making it a priority.

Compounding the problem is the U.S. talent pipeline. While some countries including India and China are funneling more and more of their best and brightest students into science, engineering and math programs, the number of U.S. students graduating with engineering degrees, in particular, has stagnated, and in some cases, declined.

As a result, despite everything you hear about the "jobs shortage" in the United States (and, don't get me wrong, unemployment is very real problem), Boeing and other technology-based organizations are facing an impending "skills shortage." That is to say, we can't find enough qualified engineers, scientists and other technical workers to meet our needs.

When many of us in this room were growing up, our generation was inspired by the mission of sending a man to the moon and beginning to explore the universe. I hope that we as a nation will find another mission -- or missions -- to inspire and employ today's young people.

The universe still beckons, and there are other missions that we might consider worthy of major investment of time and energy. Envision a world where aerospace vehicles repair themselves, morph into different shapes depending on where they are in the flight envelope, and leave only water as a byproduct -- where today's science fiction becomes tomorrow's standard. We and other aerospace companies are working on such projects today.

In the past, we have always had the courage and confidence to do the impossible. And it's our job to develop that same courage and confidence in the generations to come.