Chairman and CEO
The Boeing Company
Rotary Club of Seattle
March 22, 2000
Thank you, Shan, for that introduction. Thank you, Bill, for the invitation. And thank you, Jim Johnson, for the real invitation.
It took a while for me to get here. Jim invited me a year ago; I just finally found the way. It is always delightful to talk to Rotary. The serious, "reverent" approach that this group has (laughter) always makes me feel at home and welcome. So I will try to be equally serious and reverent.
There are a lot of things that I could talk about today...that I could talk about with a great deal of passion. I could talk about the strike that we've just had and its causes and how it got resolved. I could talk about transportation in the Seattle area and tell Inner what I think needs to be done. There's a lot we need to do, and it's something that is vitally important to this area. As Shan said, I could talk about China PNTR and how important that is and how important world trading system is. I could talk about arts and Seattle, and why all of you ought to make sure that your subscriptions to ACT are updated because I'm the president of ACT. I could talk about education with tremendous passion, and I could talk about Boy Scouts with equal passion.
But we don't have that long so I'm going to talk about the future of Boeing, a subject that I can really get passionate about...about transforming Boeing as we enter a different age.
About the time many people thought that aerospace was becoming a mature industry, and in fact, that change had begun to slow down, suddenly the Information Revolution came along and the dot-com world arrived. And now we are into change at an unbelievable pace.
So some really interesting questions are, "What does the aerospace industry look like in a dot-com world? What does Boeing look like in a dot-com world? Two words: dramatically different. Now Boeing is a very different company than it was just a few years ago, and I will tell you right now it will be a very different company a few years from now.
The thing I'm saying to every single group that I talk to is we are going to do three things.
1. We are going to run a healthy core business.
2. We are going to leverage our core strengths into new products and new services.
3. We are going to open new frontiers.
Let's see if I can characterize that...
First, we are going to run a healthy core business. If you look at our various products...the things that you see every day. The facts are they won't look very much different, but the way we design them and build them will be radically different. The Information Revolution is changing the way we do those tasks. And the changes are every bit as profound as the impact of the Industrial Revolution.
Let me give you just one example; i.e., our current Joint Strike Fighter concept demonstrator. We designed two demonstrator airplanes...one that's a conventional strike fighter airplane and one that is a short take-off, vertical landing airplane. We designed in multiple sites around the world; i.e., in Seattle, St. Louis, in England and a number of other places. The pieces were assembled in Palmdale, California, into two different airplanes by a workforce of just 58 people. That's dramatically different. That's the kind of thing that's going to happen to allow us to run a healthy core business.
Second, we're going to leverage our strengths into new products and services. There is unbelievable potential for us...potential to supply support services and aerospace solutions to our commercial and military customers around the world. Part of this is happening because the world is changing.
Airlines are focusing on their core businesses; i.e., their service business of marketing their products, getting reservations, taking people from one point to another. They are much less interested in maintaining or modifying airplanes and that provides us with great opportunity. Those are products that we know.
That exact same thing is happening in the military area. The U.S. government once employed thousands and thousands of people in depots to maintain and modify aircraft. But they figured their job was to provide the defense, and they are now turning to private industry to do that modification and maintenance work. It's happening fast. Today, 25% of the revenue of our Military Airplanes and Missile Group comes from services.
Finally, there are enormous possibilities to open new frontiers. Let me give you just three examples, and the list can get really long. One, air infrastructure. Two, mobile communications. Three, e-commerce. Each one of those offers tremendous opportunities for The Boeing Company and its employees to do some pretty exciting things. I'm going to talk just briefly about each one of them.
First, air infrastructure. There is a great need today for what is (like all industries we come up with great names for things) Communication Navigation Surveillance and Air Traffic Management System (CNS/ATM). So from now on, it's CNS/ATM.
Let me give you the statistics. It took 45 years to reach a world fleet of 13,000 jet airplanes. That number will double within the next 16 years. In the 12 years from 1970 to 1982, the number of passengers on airplanes around the world doubled to about 750 million. Sixteen years later it had doubled again to 1.5 billion....greater than the population of China. By the time Boeing turns 100, in the year 2016, it will double again to more than 3 billion passengers a year.
Now what that means is that airports, and the CNS/ATM system, must contend with significant fleet and passenger growth in the years ahead. And that brings opportunity. Today's CNS/ATM system was literally first built up from bonfires on hills to lighted beacons on hilltops to radio beacons to omni-directional ranges and distance measuring equipment. It is all about a point-to-point, connected kind of system. The technology today would allow us to do satellite-based systems, provide communication to airplanes, surveillance of airplanes, management of airplanes on a global basis, and dramatically improve the system. I can't think of a better company than Boeing to attack that problem.
That brings another potential reward. Given the kind of data base the last Space Shuttle mission gathered...terrain data for the entire world...and the global positioning satellite system, it will be possible for every airplane to know exactly where it is. We have the potential to remove the cause of over half of all aircraft fatalities worldwide, a controlled flight of an airplane into terrain. You know where you are, you know where the terrain is, and you don't ever have to hit it. It's a tremendous opportunity for us and for the system.
Second, mobile communications on a global scale. There is a great opportunity to keep people connected anywhere and everywhere in the world...in the air or on the ground. While the average person is not yet connected all the time, we are headed in that direction and in one heck of a hurry. We are global, and we are becoming more mobile everyday. We're on the move. And there's a lot of room in here to use the knowledge that The Boeing Company has.
Most of us are lugging our laptops along with us. Why? ...because we want to be connected; we want data; we want it now. And we'd really like it no matter where we are. I believe, over the next couple of years, we will go from the classic complaint of every traveling laptop user, which is, "Were you able to get connected last night?" to the automatic assumption that we can and will be connected wherever we are.
Let me give you just a personal example. Last year, I spent the equivalent of 75 eight-hour days in the air. And that is not my time to and from airplanes or standing around waiting...that's 75 eight-hour days in the air. Now the fact that much of that time was in an airplane, which has the ability to be connected, has changed my life entirely.
All of that time was productive. I was sending and receiving e-mail, which I get a lot. I was making, and I have to tell you a bit sadly receiving telephone calls. I was checking the stock market. I was working on speeches. In fact, making this speech is a little bit difficult for me because I normally put the final touches on a speech in the air and print as we are landing. Well, I didn't get on to an airplane today so I've been scribbling up here madly. It has become an integral part of my tool kit.
It allows me to be mobile and connected and that allows me to be out meeting face-to-face with critical customers, suppliers, with employees. It is the way we are headed. We need to be in touch with our business, we need to be out talking with people. Being mobile and connected allows me on a regular basis to send e-mail directly to 160,000 of our employees from anywhere in the world with a single keystroke. A few years ago, you couldn't even think about that.
Now a lot of you are travelers...think about this one a little bit. Today in a commercial airplane you have a few choices. You can read a book, use your laptop until the battery runs down. You can watch a limited choice of movies. Not very far in the future, you will be able to operate just like you do in your living room. You will be able to watch the Mariners game live, watch a Final Four basketball game, be able to send and receive e-mail, you'll be able to shop on-line or work on a report. The airplane will begin to look like your home or your office and has dramatic impacts on productivity. It will change air travel.
Once again, nobody knows highly mobile platforms, whether commercial or military, or satellites or space-based communication better than Boeing does. This is an area that is extremely exciting for us.
The third one of those examples is e-commerce. Boeing like every other corporation has tremendous opportunities. We've established, for example, an online spares operation and it has been an unbelievable success. In the next 24 hours, we will sell more than $1 million over the Internet at Boeing.com, putting us in the top five of all commercial Web sites.
And just a few weeks ago, we launched a New Ventures' activity to leverage our position in the aerospace industry and our capabilities in the e-commerce space. I encourage you, in the classic terms, "Watch this space," because we are going to be doing some really interesting things!
So what does all this change mean to Boeing? I think it means we must make really critical, important choices. We can choose how we are going to leverage our tremendous core strengths and capabilities or we can choose to try and stay in the "good old days." Now as most of us know if we think about it critically, they weren't really so good.
What most of us want are the benefits of progress without change. That isn't going to happen. We do have choices. We can move ahead and embrace the future or be swept away by the tide of change. I believe that we can choose to adapt, to learn new things, to give back to our industry, to our company, to our communities by staying positive, by being open to change, by doing things that create a better life.
I believe we can learn from some really interesting people...people like Gutenberg or Galileo or Morse or Bell or Ford or the Wright Brothers or my favorite three Bill's - Bill Boeing, Bill Allen, and Bill Gates, who put all the pieces together.
Now let me wrap this up.
We are going to run a healthy core business. We are going to leverage our strengths into new products and services. And we going to open new frontiers. We have great opportunity. In the 1800's Darwin said, "It is not the strongest of the species that survives, nor the most intelligent; it is the one that is most adaptable to change." So, in 2000, I say, "Boeing is the most adaptable to change. We will survive and we will flourish!