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2002 Speeches
Jim Albaugh

Jim Albaugh

President and CEO

Space and Communications

"Space - Performance, Then Promise"

U.S. Space Foundation

National Space Symposium

Colorado Springs

April 09, 2002

Thank you.

It's a pleasure, as always, to be in Colorado Springs and to take part in what has become one of my favorite annual gatherings.

Once again, I have to congratulate Elliott Pulham and the staff of the U.S. Space Foundation for pulling together another successful event this year -- you always manage to make the debate topical and to get the right folks at the table.

I'd like to take a moment to recognize General Eberhart and General Anderson, among others, for the leadership they're showing in Operation Enduring Freedom

I know I speak for everyone in the room when I say how grateful we are for the wonderful job these gentlemen - and all our men and women in uniform -- are doing to fight terrorism and preserve freedom around the globe.

Clearly, space is playing an invaluable role in the campaign against terrorism. Whether it's Special Forces on horseback calling in strikes from B-52s, or a controller at a console coordinating a Predator from hundreds of miles away...Operation Enduring Freedom has clearly demonstrated the effectiveness of using integrated systems to gather data, compile it into useful information, and turn that information into knowledge to aid decision-making.

I think we can all agree that never before has the role of space been so important in detering conflicts when possible, conducting them effectively when necessary, and deciding them conclusively once begun. There are many in this room today to whom we owe thanks for that.

We've heard this morning about some of the Air Force's plans for transforming itself in accordance with Vision 2020, and about the Commission on the Future of the U.S. Space Industry, and just before lunch about the role space can play in Homeland Defense and in addressing asymmetric threats.

Clearly, all of the issues on the agenda today -- transformation of the military, the role of space in ensuring global security, and the future health of the aerospace industry - are closely linked.

While the DoD is transforming itself for the 21st century to achieve full spectrum dominance in order to address emerging threats, so, too, are many of us in industry undergoing a similar transformation as we strive to become more competitive and adapt to a changing marketplace. I think we can agree that the success of these efforts is mutually dependent.

I'm reminded that it was 43 years ago today that NASA named its first seven astronauts - an important milestone for this industry.

But two other anniversaries being observed this week somehow seem more relevant under current conditions -- the U.S. declaration of war against Germany in WWI in 1917 and the first long-distance transmission of television via phone lines ten years later. Now -- more than ever - the future of our industry lies in the successful convergence of military and communications capabilities.

That convergence - and what we, as an industry can do to drive it -- is what I'd like to talk about today. I'm also going to talk about some performance issues that have threatened to derail it. I will offer a couple of ideas about what industry and government can do to address those issues. And then I'll wrap up by looking ahead to what we can both expect if we're successful in doing so.

Whenever you give a speech like this, it's good to check back to see what you've said to the audience over the last couple of years.

Two years ago, when the dot com phenomenon was in full swing, I talked to this group about how asset-light, information-heavy enterprises were doing much better than asset-heavy, old-economy manufacturing firms like ours - from a market capitalization standpoint. I also talked about how businesses that succeed in the future would be less about bending metal and more about creating ideas (or intellectual property). And about how we should focus less on building products and more on providing services and solutions to our customers

By last year, of course, the "e-" bubble had burst... "dot com" had become "dot bomb"... and "old and heavy" wasn't considered an epithet anymore (for industries anyway).

As a result, in 2001, I told this audience that I was very "enthusiastic about the business of space." and that the biggest challenge facing us in achieving global commercial and military connectivity was not technical...but, rather, financial.

Looking back, even as the bulk of e-businesses did crash and burn shortly after my 2000 talk, my basic premise - that "the future of aerospace would be tied to how we are able to manage and exploit the information revolution" - remains valid today. I think much of what you heard this morning confirms that.

I also think my 2001 message to this group still rings true: That whether we call it Ubiquitous Connectivity in the commercial arena, or Integrated Battlespace in the military one, the future of this industry - and its enormous growth potential -- lies in providing a common operating picture, global situational awareness, seamless communication and information connectivity to a variety of users.

I provide that brief look back, not because I expect folks to remember what I said in years past, but because these points say something about where the industry is headed.

So where are we headed?

I've spoken in the past about a vision of global connectivity where all of us will be connected to people, resources, and information... with high-speed data, imagery and video...from fixed-point locations and mobile platforms. This anytime, anywhere connectivity will be made possible by an invisible web of integrated space-, air- and earth-based communications systems that are transparent to the user.

Such connectivity will transform the way we work, play, learn, spend leisure time, conduct commerce and wage war. [We're already seeing some of that]

The key to achieving this transformational connectivity and full information superiority is development of a single architecture that is network-centric and capabilities-driven.

At Boeing, we've invested heavily over the last three years in development of such an architecture. We've demonstrated through modeling and simulation that we can provide a significant force multiplier effect to our customers. In fact, we think this network-centric architecture was one of the key factors in our Future Combat Systems win.

Setting aside the specifics of the architecture - as I know different people have different ideas about that -- I think we can all agree on the need to provide a flexible infrastructure of existing and next-generation information systems that enable users to "plug and play" into the network...and pull what they need, when they need it.

It's equally apparent that the architecture -- must be open. It must feature common protocols and standard information format. And it must be interoperable for all users.

A few weeks ago, I was reading the book, "As The Future Catches You," by Juan Enriquez. He points out that In the old economy, if something was scarce it was valuable. Those who owned the mines, or had exclusive rights to a product, or had the only copy of something could become very wealthy.

Today, in the information-driven economy, it is just the opposite. Availability drives value - the more people who have access, the better.

Whether you're talking about an AWACs crew on station, or a businessman with a Blackberry: the broader the network, the more global the access, the more valuable and less expensive it becomes to the user.

And whether it is for government or commercial use, what's more important is not the mix of LEO, MEO, GEO, wireless or terrestrial assets -- it is that the network is available and that it works. And works every time.

Which leads me to my next point: That there are some real performance challenges out there we've got to address if we're going to achieve the promise of network centric operations and ubiquitous connectivity.

Now, talking about performance issues tends to make my Investor Relations folks in Chicago a bit nervous. But if we're honest, it is clear that there are elements of the space industry that no analyst can look at without asking some pretty pointed questions about the robustness of the market and our performance.

The elements I'm talking about here are launch and satellites. The analysts should ask tough questions about these markets. And so should we.

I recognize this may sound a bit strange - maybe even blasphemous - coming from a guy who is associated with one of the country's largest space companies (which had a pretty good year in 2001) and who spends a lot of time banging a drum on Wall Street about areas that truly are growth opportunities. Areas like missile defense, military systems-of-systems and the intelligence arena.

Ironically, it's because I do believe so strongly in the potential of this industry... and because I am so bullish about where we could take it in the future...that I'm willing to go out on a limb here and talk frankly about some of the issues I see that threaten to prevent us from reaching our full potential.

These issues include quality shortcomings, unrealistic business plans, and technical reach. Let me briefly talk about each.

First, quality shortcomings. In the area of launch -- although the U.S. government has had something like 30 straight successful launches, we all recall the string of failures of the late '90s. You're only as good as your last launch - so we must continue to perform. This is particularly important for the next-generation heavy-lift vehicles coming online this year.

Turning to satellites -- satellite performance issues are well documented. They are impacting both commercial and military capabilities. At my own company, during the past year and a half, we've had an opportunity to learn from the on-orbit performance of our spacecraft about the critical importance of product quality and reliability.

As far as I'm concerned, there's only one make-or-break requirement for the satellite industry -- and that's quality. Quality of product and on-orbit reliability.

Unrealistic business plans also remain an issue for our industry. Stepping back and looking at who's succeeded in this market over the past few years and who's failed, there are common elements for those who've been successful. They were market- or applications-driven. They didn't compete with fiber. And they required minimal infrastructure investment costs. Enterprises with those common elements have done well and will continue to do well in the future.

Finally, technical reach remains an issue for the space industry. On this issue, there has to be adequate investment on the part of the government and industry. There needs to be a better process for new technology insertion. And we have to recognize that utilization of new technologies is not without some risk.

So, given all that, what's the path forward? What do we - as an industry - have to do to drive the convergence of military and communications capabilities?

You know, a schoolboy once wrote that Socrates went around giving they poisoned him... Clearly, giving advice can be a risky business, but let offer a couple of ideas to consider.

First, we need to be more focused on bringing solutions to our customers, rather than just bringing them the next evolution of our current products.

Second, we must identify what are the most important customer-driven requirements in each market we serve. And we need to make the necessary investments to address those requirements and to minimize risk.

What are the most important customer requirements in space today?

In Human Spaceflight, they continue to be safety - first, last and always. Everything must be traded against safety of flight.

In the Missile Defense area they are: program execution-hit the target; system feasibility-don't overreach technically; and system affordability-make it affordable in the context of other national security requirements.

Customer requirements in the area of Integrated Battlespace include: understanding how network-centric systems work; providing a common architecture to ensure interoperability; enabling real-time information and data processing; and providing the customer with improved decision-making and operational effectiveness.

In terms of launch, the most important customer requirements remain: capability (how much payload can you put up?); flexibility (how fast can you put it up?); affordability (can you do it at a reasonable cost?); financeability (can you provide pre- and post-launch financing?); and most important, reliability (can you do what you say you will for your customers?).

Finally, in military and commercial satellites, customers are looking for quality and reliability first; then schedule and cost; and payload flexibility.

If tackling the most important customer requirements is what industry must do, for its part, we look to the Government to provide: clear and concise initial requirements; program stability; funding, risk and performance flexibility where warranted; and prudent incentives.

In this regard we must applaud what [Defense Department acquisition chief] Pete Aldridge is trying to do. He is working to provide full funding, realistic cost estimating, spiral development and economic incentives-all in the context of industry accountability and performance.

I spoke a few moments ago about the promise of the future integrated battlespace. Before I close, I'd like to invite you to imagine for a moment what that future could look like if we're successful in addressing some of the issues I've spoken about today.

Imagine the force-multiplier effect of arming warfighters with seamless access to information... anytime, anywhere... Giving them access to a system able to find, assess, track, target and engage anything of military significance. With the ability to make better decisions faster than the enemy can react, and to operate with reduced vulnerability and improved precision

That is the potential of the integrated battlespace - fast... flexible... responsive... and effective.

Those words make the Armed Services of tomorrow sound a lot like what a well-managed company aspires to be for its shareholders.

Just as the Armed Services today are organizing around mission-oriented task forces... so we in industry are organizing our businesses around markets...and striving to bring our customers systems solutions and capabilities, rather than the next iteration of an existing system.

This is a major change for both the military and industry, and it requires them to think not in terms of platforms, but to think in terms of capabilities. It asks generations of program managers and defense officials to let go of traditional ways of defining themselves. And to recognize that end-user requirements ultimately drive any market -- not just what contractors might want to sell or what acquisition officials or politicians might want to procure.

It isn't easy for any institution - public or private -- with a legacy of building things to begin to define itself by capabilities - not commodities. But we must.

Just as we must continue to perform, if we are truly going to transform this industry... and achieve the full potential of space. It's up to all of us in this room to make that happen. Thank you