Chairman and CEO
The Boeing Company
"Navigating the Future"
Chief Executives' Club of Boston
December 05, 2002
(As prepared for delivery)
Thank you, Jim (Kilts). I would also like to thank Peter Rollins of Boston College, who invited me. This is a great business forum, and a wonderful city and state that has played a critical role in our country's history and the roots of democracy. The Boston Tea Party of December 16, 1773, was prelude to the First Continental Congress and the American Revolution, a revolution that changed the world.
Today -- almost exactly 229 years after the tea party, I would like to talk about another revolution -- the Information Revolution. It, too, will change the world. It will change how we communicate, how we make decisions, and how we are organized. The Information Revolution will produce social impact and disruptive change, just as the Industrial Revolution did when it changed civilization from a rural, agrarian economy to an urban, industrial economy. The Information Revolution will change us into a more global, collaborative, integrated economy and the impact on industry and institutions is going to be huge.
If you look for the roots of the way we are organized, the way every large company in the world is organized today, you will find the organizational lessons of the Greeks, Romans, and Mongols. So whether you were Alexander the Great, who rode in the front of the battle line to conquer vast territories in a short amount of time; or a general like Julius Caesar, with "legions of many" who added to the Roman Empire; or Genghis Khan, who united all Mongol tribes and organized his army by dividing them into groups of tens, hundreds, thousands, and tens of thousands so he could expand his empire of "all people who lived in felt tents" -- if you were going to take thousands and thousands of soldiers on foot, or horseback, and march across Persia, across Europe, across China, you had to build a communications and a logistics structure.
You had to have a hierarchical structure because 20,000 or 50,000 people couldn't fit into the tent every morning for assignments. But you could get your top 10 people into the tent, and give directions and orders for the plan of march or the means to feed the troops. Those top 10 people, in turn, could get their top 10 people together to communicate the plan. The organizational pyramid provided the logistics and communications structure. This same basic logistics and communications structure exists today in industry and institutions. Alfred P. Sloan, Jr. studied the military structure and applied it to his company -- General Motors. It's the reason why business has "divisions" and "general" managers today.
With the Information Revolution, we are moving into a network-centric world, where organizational structures will look radically different and intelligent networks will allow for better decision-making. In the future, we will get information directly to the person who needs it to do a job, who needs it to make decisions on the spot. We will routinely communicate messages directly to large masses of people, without going through a hierarchical structure.
But this is only the beginning. I believe a network-centric world offers a great opportunity to radically change and improve decision-making. It will be able to collect data, process data into information, and structure it to allow people at all levels to make decisions quickly. It will allow leaders to move information to people who need to have it, who can turn it into knowledge, who can use that knowledge to create better products and services.
One very simple example is library research. When I was across the river at MIT in the mid-1970s, I used the card catalog and the Dewey Decimal system. Created by Melvil Dewey at Amherst 130 years ago, the Dewey system has well-developed, structured hierarchy, which was "divided into ten main classes, which together cover the entire world of knowledge." My searches were often slow and tedious.
Today, there are powerful search engines that not only access more information but structure the search process. A student today has tremendous access to almost limitless sources of material. For example, a search for information on Japanese tax policy ranks sources by whether the keywords appear in the title, the first paragraph, or randomly in the text. Students today can save tremendous amounts of time and can do research on a laptop anytime, from anywhere in the world, from an Internet cafe and soon with Connexion by Boeing on an airplane.
But this is still just the first step; just think what will it be like in 50 years? Take the first-line manager for example. Almost everything in a first-level manager's life is driven by recent and current events. Most manage in a chaotic environment. They juggle parts and daily schedules and make judgments on the best use of people's time in order to get the job done for the day. They rebalance work when the team is short a person because someone called in sick that morning. Other management levels have different responsibilities. They may audit the operational plan and communicate status. They ensure that the plan is getting done.
In a network-centric world, those processes will fundamentally change. Status will be available automatically and actions to address issues structured and prioritized. We will see different organizations work on time-critical projects. Teams will work on projects around-the-clock globally to use time effectively.
For example, when I was an engineer, we created drawings on Mylar, which had to be moved physically from one work location to another. Today we have the ability to work digitally and interactively so engineers can work with customers and colleagues across the world in a collaborative environment. The 78,000 people in our new Integrated Defense Systems unit work in 33 states and many often work in a virtual environment on the same programs. All this is improving our efficiency and ability to compete; e.g., not long ago, we had an opportunity to bid for a government contract, but only had three weeks to write the proposal. We were able to compete and win because we could work 24 hours a day with a virtual team in the United States and Australia.
In hierarchial organizations, we have trained people to follow directions and expect decisions from the top. Now, when data and information can be available at the proper level, we must teach and encourage local decision-making. In the military, for example, we have trained people to take orders and follow direction because true situational awareness existed only at the highest levels of the pyramid. Now, as the ability to process data and distribute information increases, we will have the ability to allow people on the front lines to make decisions. But we will also need better rules of engagement so that those decisions fit into the strategic framework. Information superiority will be the ultimate "high ground." The same applies to the business world. We have trained people to follow rules; take direction. When information is directly available to them, what will that mean?
Imagine a network-centric world where people are able to make their own decisions because they have the information to get the plan done, to make decisions to fix problems, to smooth the disruption of a team member who is out for the day? Imagine a world where there are fewer errors and mistakes that the complex bureaucracy and long communications' paths create?
I can imagine much less structure, far fewer people to accomplish a given task. I think the role of management will, and can, be changed significantly in a network-centric world. The leaders will be coaches and teachers, and they will focus on removing barriers. Efficiencies will be huge. We will be able to build products faster from design to market, with enormous benefits to customers and consumers.
Many questions will have to be answered in this very different world. How will we reward people? Today, we have a reward structure that, for the most part, is based on how many layers are beneath you and where you are in the pyramid. If we no longer need that structure and can get a lot of information to flow through the organization, how do we pay the valuable people -- sometimes individuals with no direct reports? How do we provide the social structure that is part of the fabric of everyday business? People can telecommute but they also need to interact on a social level. How do we get the right data easily to the right people in the right way? What does a world look like that allows us to achieve the massing of information versus the massing of people? What education and training is required when we expect each person to act logically, with common sense, and make the best decisions?
All of these questions reflect my belief that a network-centric world will be about superior decision-making by those closest to the action. What will be very difficult for many people is that they will have to perform in a totally new and unfamiliar environment. It will not allow participants to sit on the sidelines and complain about those who lead.
I don't have all the answers but I do know all of this is going to take a phenomenal amount of leadership. We must consider the implications for our industries and universities, for our government and military, for our managers and employees of a network-centric environment. In business, we will need leaders who understand the magnitude of change and are willing to think about the future so their company will exist 20 or 30 years from now. My bet is that many companies aren't going to survive because they won't be able to make the huge transition.
It will require working against huge cultural and institutional biases that have been in place for thousands of years. But it is a journey with huge rewards, and one worth taking. Thank you.