Harry C. Stonecipher
The Boeing Company
"Boeing: In the Midst Of a Transformation"
Address to 67 Visiting Journalists From 14 Countries
Boeing Leadership Center
St. Louis, MO
April 27, 2002
Good morning. Back in 1997, when Phil Condit and I were negotiating the merger of Boeing and McDonnell Douglas, there was one item (apart from price) at the top of my list of priorities. That was getting Phil's commitment to the continued development of this Leadership Center as a Boeing-wide enterprise. Phil agreed instantly - and enthusiastically. He is a huge champion of what the Leadership Center represents.
And what is that? The Boeing Leadership Center, to my way of thinking, is kind of like the ears of an elephant. Why does that big creature have such great ears? Believe it or not, it is not for better hearing. Rather, it is for better locomotion. Without the outsized ears, the elephant would lack the surface area to cool its huge mass. The ears act as a radiator in dissipating heat. In doing so, they keep the elephant from being immobilized by its own bulk.
Going into the merger, I was very much concerned about the effect of greater mass on our speed and agility. That is why I felt so strongly about the value of this center as a company crossroads, which would greatly increase our surface area, or the number of nerve endings exposed to the outside air. This center draws people from all of our businesses - and from our worldwide base of customers and suppliers as well. It promotes and facilitates greater movement of people and ideas . . . and greater interaction between Boeing and the outside world.
So I am truly pleased to welcome all of you to the Boeing Leadership Center. As journalists, you travel the world in search of fresh information and insight. As business people, we must learn to do the same. And we are.
As I am coming to the end of a long career in the aerospace industry, I have been asked to look back - and to look ahead . . . to go from hindsight to foresight, or from history to destiny. I can approach the second part of that mission with the utmost confidence - knowing that I cannot be held accountable for any errors in prediction.
When I started out - in 1955 - Commercial aviation was still in its infancy. It was A BIG DEAL to fly. Whole families dressed up and went out to the airport to send off or greet a family member who was rich enough and brave enough to go on such an adventure.
- No one had yet heard of Sputnik or dreamed of the possibility of satellite communications.
- The Cold War provided instant focus to everything we did in military aircraft and missiles. We knew a great deal about our enemy and its capabilities. Within the defense industry, our all-consuming goal was to maintain a competitive edge in technology and technical performance over a massive yet highly predictable adversary.
Now contrast all that with today:
- Commercial aviation has become so inexpensive and reliable that other forms of public transportation, such as inter-city busses and trains, have been unable to compete in many countries. The real cost of airline travel has fallen by about 90 percent over the past five decades, thanks largely to enormous improvements in the productivity or efficiency of airplanes.
- Cheap and instantaneous communication with other people in other parts of the world by satellite and other means is something that millions of people now take for granted. It is hard to imagine life without it.
- Instead of one massive but highly predictable enemy, the free world is now confronted with menace of terrorism. We are faced with an enemy who will not stand and fight - army to army, or navy to navy. This is a many-headed and elusive enemy. It may strike anywhere and at any time with potentially devastating force.
Now let me mention one more change - one that has affected every kind of business. As the world economy has become more integrated - more global - it has become more and more knowledge-intensive. The determining factors in value creation have changed as a result. Software has trumped hardware. While the value derived from the knowledge or intelligence embedded in products - and, indeed, in whole systems connecting products - has grown, the value derived from other factors - such as labor or material content - has declined.
As you know, Boeing - including Rockwell, McDonnell Douglas, and other heritage companies - has played a key role in virtually all of the major developments in aerospace over the past half-century and more. We ushered in the jet age in commercial aviation with the Boeing 707. We made the rockets that put the first men on the moon. We have both launched and built many of the satellites orbiting the earth today. Our military aircraft are superb.
But a rich heritage is no guarantee of a bright future in the fast-changing, knowledge-based world of today. To the contrary, it can even be something of a liability - in allowing people to become too set in their ways or in making them feel too comfortable for their own good. And that is why anyone who is part of the leadership of this company will tell you that Boeing is in the midst of an ongoing "transformation" that will leave no operation untouched.
The transformation is all about how we view each other, how we view the outside world, and how we think about creating greater value for our customers. For one thing, we have created all kinds of incentives and opportunities for bright people to move around from one place to another within Boeing. We want to capture all the synergies we can - and that requires constant movement and flux between our different businesses.
Take the X-45, our unmanned combat aerial vehicle, or UCAV, which is very much of a transformational product - a true game-changer - in its own right. We are building key parts of the X-45 at five different sites, based upon a mix of technologies and expertise that have come from all of our principal divisions - Space & Communications, Commercial Airplanes, and Military Aircraft & Missile Systems.
Another part of the transformation is the move from being a hardware and platform provider to a solutions and systems provider. This means putting more intelligence at a higher level - in tying individual platforms together so that people are able to see the big picture. In the civil or commercial world, we have two new businesses - Connexion by Boeing and Air Traffic Management - that exemplify the immense potential benefits that exist in space-based systems with real-time linkages to the air and ground.
On the military side, a similar approach can provide not just information superiority, but information dominance. We all got a small glimpse of that in Afghanistan. Guided by many pairs of eyes - including unmanned aerial vehicles, satellites and foot soldiers equipped with laser-tracking devices - our forces were able to call down precision-guided bombs from the sky and direct them against the enemy with devastating accuracy and economy. But the fact is, we are not nearly as good as we could be when it comes to locking onto moving targets. There is vast potential for more effective and creative use of space-based networks and systems to deter and, if necessary, destroy the kind of adversaries that we face in this new century.
Finally, I can tell you that we are determined to become a true global enterprise, as opposed to a company that sells products all over the world. You have heard of the "selfish gene." It used to be part of our makeup in the sense that many people in this company had a hard time conceiving of any relationship with an outside partner or supplier in which Boeing was not the dominant party. As part of our transformation, we are trying to implant what you might call a "global collaborative gene." We want to get as many good ideas as we can . . . from as many different parts of the world as we can . . . and we want to get them sooner rather than later.
We are investing in new ventures all over the world. Our Office of Technology is working to expand our affiliations with universities and technical institutes around the world. Partnering with others, we have put a plan in place to create a number of international research and technology centers around the globe. We are just about to open the first such center in Madrid.
Now I'd like to hear from you. I welcome any questions or comments, or any advice you may have for us in regard to turning Boeing into a true global enterprise.