Boeing

As the industry leader in the design and manufacturing of commercial aircraft, Boeing, with its traditionally centralized organization and strong market position has been faced with few external forces serving as motivators for operational or organizational change. In recent years however, the increasingly competitive industry for commercial aircraft and the growing competitive threat of Europe’s Airbus looming on the horizon, Boeing has been forced to rethink its operations, specifically, in the way it designs and manufactures its planes. In doing so, Boeing chose 1) to implement an interactive CAD system for product design and development and 2) to improve relationships with its customers and suppliers. The first product to evolve out of these changes was the Boeing 777 aircraft.

Boeing’s 777 aircraft was the first to be designed and pre-assembled using 100% 3-D modeling technology. The software employed, CATIA (computer-aided, three-dimensional interactive application), could be found on over 2200 workstations networked to eight-mainframe computing clusters housing the 3 tera-bytes of information which defined the aircraft.

The technological transition that took place during the development of the 777 aircraft led to profound changes both internally and externally to the organization of the company. Internally, the organization of the design group shifted from a purely functional one to one that was a more cross-functional team based group.  Externally, the company strengthened its relationship with both its suppliers and customers, increasing their direct involvment in the design process and incorporating customer feedback earlier into this process. These shifts in technology and organization resulted in, among other things, reduced time-to-market, reduced design and production costs, and increased commonality of parts.

The Value Proposition

Given the increasingly competitve nature of the commercial aircraft business, Boeing focused on enhancing its existing strengths in product R&D and manufacturing while at the same time reducing the costs of these efforts.  With the average aircraft development process taking near 25 years to complete, Boeing was in need of improved processes in terms of both cost and speed.  In response, the company invested in an interactive CAD system which not only addressed these issues, but provided the company with a number of additional benefits including greater technological flexibility and capability.  

Increased Value in Customer & Supplier Relations

Faced with the challenge of effectively managing its organizational changes and industry growth simultaneously, Boeing's development of the 777 all but demanded improvements to its relationships with its customers and suppliers.   Boeing recognized the strong need for customer loyalty and sought to create additional value-added services.  At the same time, it moved to distribute the risk associated with its new product development and worked with its major suppliers to split the burdensome costs of their development efforts. Given these two factors and the ambitious objective of increasing the ratio of airplane parts built by outsiders from 48% to 52% over the next 5 years Boeing needed to, and continues to, strengthen these relationships.  It did so by increasing the level of interaction of these two groups with the design team.  By improving the information sharing and knowledge transfer outside of its corporate boundaries Boeing was able to gain efficiencies in production via increased supplier interaction and improve product delivery by incorporating the direct feedback of its customers early into its design process. The involvement of both of these parties led to the reductions in development time, improved understanding of actual product use, potential cost savings from the reduction in design rework and improvements in the overall quality of the final product.

Value Opportunities

The changes that Boeing has undergone over the last 10 years have had a profound impact on the way it now performs its business.  It has built upon its strengths and in those areas where weak, has joined forces with those more capable.  Change is a continuous process, however, and by its very nature, provides opportunities for improvement.  In light of this, Boeing may find opportunities of improvement in the following areas: better leveraging of its internal knowledge, increased modularity of product design, and the redefinition of its corporate boundaries.

The Success of Boeing's Investment

Boeing's investment has proven successful in relation to its traditional practices because it has focused on the enhancment of its core competencies while doing away with (i.e. outsourcing) those areas of product development in which it was inherently weaker.  The prime example of this is Boeing's investment in interactive CAD systems.  Traditionally, the product design process included aircraft prototypes, created as full scale non-flying mock-ups, in order to verify the fit of parts and at the same time preempt part incompatibility.  As a result, the whole design process potentially required as many as 4 to 5 changes before final release resulting in major additional costs.  The use of the 3-D database, however, eliminated such incompatibilities, saved time that would normally be attributed to building a mock-up, and significantly reduced costs. Blue-prints for product components could then be delivered to partnering operations who specialized in their manufacturing.  This, of course, is but one example of many.  The impact of change on Boeing's core competencies has been two fold -- enhancing some competencies while eroding others.  Below is a table identifying the impact of such changes on the core competencies of the Boeing organization and the erosion of those no longer their focal point.