Friday, January 18, 2008

We make money by leaving the tough stuff to others

Boeing has encountered yet another problem with the 787 Dreamliner (as reported in the Chicago Tribune - here). What fascinates me is the contrast between the reality and the plan as expressed in the Global Business section of Time just a few months ago (here).

The glowing report in Time, which, even then, read like a reworked press release, now seems to be the product of wishful thinking rather than revolutionary business thinking. The 787 project was going to revolutionize manufacturing, largely through the expedient of having Boeing do as little of it as possible. Instead, they were to outsource not just the component work, but the design of the components:

[T]he specification control document, which explains how to build an electrical-distribution system, was about 2,500 pages for the 777. "[Partners] had to figure out 2,500 pages of stuff, and we monitored them applying 2,500 pages of stuff," says Bair.

On the 787, the equivalent assignment was 25 pages. "For high-level requirements, you go design it," says Blair. "We're not going to micromanage how you do it." Bair says this accomplishes three things: partners can show their expertise; there is no duplication of work; and innovation can flourish where "in the past it was our way or no way." He doesn't consider these new methods revolutionary.

This, of course, is the logical consequence of modern-day management thinking. You out-manage your risk by transferring it to others, relying on contract compliance to take the place of responsibility. You conceptualize or ideate, not even descending to the point of high-level design, rather shifting that to the "experts" who know better than you what you need.

But you can't take a contract and glue it into a working airplane. Perhaps Boeing will get some money back, eventually, through negotiation or lawsuit. Will they ever make up the deficit to Airbus in market or mind share? I doubt it.

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