Boeing's 787: Lessons in Prototyping and Pivoting
In 2000, Boeing was scrambling to define itself for the 21st century. The American aviation leader was facing an existential threat from its European competitor, Airbus. In 1999, Airbus had passed Boeing in total sales, and was eroding Boeing’s market share. The European company was moving ahead with plans to produce the largest superjumbo jet ever, the A380. It could seat up to 853 passengers in an all-economy class setup. And it would have a range of about 9,000 miles — more than 500 miles farther than Boeing’s 747. Boeing had long played down Airbus’ vision, saying there was no market for such a large plane. For more than 30 years, Boeing had had a monopoly on the market for large aircraft — any airline wanting a plane that could carry more than 350 passengers had but one option: the 747.
The 747 was a cash cow for Boeing; Airbus executives believed that in some periods, Boeing made $40 million on each 747 it sold. As Airbus started muscling into the large aircraft market, Boeing was struggling with massive change. Boeing executives had decided to diversify the company and were preoccupied with absorbing several huge acquisitions: In 1997, McDonnell Douglas merged with Boeing in a $13 billion stock swap. A culture clash had ensued, and Boeing was beset with production meltdowns. But in 2000, just weeks after Airbus started marketing the A380, Boeing officially leapt on the superjumbo bandwagon. Boeing took a “sell-design-build” approach to developing the new aircraft. This was intended to prevent Boeing from over-investing in designing (or worse, building) a plane that few airlines would buy.
After doing initial design work, Boeing would shop the prototype to potential customers and get feedback on the concept. If it succeeded in securing a minimum number of orders, Boeing would refine the project and build the aircraft. The process of prototyping, getting feedback, iterating and laying out clear decision points to move ahead (such as a minimum sales order) worked well — almost too well. It would take Boeing nearly four years and multiple pivots to decide what new plane it should offer to respond to the A380. “The process of getting to a new airplane is a tortuous road,” then-chairman and CEO Phil Condit told Fortune magazine in 2002. What Condit did not realize was that the torture would not end after Boeing had settled on which plane it would build.
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- Understand how “lean” concepts of prototyping and getting customer feedback apply to large industrial manufacturing companies like Boeing.
- Understand how Boeing settled on the 787 model after multiple rounds of customer discovery.
- Analyze the risks posed by Boeing’s move to a new supply chain system.
- Analyze what went wrong for Boeing with this new manufacturing model and discuss ways the company may have averted these problems.