The 20xx Program
That's a serious picture or artist's rendering. You can look it up. Just Google "Toyota Lunar Rover."
During the Japan Study Trip in 1989, Toyota rolled out the red carpet for the visiting Boeing executives. They showed them almost everything except their secret sauce, which is the history of their 1949 strike and the radically different labor agreement that came out of it. Toyota does not like to talk about that. I've studied that history in some detail and will cover it elsewhere on this website. Also, the important role of the Japanese keiretsu system in making lean thinking span the entire enterprise and its critical importance to making the methods of lean work, but that is no secret. One just has to realize it is important, and then figure out how to accomplish something similar.
But they did show their Boeing visitors everything else that they thought was important, including a presentation on the Toyota 100 year plan. In that presentation they described a Toyota factory on the lunar surface. Their product was a pressurized rover. The Boeing folks were in disbelief. They thought it must be some sort of joke. When asked to explain their thinking, the long range planning folks from Toyota told their visitors how the purpose of their company was to provide personal transportation equipment. Their thinking was that eventually there would be a lunar colony, and it was their intention to be there and supplying the transportation equipment needs of that colony.
There were two messages in that statement of purpose. One, the part about long range planning and its importance is the subject of this page. The second, the absolute paramount importance of defining the purpose of a business in terms of some sense of its role in society, rather than as merely being an engine of greed will be covered elsewhere on this site. Suffice it to say here, that many American companies get that, but there are also quite a few business non-leaders, especially in the investment communities, who are totally clueless about that.
I kept copy of the formal Japan Study trip report handy on my new desk at the Everett site as a reference as soon as I came across it after transferring from AR&T to BCA. The long range planning part of what the Boeing executives learned from Toyota did not make it into their official trip report, but people were starting to talk about - a lot. Shortly after I arrived in in Everett, the leadership of Boeing would come to realize the critical importance of that long range planning activity that Toyota was doing. In 1997 we quickly started one of our own. It was called the 20xx Program. That program is in my belief, one of the two most misunderstood activities Boeing ever undertook or participated in. The other one deals with the history of the internet, and that is covered in a separate section on this website.
After getting home from Japan, there was a lot of urgency to transform the company. The plan was to adopt much of what Toyota was doing, with a Boeing twist on everything. The critical parts of the labor agreement and the long range plan were not included, but as luck would have it, Boeing was already ahead of most American companies in its labor relations due to having started, but not finishing an adoption of a variant of "The Scanlon Plan" in the late 1950s. I've never been able to find any evidence to suggest that the leadership of the company in the 1990s had ever even heard of the Scanlon Plan, but that may not be entirely correct. I simply may not have had the necessary visibility to detect it. George Schultz, the former Secretary of State, was one of the authors the best record of the plan, from his days as an economics professor at MIT. In the 1990s, he was on the Boeing board of directors, so it is possible that some awareness of it still existed in the company. Clearly, Alan Mulally's "working together" approach sounded like it was lifted right out of the 1958 book on the topic that was edited by Frederick G. Lesieur, and Schultz had authored a chapter in that book. Whatever the case, I'll also cover these details in another section on this website.
In the Fall of 1997 right after the merger, Boeing had become extremely focused on developing a long range planning activity. This came about because of a capital investment disaster that occurred on the 747 program. It also led directly to the total fiasco that became the North Charleston site in South Carolina. Here's what happened.
When the execs got back from Japan in 1989, they decided to immediately implement "that Toyota stuff" on the new airplane program that was about to be kicked off. This was what became the 777. Rising star Phil Condit was named program manager, and his brains, Alan Mulally was made chief engineer. This was well documented in a PBS series titled "21st Century Jet." But even though Phil and Alan were nominally in charge of the program, their budget was dictated by BCA Finance based on a study they did to define the resource needs of the program. It should be noted that Phil was soon pulled off the program to be groomed as a CEO under the tutelage of Frank Schrontz who had the role as a caretaker. T Wilson was dying - a well kept secret at the time - and Boeing had not adequately prepared for his succession. The choice of Condit, made by T, turned out to be a terrible mistake because of issues with his ego and and personal ethics, but they were doing this fast without the careful preparation and grooming that had been done in the past.
The finance study for the 777 program used the 747 program as its model. The 777 was expected to have a similar peak demand and production rate. 747 had two final assembly lines in adjacent bays, with enough feeder line capacity for each of the major components to supply those two lines. So, finance budgeted the addition of two bays on the Everett factory building with an identical set of feeder lines. The only real differences were that the new 777 bays were wider so things would not be quite as crowed, and there would be some shared facilities for things like receiving and storing buyer furnished equipment, so the back bays were not quite as deep, or at least that was the excuse they gave for the smaller back bays. The real reason is that one of Boeing's imperial executives didn't want the old Everett site executive office building torn down to make room for those back bays, so they built around it, which was a big mistake.
Let me insert a note about Boeing's building nomenclature, so as to avoid confusion as we go. The assembly bays of an airplane factory are way beyond huge. I remember walking along the 777 line from the rear one time and thinking that one of the plane positions must be empty. It wasn't. One 777 was obscured by another one. There is enough room in one bay for four 747s or 777s to fit end to end. If all of the tooling were removed with the lines extending to the rear across the main transportation aisle, and planes were squeezed in staggered, one could fit about a dozen of those monster planes in just one bay. So even though from the outside, it looks like one big building, in Boeing terminology each bay is actually two buildings, one to the front and one to the rear. The Everett factory is one of the largest buildings in the world. By one measure, useable interior volume, it is the largest.
In managing the 777 program, for the first time since the B-17, Mulally had the design engineers and the manufacturing engineers hold regular meetings. The result was the plane as designed was a lot easier to assemble than anything Boeing had produced in decades. One of the two new bays was completed before the other, and the tooling for the first assembly line was setup and in use well ahead of the completion of the second bay. As we started assembling the first few 777s, something magical happened that was totally unexpected. Productivity came up so fast, that it quickly became clear that the second assembly line was not needed after all. Some of the tooling for it had already arrived on site, and it was put in storage. That "Toyota lean stuff" really did work as advertised, just as it had worked fifty years earlier on the B-17 program down at Plant II.
A stop work order was given, and the interior of the second 777 assembly building was left unfinished. For years I would give factory tours which we called gemba walks. I would show people the rebar sticking out of the end of the unfinished balcony, and the crude pipes that had been clamped in place as safety barriers. That spot was a very graphic illustration of learning event number one in what would become the lead-up to Boeing's long range product planning process. That was where we relearned the critical importance of working much more closely together, across functional organizations. Get the layers of bureaucracy and value destroying human relay nodes out of your process networks. Similar lessons were being learned in parallel down in Renton on the 737 and 757 programs.
With the second 777 line canceled, everyone looked back down at the other end of the Everett factory at the 747 program's two assembly lines. The "queen of the Skies," the pride and joy" of the company (there's that word pride again): Suddenly it looked like an awful mess. The second 747 assembly line was immediately shut down, and the program started making as many changes as they could based on what was being learned on the 777 program. But, some of the needed changes required a big investment. The tooling monuments for assembling the fuselage barrel sections needed to be redesigned and replaced.
A program was kicked of called "747 FAIT" which is short for fuselage assembly and integration tooling. Some offices were rented in Lynnwood, the same offices where I Steve Venema and I would meet to take on the 777 moving line network challenges some years later. The new tooling was designed, but someplace was needed to put it. We had just shut down the second assembly line, so it seemed like an obvious thing to put it there. We didn't have any plans for the space, so that's what was done. Thus, two years after learning event number one and that stop work order for the second 777 assembly line, learning event number two occurred. We began to realize that we had just thrown away a wide body final assembly bay. What could we possibly have been thinking?
This mistake was initially referred to as "the 100 million dollar mistake," but the reality is that the long range negative impact is still being felt 25 years later, and the actual costs run into the billions. It was only after this mistake was made that someone mentioned that Toyota 100 year plan, and we began to realize why it was so important.
In business, surprises happen. There can be a sudden change in the markets, or technology, or some other critical part of the business environment. If, like General Paton had routinely done during WWII, and like Toyota was doing now, one constantly had part of your team working on long range plans, and you were maintaining a list of key indicators that would signal a big shift, then when the indicators of some big change start to show up, one, you are looking for them, and two, you have a plan on the shelf already to go that will take you in the right direction. Boeing didn't have anything like that in early 1997. Big changes would catch the company by surprise, and big changes were in the wind.
Boeing had always prided itself (there's that word again) in the way we worked with customers to get their input on potential new products, but in truth those were all very short term things. The pre-1997 approach to product planning were questions which at most, were only looking about five years ahead. Five years was the average time to do a whole new plane from scratch before the GE folks screwed that up. But before late 1997, there was no real long range planning being done in Boeing, and now the impact of that was hurting big time.
So in the Fall of 1997 just as I was arriving on site in Everett, a senior management team kicked off a 50 year planning effort. The reason that fifty years was chosen was partly because they didn't think going out any further than that would be useful, and there was a limit to to just how much crow Boeing's leadership could stomach.
It took several months to build the plan. This was right after the merger with McDonnell Douglas, and the arrival of the GE trained folks led by Harry Stonecipher. These folks came with trumpian egos. If Boeing leadership had issues with the seven deadly sins before the merger, those issues went up by an order of magnitude afterward. The planning meetings were held in the 40-88 building in Everett, right where my new desk was located. Harry would fly up in a helicopter from the corporate offices down in Seattle and land on the roof so he could attend the meetings in person. One thing about Harry, he was big on entrances. The results of that plan were actually pretty darned good.
Ok, now a reasonable reader would be asking about now, how in the heck could I possibly know about what went on in those meetings? I'm not sure what Pete had told folks about me before my arrival in Everett, but clearly some folks knew about my arrival and saw me as some sort of a computing futures seer. One day while I was sitting alone at lunch in the cafeteria one of the execs came over and sat down with me. He was a participant in the meetings, and it was his job to paint a picture of what the future of technology would be like in the year 2050, and how that would impact the way we built planes. He told me all about what they were doing, and pumped me for what I thought. We had several such meetings, always over lunch in the cafeteria, and always initiated by him.
The report the management team came out with started with a basic question:
"If Boeing is still in the airplane business in 2050, what will that business look like?"
The key observations about the future business environment dealt with rising fuel costs, environmental issues, and a need on the part of the airlines to be taking advantage of new technologies at a much faster pace. Technology would be changing rapidly, and so would the economics of the airline business.
The traditional structure of Boeing's airplane business, had been to pour in about 25% of the company's net worth, turn the crank for five years, and out the other end comes a shiny new wonder of aviation. And, to make it work, we had to be confident of selling at least 1,000 of them, and we had to have a kick-off order of at least fifty planes, preferably more. We would try to do this spaced out by no more than about ten years, so that the knowledge of how to do it would still be in the company. That model had to change. We had to do things much faster, at much lower costs, and with a much higher rate of frequency.
The thinking of the fifty year planning team was that if a customer came to us in 2050 and wanted to buy a dozen of some new product that did not yet exist, we wanted to be able to take the order, and start delivering planes in only about a year from taking the order. How do we do that? That was the essence of the report-out. The conclusion of the executive team's fifty years plan was not a plan so much as a description of what Boeing had to do to survive, and an open question as to how do we make the changes that clearly needed to be made? They also provided an answer, but they did not know what it meant.
At this point they knew they had to avoid the risk of incrementalism. If a goal does not look and feel sufficiently alien compared to the way things are being done at the moment, almost everyone will take an approach that starts with one's current methods, and start tweaking them to see what sort of small improvements are possible. And some small improvements can indeed be achieved this way. But, to really make a big breakthrough, one needs to set a goal that is sufficiently audacious that one is forced to look for new approaches, and ignore current methodologies. The executive fifty year plan team understood this risk and set a seemingly impossible goal.
The goal they set was for a "1 in 10 airplane." That was we needed to be able to go from program kickoff to first flight in ten months for one billion dollars." And the big question was: "How do we do that?" This led to fifty year planning team number two.
Forty of the more senior members of the Boeing Technical Fellowship with various design and manufacturing engineering backgrounds were assigned the task. I knew several folks on the team. Their main conclusion was that the very structure of the American aerospace industry needed to change in some ways that were quite radical. To meet the goal of the 1 in 10 airplane, the idea of a traditional airplane program centered on an all new model was a nonstarter. We had to get into a continuous design and model improvement mode. Also, the interfaces for all of the major components and systems needed to become highly standardized. And, the supply chains needed to become dramatically more independent.
That last point about the supply chains becoming more independent is perhaps the single most misunderstood part of what happened during the 787 program that followed. A lot of publicity has been given to a paper prepared by John Hart-Smith, and presented at the 2001 gathering of the technical fellowship in St. Louis called the "Technical Excellence Conference." The basic idea of the paper is that too much sourcing robs a company of profits by passing too much of the ultimate sales price of a product out the back door to one's suppliers. The paper is at one and the same time spot on and profoundly in error. It all comes down to the way one thinks about an enterprise, and of how the products of the enterprise are produced.
In the the traditional American way of doing business, the enterprise is defined by the boundaries of each company. Professional buyers on the staffs of large industrial corporations, are always looking for ways to squeeze suppliers for a better deal, and suppliers are always padding their quotes to offset this. It's financial warfare. Contracts are combat zones over their super fine details. All changes come with renegotiated costs. This approach to doing business drives up the total end cost, and destroys quality. It also impedes the flow of information through the chain and is destructive of trust in supply chain relationships. That in turn impedes the flow of information even more, and so on. It's a non-virtuous cycle that destroys a huge portion of the value creation potential.
One of the first things one learns in "lean thinking" is how to look at the enterprise as a whole, ignoring corporate boundaries. This part of lean is what the Japanese keiretsu system takes care of. During the second world war, multiple agencies in the War Department and other parts of the government effectively did the same thing. But, there is no reason that an enterprise cannot be voluntarily collaborative and trusting in nature. All it takes is a commitment to work that way, and strong leadership by example.
Alan Mulally's "working together" system is all about growing the collaborative relationships and trust both inside the company and throughout the enterprise as a whole, including the suppliers and customers. The goal of the entire business supply chain is to work together as closely as possible, and to make sure that everyone involved feels like a partner in the whole. One shifts from the business as warfare approach to one of trust and shared destiny. In that way of doing things, John Hart-Smith's paper is profoundly misguided. But, one can't have it both ways. One cannot commit to a plan that is critically dependent on trust and shared destiny and then continue down the business as usual, supply chain warfare approach.
In fact, when a company becomes too large in terms of its internal supply chain, another kind of waste can develop that may be remedied by spinning out part of the company so it can operate more independently. The process of lean continuous improvement actually create new capacity. As fewer resources end up being required for a given process, some of those resources may go idle. If a department or division that is sitting on such idle resources has enough independence, it can look for other products and services that it might offer, both internally and externally. Sometimes, this is more easily accomplished if the leadership is totally independent from that of the parent company. There are no hard fast rules here, but there are times with everyone is better off if a divestiture is made.
The Technical Fellows working on their part of the fifty year plan came up with an approach that had a good chance of achieving the 1 in 10 airplane, and it was presented to the Boeing board. When they were done, the board made a simple decision, "go do it." And thus, a 50 year plan to transform the way we did business and replace every one of Boeing's existing airplane products with all new, ever improving models was kicked off. That program was called the 20xx program. Airplane number one, would be a replacement for the 767. But the point of the program was less about the plane than it was about transforming the industry.
So what was done? The GE idiots were put in charge and didn't do a single thing the plan required. In fact, they we created the single biggest economic disaster to ever hit The Boeing Company. It came to be called the 787.