To win in commercial aviation, Boeing needs engineer-based leadership back

I've been researching/writing a book for the last 8 years that compares the history of Detroit vs. Seattle:  the Automotive vs. Aviation industries and Ford/GM vs. Boeing. I was going to start heavily blogging about my analysis next year. Given Boeing's continued safety issues, I wanted to share some relevant history and insights on the company to understand the importance of leadership returning to its roots. 

The history of one of America's most innovative companies

After WWI, Bill Boeing personally financed his aviation startup from capital created by his timber ventures; his cousin was president of the company. In hopes of generating more income, Boeing's cousin instructed the young engineers that Boeing had hired to design furniture to make extra money for the company. Claire L. Egtvedt, a young engineer from the University of Washington, had visited the European airplane makers and saw how much they were investing in R&D to increase the safety and capabilities of airplanes and knew Boeing would have to do the same to compete. The young engineer challenged Bill to invest in R&D and design their military airplane against Bill's cousin's wishes. Bill's decision to follow the engineer's vision (his cousin would eventually leave the company) created a company culture where engineers would have the ability to drive the company strategy. Bill Boeing would continue to invest in engineering and safety; in fact, it was one of the first aircraft manufacturers to invest in their wind tunnel for testing.

Boeing's engineering DNA was strong after the founder left the company. Before WWII, management financed an aggressive design for the world's first 4-engine bomber and prototype, which would become the B-17 bomber led by young engineer Ed Well. The B-17 would become a WWII pilot favorite and one of the workhorse bombers. After WWII, Bill Allen, their former legal counsel, would become the CEO. Ed Wells challenged Bill Allen and Boeing executives to enter the civilian aviation market with a jet airplane. Boeing had a great reputation with the military, and focusing on that market would have seemed like a safe financial strategy. At that time, Douglas had most of the US civilian market, and the airlines trusted Douglas, not Boeing. The British government backed the production of the first civilian jet aircraft, the Comet.

Ed Wells presented his vision for a jet airplane to Allen and the Boeing board. Bill Allen, being conservative, tried to cheat the market by asking the engineer to design a military jet cargo plane that could be used for civil aviation, which would be called the 707, investing in 1 product for 2 markets. However, a military cargo plane did not meet the needs of the airlines. Again, Ed Wells stepped up and pushed Bill Allen and the Board to further invest in changes the airlines desired for the 707, raising the cost to develop the plane. Like Bill Boeing before him, Bill Allen would agree with an engineer and agreed to invest in planes the airlines demanded. 

When tests showed safety flaws in the design of the 707, Ed went back to the board and told them they would have put more funding into design changes to ensure a safe jet that would fly 100 passengers. The engineering culture was important in the aviation industry. The Comet would be involved in 3 deadly crashes in a year, ending any chance the British had of building a global airplane company. As an engineering lead company, Boeing would dominate civilian aviation until the 1990s, becoming America's biggest exporter. 

Boeing became a military-first firm focused on short-term financial returns

In the 1990's, something unexpected happened, a prosperous and financially healthy Boeing would merge with struggling military contractor McDonald Douglas. The new company would keep the name Boeing, but McDonald Douglas executives would take over the leadership positions. The people in Seattle would say McDonald Douglas used Boeing money to buy Boeing[1]. The combined company would have a culture war right away, the engineering culture based in Seattle conflicting with the profit seeking military focused McDonald Douglas Management. After the merger, to physically increase the distance between the management and engineers, Boeing would move its corporate HQ to Chicago while keeping the engineers back in Seattle.

After his term, President Eisenhower warned America about the Military-industrial complex, which built up its ability to lobby and influence the US government and Congress on what military equipment our taxpayers would buy. True to President Eisenhower's words, Boeing would become a leading part of the Military Industrial complex. For example, a former Air Force official / turned Boeing executive would get arrested for corruption in the early 2000s for favoritism toward Boeing. Given this crisis in leadership, the Boeing CEO would step down. Soon following this, European Aircraft manufacturer Airbus would consistently beat Boeing in market share. 

The biggest tragedy of Boeing's leadership, being military-driven with financially focused leadership, is the tragedy of 346 people losing their lives in Indonesia and Ethiopia because the company hid major design changes from the airlines and pilots. And now, the Alaska Airlines Incident, uncovering a manufacturing issue at Boeing, shows how deep the quality issues are at Boeing. 

For 70 years, Boeing was one of America's greatest companies; it was an engineering-led company where safety and customer needs came first. Today's Boeing needs to return to its roots and move back to an engineering-based governance organization. 

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[1] There is no clear strategic reason Boeing should have done this merger, but I will lay out some of my theories in my book.

Entrepreneur Support Organization (ESO) Funders Matrix (part 2 on ESO Financial Sustainability)

Part 1 of 3 blogs regarding ESO financial sustainability can be found here --> What are the 4 hard questions for new ESO Financial Sustainability

No one wants to say it, but money is needed for any entrepreneurial ecosystem to drive positive long-term change. Programs need resources and funding from different types of funders. I categorize the funders into 5 different types of orgs 1. Government/Donors, 2. Foundations, 3. Private Corporations, 4. Investors, or 5. Revenue is paid directly from the entrepreneurs. Even though I couldn't find any recent data on where Entrepreneur Support Organizations (ESOs) make their money, in my work in emerging markets, 40% to 75% of funding for ESOs is provided by governments, donors, or foundations. Most ESOs I have worked with do not work entirely commercially but need outside funding to operate. So I provided an ESO funder Matrix to help guide keys to getting funding and the downsides of that funding, with some explanations below:

Break Down of funders of ESO's

1. ESO's earning revenue from entrepreneurs: As I mentioned in the last blog, ESOs, which entrepreneurs entirely fund, go into 2 scenarios:

   1. They are primarily real estate companies offering co-working, event management, and networking. There are benefits to their services, but I have not seen any proof that these services significantly impact entrepreneurs. The entrepreneurs who pay for rent have the capital, or the founders are wealthy, so they do not have inclusive services.

   2. There are other ESOs, with Founders Institute as the best example, earning the vast majority of their income from new startups they support. The target founders working are generally professionals in finance or consulting and have money to pay for their program. The FI programs I have visited are impactful, and their business model aligns very well with the founders they are supporting. I have also seen more SME networking organizations creating peer learning that their members fund. The best of these orgs run on small budgets and fees for membership. Some argue that entrepreneurs should pay something to verify the value of ESO services, but others will argue that any money they generate should go toward their business. I see both operate effectively and don't have a strong opinion either way.

2. Governments and donors like regional governments, World Bank, and USAID are in this funder bucket to provide longer-term financial support. These organizations are risk averse, so very challenging to get awarded funding. The most difficult part, I believe, in working with these funders is governance and the desire to control your strategy over how the funding is controlled. Because of this, it's important to remember that an ESO that receives government and donor funding will become part of a bigger government or even political strategy. So, money from these funders works when your objectives are aligned with the government or donor agenda. Still, there will be a time when these funding organizations will ask your ESO to do something beyond its mission, and the ESO will have to make a strategic decision if it's worth the funding. Despite the bureaucracy and their tenacity to choose organizations they trust, governments and donors are trying to find procurement methods to bring in new partners. Don't be afraid to advocate with these organizations to open the door, especially if you are a new player.

3. Foundations: I have the least amount of foundation experience, just some information I've learned from engaging with ESOs who have found funding. It is easier to have a productive relationship with them because there is less bureaucracy, and they are more straightforward in getting funding. They are risk averse but not as bad as donors and the government. Foundations like to work with known ESOs with a track record. Typically their missions and purpose are much more narrow than government and donors, so more challenging to align with their objectives. Because of their focus, they create a close network or tribe of people and orgs with the same thought and beliefs and use the same terminology to communicate their purpose. Hard to work with these foundations if your beliefs don't fit within their tribe.

4. Private Companies: There are 3 areas where private corporations typically work:

   1. They want to learn and explore new markets or technologies and will support an ESO on a unique program like Fintech or Agtech. These are generally one-time support for programs, so we will have to find other funding in the long term.

   2. Corporate support is from the marketing department. When the ESO can be an effective business development channel to connect companies to their target market, private companies will need to see data on how the ESOs reach their community and how effectively the ESO outreach and media channels are working.

   3. CSR support is usually small but closely tied to the company's marketing.

5. Investors: I won't go far into the investment business model, but ESOs need a track record of building companies that get follow-up investments. If you don't have this or a great deal of capital, don't try.

There is a time for every Entreprenurship Support Organization (ESO) to decide whether it should support entrepreneurs or small businesses that fit their purpose or have more consistent funding by programs their funders desire for them to support. Foundations and private companies are better funders to help support your purpose, while government and donors typically force you to work on their agendas. Funding from entrepreneur services or becoming an investor will typically force your ESO to focus on more highly educated founders rather than more inclusive ones. Good luck in finding funding for your program.

Four hard lessons from America's Ugly Labor History

I have dug heavily into the labor history of the automotive and aviation industries from the 1900s to the 1950s. As a new labor movement gains momentum, I have 4 hard lessons for today's companies.

https://pixabay.com/images/id-424500/

1. American Entrepreneurs and executives allowed themselves to get too emotional about labor unions. American businessmen overestimated their status in society during the labor union rise from 1920 to the 1930s. These businessmen used violence to fight union organizing, often by building their security operations or controlling local police. In retaliation, unions were forced to fight back, even using the mob [1]. For example, America's first Billon Dollar Entrepreneur Henry Ford almost destroyed his company over his inability to give workers the right to organize. He was so paranoid and tried to control everything, including how his worker's homes[2]. He built the world's largest private security force to prevent the Union from organizing the Ford Motor Company (FMC). There were literal battles fought between the company and the newly formed United Auto Workers (UAW). The UAW responded to the violence by creating a flying squadron, which defended labor organizers.

FMC also used African American Workers' loyalty against the union movement. In 1941, the UAW set a strike at FMC's biggest plant, the Rouge Plant. FMC used African American strikebreakers, which caused racial violence at the plant that only ended when Clare Ford (Henry's wife) stated she would leave him if he didn't stop this. FMC was an essential part of the military production for WWII, the federal government thought about taking over because of Henry Ford's poor management, fearful of how it would affect the production of military equipment. Two years later, Henry Ford II (Henry's grandson) became the company's CEO. He had to give the Union some of its best contracts in the industry to build a better relationship between management and the Union.

2. Corporate ignorance of a changing society leads to bad decisions: Alfred Sloan[3] was GM's brilliant CEO who developed one of the most sophisticated systems to understand market trends. The system was so insightful, he successfully ensured GM made profits through the Great Depression. Part of GM's Great Depression success was leveraging high unemployment to increase the speed of the assembly line with little worry of exhausted workers quitting. His political biases would blind him from adjusting to the new political wave from pro-business Republicans to worker-supporting Democrats of President FDR and a new Michigan governor Frank Murphy. The Democratic wave came from an angry America Public against corporate executive greed that contributed, in part, to the Great Depression. GM's unique systems or Sloan's brilliant mind could not correctly evaluate these societal and political changes and adjust.

Although Sloan was brilliant, he was very biased and thought successful business was the driver of America's success, not the American worker, voting public, and politicians. He was great at motivating the managers who worked for him but had no compassion for workers in the factory. He saw the factory worker as an extension of the machines that controlled their tasks. Sloan would fund many political advocacy groups to fight FDR and the union. In the mid-1930, a weak UAW kept trying to organize workers to negotiate for better working conditions at GM factories, and Sloan and GM kept ignoring them. Sloan and GM had no system to see the workers' frustration with the back-breaking speed of the assembly line and how the desperate workers felt they ran out of options. With no progress, the UAW joined with the more militant CIO and staged the 1937 Flint Sit-In with massive political, media, and public support. The automotive giant would lose thousands of work days as the market started to pick up for automobiles. Still, this strike caused by management’s ignorance would create a distrustful Union and management relationship full of conflicts well into the 1950s.

3. Some American unions and companies successfully aligned Interests: The book's uniqueness is that I compare how cities, industries, companies, entrepreneurs, managers, and labor leaders; desires, decisions, and outcomes. I compare Boeing to FMC and GM and the UAW with IAM 751. The labor relations between Boeing[4] and the Machinist Lodge of IAM 751 differed significantly from automotive companies and the UAW. It was a relationship that started with trust and understanding of each party's interests. There was no violence or even name-calling. Boeing and IAM 751 aligned their interests, and there were no strikes for the first decade of the relationship. IAM 751 always knew a successful Boeing would ensure its workers better pay and work, and Boeing executives wanted to be fair with its workers, who were the key to its success.

4. In the end, markets rule, and unions need to consider them: The founders of the UAW had a deep socialist history and always saw labor and corporations fighting about how to slice the pie. The UAW tried for too long to build political relationships for U.S. government intervention in business instead of trying to help the auto companies to become more competitive. The UAW never took any responsibility for the success or failure of the auto companies, even though they were an essential part of it. Ultimately global automotive makers from Japan and Germany with stronger labor productivity and products would take market share away from FMC and GM, which lessened labor influence. IAM 751 was very concerned about Boeing's competitiveness and would often advocate with the government for them, ensuring Boeing's success was the Union and the worker's success.

The book will have more insights into how labor-corporate relationships lead to an uncompetitive automotive industry and a competitive Boeing that outcompeted the better-supported LA Aviation firms. Sign up here to be the first to know when the book is coming out. https://www.ecosystemmike.com/upcoming-book

[1] More on violence in Unions can be found here https://muse.jhu.edu/book/10740

[2] More can be found here on Henry Ford trying to control his workers here https://sunypress.edu/Books/T/The-Five-Dollar-Day

[3] More on Alfred Sloan can be found here https://press.uchicago.edu/ucp/books/book/chicago/S/bo3618412.html

[4] Most of my research had focused on Boeing when it was a Seattle-based company before the merger with McDonald Douglas, which helped to create many of the current issues at Boeing.