Is Boeing’s 787 Dreamliner a Triumph or a Folly?

On Dec. 15, after two-and-a-half years of teeth-gnashing problems and delays that cost Boeing more than $10 billion in contractual penalties, the 787 Dreamliner completed its maiden flight, making aviation history in more ways than one. With its new composite skin and sculptured structure, it is the most technologically advanced commercial airplane ever. Offering a lighter but stronger and more aerodynamic structure, the 787 is designed to be quieter and more fuel-efficient than other commercial jets, allowing carriers to bypass hubs and whisk many more passengers point to point cheaper, faster, and with new levels of in-flight comfort. After announcing the Dreamliner, Boeing booked a huge number of advanced orders for the plane (nearly 1,000), curtailing to a slow crawl new orders for rival Airbus’s giant 380 plane. But there’s a dark side to this story. In trying to keep down Airbus, Boeing may be creating a much more dangerous competitor, one that likely will come from Japan, China, or India — countries that will own the markets for new airplanes in the near future and are in various stages of building their own commercial-airplane-manufacturing industries. To finance the development of the 787 and secure global orders, Boeing agreed not only to outsource an unprecedented amount of the plane’s parts to partners in Europe, Japan, and China, but also to transfer to them unprecedented know-how. Before the 787, Boeing had retained almost total control of airplane design and provided suppliers precise engineering drawings for building parts (called “build to print”). The only exception was jet engines, which have long been designed and manufactured by suppliers such as GE, Rolls-Royce, and Pratt & Whitney. The 787 program departed from this practice. Boeing effectively gave Tier 1 suppliers a large part of its proprietary manual, “How to Build a Commercial Airplane,” a book that its aeronautical engineers have been writing over the last 50 years or so. Instead of “build to print,” Boeing provided suppliers with performance specifications for parts and components and collaboratively worked with them in the design and manufacturing of major components such as the wing, fuselage section, and wing box. Redesigned Boeing 747s (called “Dreamlifters”) then fly these components directly to the final assembly site, where they are “clicked” together, reducing time needed for final assembly from 20 to 40 days to a mere three. Getting this system to work as envisioned has been a nightmare. It turned out that most of the major components were not manufactured as planned and had missing parts. It took Boeing and its partners more than two years to clean up the mess. The good news here is that Boeing gained tremendous knowhow in making its new global, virtually-integrated, manufacturing network work — a very big deal. Clearly, Boeing has pioneered a system that other industries will adopt. But there is a dark side to all this: Boeing’s bold 787 program has accelerated the inevitable competition from Southeast Asia, and that competition promises to be different and tougher than anything Boeing has encountered to date. Most likely, Boeing’s first competitor from hell will emerge from China. That country already builds advanced military fighter planes and is aggressively investing in its space programs, which continue to be a source of important innovations for commercial airplanes. Both Boeing and Airbus continue to share know-how for building advanced airplane parts with Chinese suppliers. And while Boeing has resisted transferring the system-integration knowledge needed to perform final assembly to the Chinese, Airbus has caved: It recently completed a jointly owned final assembly plant in China. China has successfully built a 105-seat regional commercial jet, the ARJ-21. The first passenger jet to be developed and manufactured in China. the ARJ-21 is about 15% cheaper than comparable Western airplanes and has an additional cost advantage: Chinese carriers that purchase it don’t have to pay the 23% tax levied on foreign planes. In the years ahead, we can expect China’s capabilities to manufacture major systems and entire planes to increase rapidly. As this happens, Boeing will find that its edge in systems integration will be difficult to maintain, and it will have to become even better at innovation to remain competitive. It took a decade to bring the 787 Dreamliner to market. Boeing needs to figure out how to turn out breakthrough innovations in less time. So will American and European companies in other industries where China has aspirations. Welcome to life in the 21st century. Dick Nolan is the Boeing Philip M. Condit Professor of Business Administration at the Foster School of Business, University of Washington, and is a Harvard Business School professor emeritus.

Is Boeing’s 787 Dreamliner a Triumph or a Folly?

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