Visionary entrepreneurial leadership in the aircraft industry

The Boeing Company legacy

The Authors

Robert S. D'Intino, Rowan University, Glassboro, New Jersey, USA

Trish Boyles, Department of Management, Virginia Tech, Blacksburg, Virginia, USA

Christopher P. Neck, Department of Management, Virginia Tech, Blacksburg, Virginia, USA

John R. Hall, University of Tennessee, Knoxville, Tennessee, USA

Abstract

Purpose – In the early twenty-first century organization scholars and managers face an economic outlook full of daunting challenges. With investors, workers, and other stakeholders distressed and hostile toward corporate executives and boards due to recent corporate scandals, the future for many industries and firms appears grim. In what ways can business history help corporate managers and new venture entrepreneurs overcome these leadership challenges? This paper seeks to uncover practices throughout the Boeing Company's management history that offer today's executives and board members numerous examples of industry vision and leadership.

Design/methodology/approach – Visionary leadership theory is used to help understand Boeing's actions. A theory of visionary entrepreneurial leadership is proposed based on Boeing's history. Four specific cases of aircraft design and development decisions and actions are presented as examples of executive and board directors' vision and leadership.

Findings – Boeing has served as the aircraft industry's innovator and leader for over nine decades by designing and building path-breaking airplanes when no other aircraft manufacturer would venture similar risks to their reputation and capital. Furthermore, Boeing executives and board directors have repeatedly made risky decisions that – if the prototype literately crashed and burned – would probably bankrupt the company. Management's vision was always on the next great airplane, never on individual image or personal wealth.

Research limitations/implications – Future research directions are presented suggesting a focus on firm executives and boards of directors' decisions and how these decisions influence industry wide innovation and development.

Originality/value – The paper analyses the leadership attributes of Boeing executives over the last nine decades.

Article Type:

Case study

Keyword(s):

Leadership; Entrepreneurialism; Decision making; Aircraft industry.

Journal:

Journal of Management History

Volume:

Number:

Year:

2008

pp:

39-54

Copyright ©

Emerald Group Publishing Limited

ISSN:

1751-1348

Perspective

In what ways can business history contribute to contemporary decision-making and business practices for corporate managers and new venture entrepreneurs? In the early twenty-first century scholars of organization management and leadership face an economic outlook full of daunting concerns and challenges. These include investor and worker distress and hostility to corporate executive management, and widespread worries about future prospects. Recent business press coverage has been full of revelations about dishonest, selfish, and greedy corporate executives and boards of directors. A key element in these stories of once famous and now infamous corporations is that all the major leadership participants – CEO's and other senior executives, boards of directors, and an associated cast of less than ethical professional accountants, attorneys, bankers, and consultants – put their own private and personal interests above the corporations they worked for and basically ignored all other relevant stakeholders, including investors, employees, customers, suppliers, and their respective local and national communities.

A partial listing of recent corporate failures includes Adelphia Communications, Andersen Worldwide, Enron, Global Crossing, ImClone Systems, Quest Communications, Tyco International, Worldcom, Halliburton, and numerous other firms. These companies do not just represent business financial failures, but public ethical failures of business men and women who engaged in management negligence and theft that has greatly damaged public perceptions of business executives and board of director members (Byrne, 2002), as well as their hired gun accountants, consultants, and attorneys. A 2003 New York Times headline summed up this observation: “WorldCom to write down $79.8 billion of Good Will”. This decision acknowledged that many areas of that company's vast telecommunications network were essentially worthless, and closely followed AOL Time Warner's financial write down of approximately $100 billion in goodwill and assets. In such an environment, executive and board of director competence and honesty are questionable. Henry M. Paulsen, Jr, CEO of Goldman Sachs said: “In my lifetime, American business has never been under such scrutiny. To be blunt, much of it is deserved” (Byrne, 2002, p. 31).

Business scholars working at a theoretical level are attempting to make sense of apparent widespread failures among business executives, managers, and board members to pay attention to the functions and purpose of their organizations (Arnett and Hunt, 2002; Badaracco, 2001; Sorauren, 2000; Toenjes, 2002). Bartunek (2002) discusses how unethical actions have multiple negative effects on society and asks what business professors and scholars can contribute to addressing these problems. Perhaps, the way forward includes looking back on relevant historical cases. Specifically, this paper asks: what can the history of the Boeing Company in terms of executive and board of director decision-making and Boeing Company's visionary entrepreneurial leadership of the aircraft industry contribute to the education of contemporary business executives and board directors? Essentially, can the Boeing Company's history of visionary entrepreneurial leadership offer a relevant and useful model for contemporary executive and board of director actions?

The presentation of decisions and leadership actions by the Boeing Company demonstrates quite opposite qualities and behaviors from the stories published about some of today's businessmen and women. Executives and engineers and assembly line workers at Boeing were focused on the possibilities and challenges of designing and building Boeing airplanes that advanced the flight performance envelope. Boeing acted with entrepreneurial leadership in that the company's executives and board moved forward with innovative aircraft designs and manufacturing without regard for any current absence of technical or financial resources.

Case study approaches offer researchers an opportunity to evaluate and understand events and dynamics on the part of individual companies (Eisenhardt, 1989), which can advance knowledge and contribute to theory development by bringing to light ideas and concepts yet to be empirically tested in social science fields (Gummesson, 1991; Nagel, 1961; Yin, 1989). In this study, we employ a case-based approach to our analysis of Boeing and the decisions made by its leaders, to explore the question of what today's business leaders can learn from the decision-making and values demonstrated by business leaders of the past. Specifically, we look at four instances of Boeing's aircraft development to illuminate how the executives and directors of the Boeing Company demonstrated visionary industry leadership, focusing on innovation and product development, at the risk of financial and technical failure. In doing so, the Boeing Company continually transformed their industry.

History and legacy of the Boeing Company

The history and legacy of the Boeing Company is one of technological vision, innovation, courageous decision-making, and rational bet-the-company risk taking. Boeing combined all of these qualities into a position of enduring aircraft industry leadership, as reflected in the statement: “Boeing … [is] an American corporation whose name has become synonymous with technical excellence and integrity” (Serling, 1992, p. xiii). Nevertheless, Boeing never possessed a reputation for what contemporary business commentators' value most-reported corporate profits consistently growing every quarter and every year. In fact, for the 90 years of its corporate existence, Boeing has been only marginally financial successful and on the edge of bankruptcy many times. Two major questions ask: what makes the Boeing Company distinctive? How did Boeing emerge and remain the dominant aircraft innovator and industry leader up to the current time – 90 years after its founding? Boeing's executives, engineers, and board of director members focused on the goal of improving flight technology and becoming and remaining their industry leader. More importantly perhaps, they measured their success by Boeing aircraft flight performance rather than Boeing Company's income statements and balance sheet, and more than their own personal reputation or net worth. Nine decades of aircraft design and production demonstrate a firm that is “both conservative and daring” (Serling, 1992, p. xiv). On the one hand, Boeing has risked the entire firm at least four times on the development of an innovative new aircraft design (Collins, 2001; Collins and Porras, 1995, 1997; Mansfield, 1966; Redding and Yenne, 1983). On the other hand the firm's executives and engineers have also acted conservatively, waiting at technology transition moments until Boeing's technical expertise and experience was mature enough to create a new aircraft market (Serling, 1992).

This paper briefly examines visionary leadership theory, an overview of the American Aircraft Industry and the Boeing Company, and four critical aircraft development case studies: two military heavy bombers, the Boeing Models B-17 and B-47, and two civil passenger and cargo jets, the Boeing Models 707 and the 747, are presented as representatives of executive and board directors' vision and decision-making. In conclusion, visionary entrepreneurial leadership theory as exemplified by the Boeing Company's history is discussed and future scholarly research directions are proposed.

Leadership theory and entrepreneurship

Leadership theory encompasses a vast literature (Burns, 1978; Hunt and Dodge, 2001; Stogdill, 1974; Yukl, 2002) representing numerous theories and thousands of empirical studies. The Boeing Company's aircraft development can help describe and understand leadership at both the firm and the industry level, emphasizing Boeing's focus on flight technology advances over financial success. Boeing executive, engineer, and board member actions are discussed using the lens of visionary leadership theory (Collins and Porras, 1997; Groves, 2006; Maccoby, 2003; Morden, 1997; Nanus, 1992; Rafferty and Griffin, 2004; Westley and Mintzberg, 1989). Nanus (1992) said that visionary leadership provides clear and compelling directions for an organization, in a sense providing both strategy and culture to communicate to everyone what to do and why. Collins and Porras (1995, 1997) provide perhaps the clearest and most comprehensive theory and presentation of visionary companies, with their focus on building the organization itself rather than a focus on a particular product or on individuals. They present a leadership theory that truly focuses on the firm and the team rather than individual star presidents or CEO's, fitting precisely the nine decades of Boeing Company history and leadership. Extending the scope from visionary leadership of a firm to the leadership of an industry results in what we call industry visionary entrepreneurial leadership, a theory based on the Boeing Company's history of industry innovation and leadership. Industry visionary entrepreneurial leadership theory incorporates a combination of visionary focus on product (or service) design and development, with the courage to recognize a firm's resource limitations and a willingness to risk financial ruin to achieve innovative performance and production goals. This visionary leadership requires a focus on creation over personal reward, a rather refreshing change from the recent reporting of executive and board director criminal and unethical behavior. Visionary leadership is style and strategy coupled together (Mintzberg et al., 1998), and requires more than just vision. Moving from vision to visionary leadership entails working to create the future envisioned, incorporating the strategic direction and planning necessary to do so (Kakabadse et al., 2005).

Tellis and Golder (2001) suggested that it requires more than technological change, visionary leadership and the commitment to create a future envisioned. It also takes strategic direction by company leaders to achieve long-term firm survival and success. Enduring market leaders focus relentlessly on innovation and creating the best product possible for potential emerging markets, and are willing to “cannibalize their current assets to realize that future” (Tellis, 2006, p. 4). We suggest that leadership at Boeing possessed not only the vision, but also the commitment to carry out that vision at the risk of “cannibalizing” firm assets to a point of no return. We will attempt to demonstrate this through a description and analysis of four specific cases of aircraft innovation performed by the Boeing Company.

Overview of the American aircraft industry

Orville and Wilber Wright flew the first powered aircraft on December 17, 1903 at Kitty Hawk, NC. At that time the world took little notice or interest in their technical achievements or aircraft's powered flight potential. In 1908 the Wright Brothers modified their original design to carry two people (May 14), the US Army purchased the first airplane for military use (September), and the Wrights' demonstrated their new Wright Flyer in France from August 1908 to May 1909 (Blake, 1974). At the beginning of the World War I in August 1914, the US Army had approximately 20 aircraft and perhaps 12 trained pilots. Only 49 aircraft were produced in the USA in 1914 (Simsonson, 1968). Though completely unprepared for wartime production, US aircraft production reached 14,020 in 1918. At war's end demand ceased and the aircraft market was glutted with unwanted planes. See Tables I-V for an overall American aircraft industry perspective.

Boeing Company's formative years

In 1914, William Boeing and his friend Conrad Westervelt paid for several airplane rides. They enjoyed flying and after several flights Boeing told his friend and future business partner Navy Lieutenant G. Conrad Westervelt that “he thought they could build a better one” (Serling, 1992, p. 2). Boeing Model 1 was basically a copy of a Martin seaplane that Westervelt designed with Boeing providing the funds and serving as test pilot. The US Navy evaluated this plane and rejected it. Undeterred, Boeing incorporated Pacific Aero Products Company on July 15, 1916. The company's first sale consisted of 50 Boeing Model Cs – a two-seater seaplane modification of the first Martin-inspired Model 1. This $575,000 Navy contract put Boeing in the airplane business and reflected the aircraft boom that developed after America's 1917 entry into the Great War. Boeing advertised his Seattle-based company “Built Where the Spruce Grows” reminding people that airplanes were primarily built of wood. William Boeing renamed his company the Boeing Airplane Company and built an additional 25 Curtiss flying boats under license – a common practice at the time. The war ended as did the boom in aircraft orders. Four years later in peacetime 1922, with a surplus of used planes and engines, only 263 aircraft were produced in the USA (Rae, 1968). This 98 percent decrease in production helps place the recent high-technology and telecommunications industry crashes in historical perspective.

The post-war collapse of the aircraft market did not present an auspicious environment for the new venture Boeing Company. For the company to survive, Boeing made a variety of products including wooden furniture, powerboats, windmills, low-priced homes, and even sold milk from the company's herd of cows. William Boeing raised cash with new stock issues, which he purchased from his personal lumber fortune (Serling, 1992). Aircraft business included one flying boat called the B-1 built in 1919, and a US Army contract to modify 111 de Havilland planes. In 1929, the Boeing Company lost $300,000 and again only William Boeing's personal fortune kept the firm operational. During this time Boeing survived by bidding low to build other designer's planes because William Boeing owned extensive spruce timberland.

Given William Boeing's personal resources, one would have expected that Boeing Aircraft Company to continue to emphasize wooden aircraft manufacture. Nevertheless, in 1923 Boeing designed and built the Model 15 Army biplane fighter XPW-9 with a welded steel fuselage, thus illustrating Boeing's interest in innovation, entrepreneurial risk-taking, and advancing aircraft design and performance. The Army ordered a total of 30 of these fighters and later improved versions of the PW-9 were ordered by the Navy designated the FB-1 series. Boeing developed into the dominant supplier of US Navy fighters from mid-1920 through the late 1930s, beginning with the 1923 FB-1, designed and built solely with Boeing funds, a practice, which both became a Boeing trademark and almost bankrupted the company on many occasions. Boeing is best remembered during this time period for the F4B, a fighter design used successfully by both the Navy and Army (Cooper and Batchelor, 1973). About 600 Army P-12's and Navy F4B-4 fighters (essentially the same airplane) were sold in the 1930s, with Boeing building the largest number of fighters for both services. The Boeing Company had a well-deserved reputation for learning from its mistakes and making immediate changes and improvements to airplanes in production – this becoming one of Boeing's greatest corporate reputation strengths, along with its well-deserved reputation for very strongly built airframes and wings.

The Boeing Company was also looking for a commercial (mail and freight) and civil (passenger) aircraft market. The US Post Office issued aircraft performance specifications in 1925 for airmail carriers. The Boeing Model 40 was produced (Blake, 1974) for these government specifications. In 1927, the post office contracts for airmail transport were given to private companies and Boeing bid and received the San Francisco to Chicago route contract. This was the beginning of the American airline industry and Boeing was involved from the very beginning as an aircraft designer and builder, as well as an airmail and passenger carrier. Boeing Model 40 was a three-engine biplane used by Boeing Air Transport, which later merged with other air carriers to become the now famous United Airlines with William Boeing as Board Chairman. Though various executive and board of director decisions, the Boeing Company was essentially creating through ownership its own market for commercial and civil aviation.

Boeing aircraft innovation and visionary entrepreneurial leadership

In 1930, Boeing produced the Model 200 Monomail, an airplane that served to advance modern aircraft design by incorporating all metal construction, a low-wing cantilever wing design, and retractable landing wheels (Blake, 1974). As an innovative aircraft prototype, the Monomail allowed Boeing to experiment, innovate, and learn about all metal construction and retracting landing gear. This design and production knowledge resulted in the Model 215, a two-motor, cantilever wing, retractable gear bomber design. The US Army bought a few aircraft, but the Martin Aircraft Company received the full production order with a plane incorporating a newer design with enclosed pilot cockpit and machine gun turrets. Although the Model 80, the Model 200 Monomail, and the Model 215 Bomber were all innovative aircraft designs, they were also all financial failures. Yet the Boeing Company was learning how to push the aircraft design and production envelope for both military and commercial/civil aircraft performance, despite a consistent Boeing Company lack of profitability.

The Boeing B-9 bomber followed the design innovations of the Monomail in a much larger airplane with more powerful Pratt & Whitney Hornet engines. However, the competing Martin B-10 was an overall better bomber aircraft and once again Boeing did not receive an Army contract. Not to be discouraged, Boeing modified the B-9 design into the innovative 1933 Boeing 247 airliner which the aircraft writer Serling (1992, p. 19) described as “a revolution wearing wings”. However, even with design improvement including a heated low drag all-metal body, variable-pitch propellers, cantilever wings, built-in wing deicers, and fully hidden retractable landing gear, the 247 was not an economic success (Chant, 1982). Boeing Air Transport System thought the 247 too heavy at £16,000 with 14 passengers and insisted the Boeing Company design a new smaller £13,000 ten passenger airliner. Boeing agreed to these demands and changed their design. A total of 60 Boeing 247 aircraft were ordered by the airline that would later be renamed United Airline. Rodgers (1996) points out that the 247 represented the first airplane recognizable as a modern airliner, yet it was not a financial success. TWA and American airlines both discussed ordering this new 247 – a much faster plane than anything else available – but were told by Boeing that the United Airline order would backorder production for another year. These two combined decisions illustrate the more conservative side of Boeing's executive decision-making, decisions where they were willing to design and produce a smaller and less advanced commercial/civil aircraft – essentially the decisions that were to prove fatal for the firm's commercial/civil airline business for the following two decades. TWA Airlines asked Donald Douglas to design a better and larger version of the Boeing 247, resulting in the Douglas DC-1 and DC-2, soon redesigned into the famous DC-3 that would allow Douglas to dominate the airliner market with this and follow-on designs until Boeing produced the Model 707 in 1954-1921 years later.

Boeing also designed the high-performance P-26 fighter aircraft and sold 130 to the Army. However, the P-26 aircraft were sold to the US Army for a fixed contract price of $10,000, although Boeing spent $13,000 to build each one (Serling, 1992). Vander Meulen (1991, p. 139) in his book on the politics of aircraft manufacturing confirmed that Boeing lost over $500,000 on total P-26 production. Though many aircraft manufacturers would only design and build a prototype military airplane with government funding, Boeing developed both the B-9 bomber and P-26 fighter entirely with company funds, following a tradition of company financial risk taking, originally based on a resource strategy utilizing William Boeing's large personal fortune from his timber and lumber businesses. Nevertheless, the willingness to expend company funds to design and build prototypes of a new type of aircraft was the way Boeing Company developed their reputation for industry leadership.

Returning to visionary leadership, Westley and Mintzberg (1989) suggested repetition, representation and assistance are three concepts that contribute to such a leadership style. Research suggests that repetition can provide success that comes from deep knowledge of the subject at hand (Westley and Mintzberg, 1989). By entering the aircraft industry in its infancy, there was no establishment or design foundation from which to draw upon. William Boeing was able to develop a deep technically proficient knowledge of performance-based aircraft design through his experience as an aircraft industry pioneer.

As the aircraft industry began to develop and new competitors joined the market, Boeing possessed the ability to replicate past successes with a focus on present and future endeavors. Some might argue that without William Boeing, the organization would have failed because the leader's personal involvement was integral to the company's success. Continuity of leadership can make or break an organization. Turnover of top management can erase organizational “memory” or reinforcement history (Miles, 1980). This representative or performance aspect of visionary management identifies the performer, in this case Boeing, as having the unique ability to bring the past to life giving it immediacy and vitality (Westley and Mintzberg, 1989).

The third common thread of visionary management, assistance (or attendance) points to the concept of reciprocal empowerment (Westley and Mintzberg, 1989). During wartime, there was pressure by the military services to quickly resolve design issues and respond with effective solutions. Accurate and timely feedback regarding the outcomes of strategic choices is essential for organizational learning (Miles, 1980). Through relationships with the US military services and early government contracts, Boeing was afforded opportunities to create advanced aircraft capable of outperforming previous designs. Likewise, the military was empowered, through its relationship with Boeing, to participate and make recommendations during the design and testing stages of the craft. The propensity for managers to employ a specific choice is conditioned, strengthened, or diminished by the consequences it has elicited from the environment in previous situations (Miles, 1980). The following four case studies of innovative aircraft development will be discussed to show how the executives and directors of the Boeing Company demonstrated visionary industry leadership to make executive decisions and risk significant firm wealth to design and build airplanes that time and time again transformed an industry (see Table VI for a list of Boeing executives).

Four cases illustrating Boeing Company visionary leadership and innovation

The following sections describe four critical aircraft development case studies: two military heavy bombers – the Boeing Models B-17 and B-47 and two passenger and cargo jets – the Boeing Models 707 and the 747. These four aircraft design and development cases are presented to illustrate Boeing Company executive and board directors' industry vision, leadership, and innovative decision-making.

The technologies needed for military and commercial aircraft applications are interconnected so the following narratives of four cases of aircraft developments connect with each other on technological and manufacturing dimensions. For example, the technical lessons learned from the B-47 bomber provided Boeing with a competitive advantage in designing and building the Model 707 jet airliner.

B-17 Bomber

Boeing's president Egtvedt decided that previous company executive decision mistakes would not be repeated. He was referring to earlier decision to re-design the Model 247 commercial airliner with a smaller airframe and agreeing to employ older less powerful engines (both at United Airline's request). With no orders on the horizon from commercial airlines, and an absence of US Navy interest in Boeing's new fighter designs, the only viable market remaining for preserving the company's future was an opportunity to design and build a big innovative bomber for the US Army. The Army funded the XB-15 in 1934 as an experiment in big airplane design and development, though it did not fly until 1937. At the same time, the US Army issued specifications for a multiengine bomber for which Boeing, Douglas, and Martin aircraft companies could submit designs and production bids. Specifications required a multiple engine bomber that would carry one-ton of bombs over a 1,000 miles at approximately 200-250 mph. Even though the Army wanted and expected a two-engine bomber, Egtvedt instructed Boeing's engineers to design a four-engine bomber to be called Model 299 or Army B-17. The Boeing board of directors voted $275,000 for design and prototype development, and then when the funds were spent, the board voted another $150,000 for further development. The Boeing Company board and executives literally bet the company's future on Model 299, given that the firm had previously lost a total of $266,000 in 1934.

What lessons can business entrepreneurs and executives learn from this momentous decision? One lesson is that Boeing executives did their homework before they “bet the company”. For example, only after Boeing executives discussed with Army Air Corp decision makers potential advantages of a four-engine bomber in terms of load, speed, and range (Chant, 1982) was the corporate decision to move forward with a four-engine design implemented and firm resources engaged for design and prototype production. This decision is indicative of the willingness to innovate for potential emerging markets even at the expense of exhausting company assets as described by Tellis and Golder (2001).

Model 299, financed completely by Boeing, moved rapidly from the initial design begun on June 19, 1934 to the first flight on July 28, 1935 (Chant, 1982). From decision to first flight took less than 14 months. The first YB-17 could fly at 250 mph and carry a load of £2,500 approximately 2,260 miles (Biddle, 2002). However, the first Model 299 YB-17 crashed during Army tests due to a flight preparation error by Army crewmembers. Because the first YB-17 crashed during initial testing, Boeing lost the Army contract, even though its airplane was far superior to the competition. The Army Air Corp instead purchased 350 Douglas B-18's (Hardy, 1982), a modified DC-3 without defensive guns that proved virtually worthless as a World War II bomber. Another reason for the Army purchase was that two-engine bombers were less expense to purchase and operate. However, the Army Air Corp. wanted the large four-engine bomber and ordered 13 B-17A's in 1936 as “field test airplanes” (Rodgers, 1996). Boeing was bankrupt at this point and the company's future viability rested on this order for 13 bombers (Serling, 1992) until an additional order for 39 B-17B's was placed in 1938. During this period the financial journal Barron's reported that the Boeing Company was great at industry innovations but did not appear to know how to make a profit.

In the fall of 1939 at the start of World War II, the Army and Boeing were unable to agree on a price for an additional 38 B-17C models. The Army's price limit was $199,000 and Boeing was losing money on the $205,000 price for the B-17B Models already delivered. Boeing lost $2,600,000 for the first nine months of 1939 (Rae, 1968) and the stalled negations continued into spring 1940. Boeing's President Johnson was ready to cancel the B-17 as a money-losing project and begin working on other aircraft design projects. Ironically, Douglas Aircraft with too many orders for its B-18 two engine bombers from France and England sub-contracted 250 planes for Boeing to manufacture, thus deferring for a time the B-17 cancellation decision. During the war the B-18 was of little use except for antisubmarine patrols and training bomber crews.

Without the design and manufacturing leadership of the Boeing B17, there would have been no derivative Consolidated B-24 or Boeing B29 Superfortress bomber. The B-17 program was finally saved in mid-1940 when the Army and Boeing agreed to delete some minor features and compromise on a $202,500 price. Although the early A, B, and C models of the B-17 first used by the British in combat were deficient in armor and defense guns and thus highly vulnerable to fighter attack, the concept of a defensive bomber pioneered by Boeing became US Army air doctrine (Dews and Kozaczka, 1981). By war's end in 1945 Boeing and its contractors built 12,726 B-17's – Boeing 6,981 and Douglas and Lockheed (Vega) another 5,745.

B-47 Bomber

Boeing engineers were discussing the design of a jet engine bomber as early as 1943. George Schairer, Boeing's Chief of Aerodynamics, visited Germany in 1945 to examine German advances in jet engines and wing design. He found that swept wings provided tremendous flight improvement and terminated Boeing's design work on a straight wing bomber with four jet engines. A new swept wing bomber Model 448 was built in wooden mock-up in 1945 and shown to the Army Air Force in 1946. Engines were increased from four to six and this design was designated Boeing Model 450. This was manufactured as prototype bomber XB-47.

Boeing was the first aircraft company to realize that jets represented the future of bombers as well as fighter aircraft, and committed significant design resources in 1944-1945. The Air Force wanted Boeing's bomber design to be powered by turboprops instead of jets, but Boeing refused. The painful lessons of the Model 247 airliner were still remembered by Boeing executives and contributed to Boeing's toughness in going their own way in the face of their sole customer's objections. Strong leaders are said to be simultaneously secure enough to invite criticism and also not afraid to defend an unpopular decision (Maccoby, 1981).

The significance of the aircraft design of the B-47 was eloquently stated by Sir George Edwards, Head of the British Aircraft firm Vickers upon first seeing the aircraft: “No one except Boeing would have had the courage to build an airplane like that” (Serling, 1992, p. 102). Carrying the vision of the B-47 through to its realization no matter the immediate success, but focusing instead on a clear vision of future of jet bombers, is another example of how decision makers at Boeing demonstrated a “conviction to craft the future” (Kakabadse et al., 2005, p. 237) that transformed vision into strategic direction and as such, visionary leadership. As Kakabadse et al. (2005) note, visionary leadership follows not just from the conviction to craft the future, but enacting all that is required to create the future envisioned. The XB-47 flew successfully in December 1947 and 2040 B-47's were manufactured from 1947 to 1957. This aircraft remained in service until 1965, when the remaining 114 aircraft were put in dry storage or sold as scrap metal.

Boeing 707 commercial jet

In 1950, Boeing neither designed nor built commercial aircraft; furthermore no airline was interested in their aircraft products. Everyone knew that Boeing built military bombers and would never successfully compete with McDonnell Douglas in the propeller engine commercial airline market. How then, did the Boeing Company succeed at designing and constructing seven dominate commercial jet airliners: the Boeing models 707, 727, 737, 747, 757, 767, and 777?

A previous observation that the Boeing Company was both a conservative and a very daring company helps explain this major corporate product transformation. Boeing was conservative in that the company had decades of experience building big military planes and also had recent experience and expertise with jet engines in the B-47 program. Boeing executives and engineers were daring in that they both saw and wanted to take on the major challenge of leading the commercial airline industry into the jet age – an industry where they had no absolutely no presence and had been soundly defeated two decades previously. In 1952 William Allen and his executives and board of directors decided to invest 25 percent of the firm's net worth to design and construct the prototype of the Model 707 (Serling, 1992). This first American jet transport for passengers and cargo flew in 1954. The US Air Force ordered 29 aircraft as air tankers (Boeing Model 717), but not a single passenger or cargo airline placed an order. Boeing executives wondered if they had another commercial failure like the 1933 Model 247 – hailed by everyone as technically advanced but a commercial bust. In October 1955 Pan American airline ordered 59 Model 707 and the American jet transport age commenced. The Model 707 changed passenger travel, completely killing what was left of the Atlantic passenger ship business. Boeing once again emerged as the aircraft industry leader, not only for large military bombers, and now also for large transport jets. It is easier to take an incremental approach that builds on the status quo; much harder to build a vision that takes the organization in a radically new direction (Conger et al., 1999; Tellis, 2006). Boeing Company executives and board member's consistent commitment to radical aircraft innovation at the risk of company financial disaster demonstrates a key component of industry visionary entrepreneurial leadership.

Boeing 747 commercial jet

The expected $500 million in development expenses for the world's largest commercial aircraft reflected Boeing's risk taking and conservative decision-making. Boeing's factories could not build an airplane the size of the proposed 747 and thus a new production complex would have to be built. In a 1965 board meeting, Crawford Greenewalt, a long-time Boeing Director and Chairman of the Board of Du Pont Company, asked about projected return on investment from such huge investments. Serling (1992, p. 285) described the reply with the following story:

The Boeing Vice President of finance replied, “they had run some studies, but couldn't recall the results”. Greenewalt just put his head down on the table and muttered, “My God, these guys don't even know what the return on investment will be in this thing.”

The Boeing board approved the 747 development program, described in the US business press as “the greatest wager ever made on a business project” (Rodgers, 1996, p. 7).

Industry wisdom in the early 1960s expected that supersonic transport aircraft would soon dominate passenger traffic and thus the Model 747 was primarily designed to carry cargo. The distinctive wide-body was designed to hold two 8 × 8 foot maritime containers side-by-side, with no thought at the time that the extra width would provide passenger comfort. The complexity of the Model 747 required over 3,000 Boeing engineers, compared to the roughly 100 engineers that designed the B-17 bomber. Pan American airline ordered 25 Model 747 in a $525 million contract, and Boeing constructed a new manufacturing complex in 1966 to build the first 747. This aircraft first flew in 1969 and the design was a production and flight success (Redding and Yenne, 1983) from then until the present.

In 2006 the 747 remains the largest and best known commercial airplane in service. Recent production delays for the new Airbus Model 380 double-decker aircraft have resulted in cancellations by early passenger and cargo airlines. Interestingly, these airlines are deciding to purchase advanced versions of the Boeing 747, an aircraft that first flew in 1969. The Boeing Company's commercial aircraft continue to be viewed in their industry and by their customers as innovative and excellent in terms of aircraft design and engineering, manufacturing quality, sales and financing, and aircraft support services (Rodgers, 1996). Boeing's success echoes the ideas regarding the importance of visionary leadership, described by Tellis (2006) as the realization that success and failure result primarily from internal aspects of the firm largely driven by visionary leadership that not only welcomes change but is also willing to sacrifice financially to incorporate new technologies and develop innovative and highest quality products.

Industry visionary entrepreneurial leadership theory discussion and conclusion

The preceding four Boeing Company aircraft cases illustrate Boeing's story of building both a company and an aircraft industry with the focus always on innovation and building more advanced military and commercial aircraft. Boeing people cared more about their product than themselves. Boeing's history helps explain the extension of entrepreneurial leadership theory to a more expansive theory of visionary industry leadership. The relentless focus of leaders at Boeing on developing the future of aircraft, at the risk of immediate financial success, captures both the ability of leaders to envision the future and the willingness to develop that vision and create the future. This is the basis for our notion of industry visionary entrepreneurial leadership, which as Boeing has exhibited, includes understanding and anticipating the future, combined with an ability to effectively guide the company strategically towards that future. Further case study research could be conducted on other companies in the same and other industries to see if industry visionary entrepreneurial leadership is specific to Boeing and the aircraft industry, or can be generalized to other industries and companies.

What a study of the Boeing Company offers executives and board of director members in the early twenty-first century is a vision of people with intense pride in their company and their product. In response to the ethical crises that often characterizes today's business environment, which typically involves a myopic focus on creating executive wealth through profit maximization at any moral cost, the Boeing Company history presents an alternative approach that emphasizes a relentless focus on innovation and product quality resulting in long-term firm success. This pride in a company's product can perhaps once again become integral to the integrity fabric of American business. The consistency in Boeing's style of decision making still exists today, some 90 years later, as reflected in the words of the present day head of Boeing Company's commercial plane division, Scott E. Carter: “Every time we do a new airplane we essentially bet the company to some extent” (Wilber, 2006). About 90 years after it is founding the Boeing Company continues to demonstrate innovative aircraft design and production to ensure their position as a visionary entrepreneurial leader in the aircraft industry.

Table I

Table IIBoeing Aircraft Company sales in relation to the US aircraft industry: total US aircraft production, 1920-1933

Table IIIBoeing Aircraft Company sales in relation to the US aircraft industry: Boeing's sales ranking with its competition

Table IVBoeing Aircraft Company sales in relation to the US Aircraft Industry: total US aircraft production, 1934-1940

Table VBoeing Aircraft Company sales in relation to the US aircraft industry: total US aircraft production, July 1, 1940-August 31, 1945

Table VIBoeing Aircraft Company executives and chief aircraft designers 1916-1988 (and other significant executives and board members)

References

Arnett, D.B., Hunt, S.D. (2002), "Competitive irrationality", Business Ethics Quarterly, Vol. 12 No.3, pp.279-303.