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The Sky's (Not) the Limit

10/19/2012 --

Boeing CEO says getting leadership and innovation right is critical for success.

ANN ARBOR, Mich. — The Boeing Co., the world's largest aerospace company, is closing in on 100 years in business. So how does it stay on top?

It's a struggle that requires a delicate balance between nurturing creativity and having a disciplined business process, said Boeing's Chairman and CEO Jim McNerney Jr. during the annual Ross Reunion lecture.

"Why do big companies lose it? They lose it when they get bigger than their ability to manage either the culture or the business process," he said. "One of them gets out of control."

In his conversation with Ross Dean Alison Davis-Blake, McNerney shared his views on how people learn to become innovative leaders, as well as how excessive burdens affect middle managers.

At a company like Boeing, innovation has to be balanced with risk. Everything it builds — from commercial airplanes to military products — has to be safe.

"At the same time, we have to do things nobody has ever done before," he said.

McNerney also said he learned at 3M Corp. that a company needs two processes for innovation. One is for idea development where creativity and flow are encouraged. The other is for when ideas go into development, money is spent, and they become products. In that case, discipline and yield are important.

"These are two separate processes, and a lot of people in management don't do that," he said. "It's very hard to create an environment where those two processes can exist in the same company. The discipline you need in the second is the mortal enemy of the first. You have to manage the two processes separately. You need a big-time toll gate in between them."

Keeping a company balanced requires leadership, and McNerney said he learned to lead through "the crucible of many experiences, many of which were uncomfortable."

For example, he said shaping a team is the most difficult thing to do, but has the most payoff when done right. It requires hiring, firing, challenging people, and moving employees around.

"You don't do it lightly, but it has enormous leverage when you have the right team lined up the right way," he said. "It has more to do with whether you succeed or fail than the strategy of the company or the capability of your competitors."

Boeing has its own leadership development center where it challenges participants with competitive classes and some pressure.

"We don't want it to be a totally fun experience," he said.

One of the biggest lessons on leadership and innovation came with development of the 787 Dreamliner. Boeing had been working on the high-speed Sonic Cruiser, but shifted course after the terrorist attacks on Sept. 11, 2001. Airlines wanted greater fuel efficiency and lower operating costs.

Boeing adopted a lot of the technology from the Sonic Cruiser to the Dreamliner, and the result is a versatile airliner that's 20 percent more fuel efficient than its predecessor and costs 30 percent less to maintain.

"The lesson there from a leadership standpoint is listen to your customers," McNerney said. "The higher tech you are, the more you have to listen to your customer, because of the bigger mistake you can make."

Still, it wasn't smooth sailing to get the 787 out, which has Boeing examining its business processes. Boeing ran into a fastener supply problem that caused delays and overestimated the maturity of the technology. McNerney said the extra cost to get the 787 in the air is "one we have in the back of our minds as we develop the process today."

McNerney also said middle managers as a whole are getting overwhelmed with "bureaucratic requirements from the top," leaving little time for coaching, teaching, and reviewing first-line leaders.

"American business has to go through another generation of workout, getting work out of the middle," he said.

— Terry Kosdrosky

For more information, contact:
Terry Kosdrosky, (734) 936-2502,