New Meaning For 'Worldwide Company'

By Jessica Lipnack and Jeffrey Stamps
from St. Louis Post-Dispatch, December 22,1991

In the waning years of the heyday of the defense industry, a new business model for aerospace has been thrust upon us. Since development projects have gone megabucks, sometimes passing the multibillion dollar cost to produce the first prototype, competitors have begun cooperating.

"Teaming" is the word heard most frequently in the defense industry to describe the improbable alliances of such fierce rivals as Northrup and Boeing, General Dynamics and Lockheed, Rockwell and McDonnell Douglas. Douglas, the mostly commercial aircraft division of McDonnell Douglas, has taken the teaming idea and run with it. The real question is not which way is it running, but rather, what game is it playing?

If history were to repeat itself, some-time in 1996 the first vehicle in Douglas Aircraft's next generation of jumbo jets would roll out of the football field-sized hangars onto the tarmac. There, it would have been transformed from the mottled greenish-brown hue that typifies Douglasí nearly completed birds into the sleek, attractive, color-coordinated air-borne objets d'art that we associate with modern planes.

A few weeks later, traffic on Lakewood Boulevard in Long Beach, Calif., would have been stopped in the middle of the night just long enough for the plane to be rolled across the street and taken to the runway to begin its yearlong initiation ritual. "First flight" is the culmination of a five-year development process and a moment of great excitement for the people who build a plane.

But the MD-12, now on the drawing boards in Long Beach, will not roll out of the hangars there. Douglas' next generation of widebody, long-haul, tri-jet aircraft, designed to compete with Boeing's aging 747, born in the 1960s, will not be built in Long Beach at all.

The MD-12 might be assembled at two new sites that manufacturing concerns call ìgreenfields,î meaning that the plants are built from the ground up to create an environment consistent with the product under development. One of these is likely to be situated in Taiwan. where Douglas is making arrangements to secure a major equity partner.

The equity partner points to the wider significance of the MD-12 program. Whereas until now U.S. airplanes have been built with money provided by their own companies, Douglas is boldly cracking that mold. To raise what could be as much as $5 billion needed to build the plane, Douglas is going to a new model of risk-sharing partners. As many as 30 companies may be part of this consortium. As partners, the payoff comes not as they supply parts in the next five years; instead, they reap rewards when airlines begin buying the planes.

Douglas is playing the globally distributed, multiple partners business game.

Building a plane is a daunting process. It takes years, involves tens of thousands of people and requires the coordination of hundreds of thousands of processes. By the time the MD-12 is finished, its task list will number in the vicinity of half a million separately tracked jobs.

Imagine the coordination problem you already are familiar with when everything is under one roof, or at least one metaphorical roof, i.e., one company, one organization or one family.

Now put the coordination challenge in a virtual mach-speed popcorn machine that reaches around the globe and you begin to see the enormousness of the challenge facing Douglas.

Douglas not only has to build a plane relatively quickly to meet its market window, but it has to do so while also coordinating the activities of the wing partner, the avionics partner, the fuselage partner, the empannage (aerospace has no dearth of exotic terms, this one meaning simply "tail") partner, along with two dozen more.

The partners, of course, don't live next door, as we've seen with Taiwan. The multi-corporate consortium will be global, with partners on at least a handful of continents in perhaps a dozen time zones.

Is such an undertaking doomed to failure? Or is Douglas' ambitious plan for the MD-12 a harbinger that will require companies to work in an entirely new way? If so, what is the key ingredient of successful, international, globally distributed work?

In our view, Douglas can he successful if it concentrates as much on its organizational problems as it does on its technical ones. Like its competitors Boeing and Airbus, which together constitute the only remaining large-scale commercial aircraft manufacturers left in the world, Douglas knows how to build very good planes. Where neither Douglas nor Boeing is a world leader, however, is in the new management required to coordinate work across corporations, time zones, cultures and continents.

Airbus, the upstart newcomer that some believe has recently surpassed Douglas as the world's second largest aircraft producer, may have a leg up on its competitors in this regard. Airbus is an entrepreneurial consortium funded by a group of European nations.

The supreme challenge of the 21st century will be the ability to manage projects that transcend all the conventional boundaries whether to produce global products or prevent global warming. The bureaucracies of the Industrial Age, with their rigid focus on in-house protocols, will appear to the new inter-corporate transcontinental networks like old Royal typewriters do to PC users.

Douglas' new plane is one development program to watch closely in this regard, not for the MD-12's metrics on its thrust and loft, but rather on its innovation in designing and coordinating its network.

Jessica Lipnack and Jeffrey Stamps, principals at The Networking Institute Inc. in West Newton, MA, have been consultants to Digital Equipment Corp.'s role in the MD-12 program.