Boeing is one of the largest aircraft manufacturers in the world, specializing in the manufacture of commercial passenger aircraft as well as manufacturing planes and security support systems for the defense industry. The company is a leader in the security sector due to its innovative products and the support it provides for the goods it sells. The company is headquartered in Chicago and is divided into five major divisions – Boeing Defense, Space & Security (BDS); Engineering, Operations & Technology; Boeing Shared Services Group; Boeing Commercial Airplanes (BCA), and Boeing Capital. The company is publicly owned and its shares are traded at the New York Securities Exchange (NYSE). Boeing is also one of the leading players in the aerospace industry, manufacturing satellites as well as rockets and providing support systems for these products.
People and organization
Boeing uses the matrix management structure, where each division has a senior vice-president, allowing for accountability and easier communication. The company is divided into various divisions and departments, which allows for specialization of functions at the different divisions. The company uses corporate governance, where its senior vice-presidents from each of the company’s divisions meet and make decisions on the running of the company. The company has a centralized decision-making structure where the senior management makes decisions that are passed down the hierarchy. Although there is differentiation in the functions of each department, integration in management ensures that the company’s different divisions work harmoniously towards the realization of company goals and objectives.
Innovative drivers and dimensions of innovation
There are various innovation trends, which have been observed in the aviation industry. Innovation drivers influence the dimensions of innovation that are possible within a company. The dimensions of innovation can be into four basic parts – what (production innovation), how (process innovation), where (expansion) and who (market segmentation). Boeing remains relatively successful because it has embraced innovation in different spheres of its operations. First, there has been ongoing innovation in the products that the company produces. According to Hippel (2005), user-centered innovation is a trend that has grown over the past few decades and is likely to continue growing due to major advances in computing as well as communication technologies, which enable users to network and share ideas. The magnitude of computing power available to ordinary users currently was unimaginable in the past. This computing power has helped in the steady improvement of design capabilities that are available to product users. Unlike manufacture-centered design, which happens in a closed-loop, user-centered innovation is open and involves the synthesis of ideas from many different users. This development has been made possible by the availability of cheap high-speed internet that enables quick and efficient communication.
Boeing is not only a manufacturer of products, making planes for the civilian as well as defense sectors, but also a user of products. The company is a manufacturer of aircraft for both the civilian and defense sectors. However, it is also a user because it requires tools to cut and shape these airplanes, making the adoption of innovation necessary for the company’s continued success. User-centered innovation can be a challenge to Boeing because users are increasingly able to make for themselves what they need without the need to wait for the manufacturer to make for the products that may be imperfect to their needs. However, user innovation can be an important complement to the producer. Most user-innovators do so because they want to customize a product to be ‘just right for them, providing an opportunity for discerning manufacturers to learn of the changing user preferences and adjust their products to fit the needs of the market. Since most of the user innovations are not patented, this information is freely shared over the internet. Manufacturers like Boeing can, therefore, incorporate the newer user designs and preferences to their aircraft, thus keeping in touch with user needs and preferences. Usually, the product innovations made by users represent the lead users segment, which is representative of a significant market (Franke & Shah 2003).
The services sector has long been considered a passive consumer of innovation as well as a facilitator of innovation rather than an area where innovation can occur in terms of service provision (Howells 2000). However, there has been a change in the outlook of the service industry, with the recognition that service provision can undergo innovation in a bid to improve a company’s financial prospects. Services can play an important role in sustaining and enhancing the demand for products in the long term. For example, Boeing sells airplanes while giving maintenance schedules. This ensures that the company can sell parts and services to the users by servicing the planes. In addition, the company offers engine replacement after a certain period. This ensures that the company can still sell newer engines to users, maintaining revenue streams. The emerging trend in which manufacturers offer services related to their products is called service encapsulation. Service encapsulation in the aeronautical industry is growing and varied in nature.
Aeronautical companies are now offering financing arrangements to help users purchase products. Due to the heavy fines that aeronautical companies incur if there is plane inactivity due to engine problems, there has been a service innovation to ensure that aeronautical companies do not suffer much loss. This includes the installation of in-flight monitors and diagnostic instruments. These relays live data, which is analyzed by the manufacturers to identify and solve any problems before they lead to serious engine failure. This implies that innovations in service provision have helped to increase the contact between the manufacturer and the user. Therefore, the manufacturer can now respond to the user’s needs in real-time and incorporate user needs in their designs and product solutions.
The production process in Boeing has also undergone considerable innovation. Initially, Boeing did most of its manufacturing in-house with limited outside participation. However, there is an increasingly complex change in the technological innovations and market dynamics, which have forced manufacturers to think of entering into strategic alliances with other players to better respond to these changes. Therefore, most aeronautical companies are outsourcing the manufacture of parts to specialist companies with the technology and means to manufacture the parts in a cost-effective manner. Therefore, the industry has a complex web of intertwined players who are involved in different levels of the production process.
There is also a new trend in the production process enabled by the growth in available computing technology. The increasing availability and growth of computing power have led to the growth of the computer-assisted innovation (CAI) field, enabling innovators and designers to use these computer design tools in designing planes from scratch (Husing 2009). This development has a serious impact on the nature of production processes expected in the future since CAI provides new software tools that substantially change the approach to design. The future of the design and production processes is likely to be more reliant on software tools provided by CAI rather than the current human-intensive process.
Aeronautical companies use business models that are similar to each other (Teece 2010). The model is based on selling jet engines at a relatively low price, but providing services and parts at a mark-up ensuring that the company makes a profit. However, the availability of technology and computing power may pose a threat to this model. There are independent airplane service companies, which provide the same services as the manufacturers. In addition, aircraft manufacturers do not manufacture all the parts themselves. They depend on external contractors to provide some of the parts. This raises the possibility that independent service providers can obtain parts from the suppliers and provide services to users at a remarkably low cost. This will have a detrimental effect on the profitability of aeronautical companies. To guard against this eventuality, some aeronautical companies are acquiring independent services providers to consolidate their position in the market.
Franke, N. & Shah, S. (2003). How communities support innovative activities: an exploration of assistance and sharing among end-users. Research Policy, 12(1), 157-178.
Hippel, E. (2005). Democratizing innovation: The evolving phenomenon of user innovation. Michigan: MIT press.
Howells, J. (2000). Innovation & Services: New Conceptual Frameworks. CRIC Discussion Paper. The University of Manchester & UMIST.
Husing, S. (2009). Computer Aided Innovation-State of the Art from a New Product Perspective. Computers in Industry, 60, 551-562.
Teece, D. (2010). Business models, business strategy and innovation. Long Range Planning 43, pp. 172-194.