The Boeing Company

Running head: THE BOEING COMPANY CASE STUDY

The Boeing Company Case Study

Eric Punt
Argosy University
B7628 Online
Professor: Dr. Anthony Petroy
April 15, 2009
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Abstract

Introduction to The Boeing Company: personnel, products, locations. Examination of Boeing innovation
practices, citation from: The Boeing Company Web Site, 2007 Annual Report, James McNerney, the
current Chief Executive Officer, and David Swain, retired Vice President. Current and historical aviation
innovation challenges, innovation system application, role of ethics, The Boeing Company centralized
innovation management practices. Failure of effective innovative practices during the development of
commercial supersonic transportation aircraft reviewed.
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Table of Contents
Table of Contents.................................................................................................................. 3

Aviation Innovation History...................................................................................................9

Innovation Systems Theory...................................................................................................9

Challenges Faced................................................................................................................ 12

SWOT..................................................................................................................................13

Ethics in Innovation.............................................................................................................16

Leadership Ethics.............................................................................................................16

Literature Review................................................................................................................17

Boeing.............................................................................................................................17

Summary of Boeing.....................................................................................................18

Innovation........................................................................................................................19

Leadership.......................................................................................................................22

Summary of Leadership................................................................................................29

Principles and Practices for Implementing Innovation........................................................30

Research Summary.............................................................................................................34

Boeing and Innovation....................................................................................................34

.................................................................................................................................... 34

Aviation and Innovation................................................................................................35

Innovation System and Boeing........................................................................................35

Ethics and Leadership in Innovation................................................................................36

Conclusions......................................................................................................................... 36
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The Boeing Company Case Study

This case study is an examination of The Boeing Company innovative practices Extensive

citation used from Boeing’s web site and The Boeing Company 2007 Annual Report-Leading the Way

for the following reasons: Boeing products have very distinct names and applications, to paraphrase

would add considerable length and detract from intent- examination of innovation at The Boeing
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Company. In other words, Boeing provides the best descriptions with the least amount of words.

Secondly, quotes from each source highlight Boeing’s complexity of product, claim to innovation, and

provide numerical values relating to income, employees, countries operated in, and customer base not

verified as factual by this author, introduced to topic using quotation for reader consideration.

W. James McNerney, Jr. is the chairman of the board, president, and chief executive officer,

(CEO) of The Boeing Company, by default the author of The Boeing Company’s web site. As

presented by www.boeing.com (2009):

The world's leading aerospace company and the largest manufacturer of commercial jetliners
and military aircraft combined. Additionally, Boeing designs and manufactures rotorcraft,
electronic and defense systems, missiles, satellites, launch vehicles and advanced information
and communication systems. Boeing contracts with the NASA [National Aeronautics and
Space Administration] to operate the Space Shuttle and International Space Station. Boeing
has customers in more than 90 countries around the world and is one of the largest U.S.
exporters in terms of sales (Boeing, 2009, About Us Section, para.1-2).

Headquartered in Chicago, Boeing employs more than 160,000 people across the United States
and in 70 countries, with major operations in the Puget Sound area of Washington State,
southern California, and St. Louis. Total company revenues for 2008 were $60.9 billion,
(Boeing, 2009, Boeing in Brief Section, para.3).

Boeing is divided into two major business units: Boeing Commercial Airplanes, (BCA), and

Boeing Integrated Defense Systems (IDS), with subsidiaries.

Today the main BCA products are the 737, 747, 767 and 777 families of airplanes and the
Boeing Business Jet. New product development efforts are focused on the Boeing 787
Dreamliner, and the 747-8. The company has nearly 12,000 commercial jetliners in service
worldwide, which is roughly 75 percent of the world fleet. Through Boeing Commercial
Aviation Services, the company provides unsurpassed, around-the-clock technical support to
help operators maintain their airplanes in peak operating condition (Boeing, 2009, Boeing in
Brief, Boeing Commercial Airplanes Section, para.1).

Boeing Integrated Defense Systems (IDS) provides end-to-end services for large-scale systems
that enhance air-, land-, sea- and space-based platforms for global military, government and
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commercial customers. In addition to designing, producing, modifying and supporting fighters,

bombers, transports, rotorcraft, aerial refuelers, missiles, munitions and spacecraft for military,
civil and commercial use (Boeing, 2009, Boeing in Brief, Boeing Integrated Defense Systems
Section, para.1).

From the quotes above, the author’s employment at Boeing and prior service in the military, this

author contends: The Boeing Company has a very diverse product base from commercial to military in

design, application, and use. These, all high dollar products, drive demand for customer satisfaction to

have the very best product available. Commercial aircraft and military systems require considerable

lead-time to develop, build, and deliver. Delivery of an expensive obsolete item to an end user would

reduce or eliminate repeat orders.

To narrow the scope of this project the Case Study will focus on the BCA Division. Innovation is

required to understand market factors and customer needs well into the future. The Boeing 2007 Annual

Report Market outlines customer concerns, market conditions, and The Boeing Company’s strategies to

deliver. The primary concerns, as outlined in the 2007 Annual Report for commercial aircraft

purchasers, the cost of operating and maintaining their fleet. Any reduction in these costs result in higher

revenue per passenger kilometer traveled, assuming the aircraft is at capacity with passengers, freight, or

the combination of both.

Boeing’s approach is improvement across multiply disciplines, use of composite materials, paint,

interiors, engine efficiency, and management of the supply chain to increase quality and reduce aircraft

weight. The 787 is the world’s first commercial aircraft constructed primarily of carbon fiber. This in

combination with new engine technologies are reputed to make the entire aircraft 30 percent lighter than

its contemporaries requiring less fuel and maintenance to operate. In kind, the 747-8 commercial aircraft

is touted as another unique Boeing aircraft for its cargo capacity, range, and operation and maintenance
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costs (Boeing 2008). The results of innovation seem to be clear with the production of just these two

commercial aircraft.

Innovation

Innovation is the collective utilization of complementary skills of personnel to improve customer

service, reduce costs, and generate new ideas that become reality. A broader definition of innovation:

something, when implemented, adds value to the organization. Value can be a new product or service,

changed product, process, or procedure (McAdam & Taylor 2004). With this concept of innovation,

what can companies do to invest in people centric innovative behavior? According to McAdam and

Taylor, (2004), Organizations that promote innovation value their employees by rewarding innovation,

opening information and learning channels, and provide professional and personal development. Does

this happen at The Boeing Company?

According to David Swain, (2007), a retired Boeing engineer and technology vice president, it

does. Swain contends Boeing does this by: “Emphasizing educational opportunities, recognition

programs, challenging work assignments, sharing the lessons learned, and communication” (p.60).

Boeing also considers innovation both short term and long term. The short term strategy-run a healthy

core of businesses and leverage core strengths- guidance and nurturing of capability. The long term

strategy-leverage core strengths and open new frontiers-turn ideas into new products, (Swain 2007), turn

ideas into reality, (McAdam & Taylor 2004).

Jim McNerney, (2008), projects this from the Message to Shareholders Section of the 2007

Annual Report:
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Our aspiration is for Boeing to become even greater than the sum of its parts (as great as those
parts already are). This requires that we accelerate learning and sharing inside the company.
The payout—faster innovation and problem solving—should impact both the top and bottom
lines. It starts with improved employee engagement and broadening the flow of ideas. As a
result, there should be clear evidence of continuously improving quality and service to our
customers, as well as enhanced growth and improved productivity across our enterprise (p. 5).

It is said, there is strength in diversity. Nothing could be truer, if one makes the critical
assumption, as we do at Boeing, that our success is fueled by a culture of sharing that brings a
diversity of people and viewpoints to innovating and to solving problems. (p. 5)

What type of leadership is required to manage approximately 160,000 people assigned in 70

countries? It would have to be one that empowers its employees, have high expectations, a climate that

rewards performance, flexibility of approach, professional, absorptive capacity to assimilate a large

volume of information necessary to steer the top management team, (TMT), in a homogeneous, one

concept, one vision approach to complexities both internal and external (McAdam & Taylor 2004). This

author contends the leadership style required to manage The Boeing Company to be Strategic or

Transformational Leadership.

Jim McNerney, (2008), places value in and attributes company success to Boeing employees as stated

from the Message to Shareholders Section of the 2007 Annual Report:

I attribute this success to the people of Boeing who continuously improved their teams’
execution, productivity, and quality of work, doing so with the utmost integrity. Without
incremental improvements generated by thousands upon thousands of Boeing employees last
year, we would not have met what was—to be sure—a very challenging business plan. I am
exceedingly proud of this team for displaying the courage, commitment, integrity, and
accountability that it takes to learn, share, grow, and improve (p. 5).

Transformational Leadership
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What is transformational leadership? Commonalities demonstrated by transformational leaders include:

leading by example, strong beliefs, ability to engage the collective, vision, charisma, empowerment of

followers, high performance expectations, intellectual stimulation, and trust (Colbert, Brown, Bradley &

Barrick 2008; Arnold, Turner, Barling, Kelloway & McKee 2007; Agle, Nagarajan, Sonnenfeld &

Srinivasan 2006; Choi 2006; Cicero & Pierro 2007). Boal & Hooijberg (2001) add absorptive capacity,

adaptive capacity, and managerial wisdom. Choi (2006) offers the addition of empathy, Läms & Pučėtait

(2006) the context of follower trust, Cicero & Pierro (2007) work group identification in relation to

charismatic leadership.

Aviation Innovation History

According to Young (2006) aviation history shows aircraft undergoing radical and rapid

improvements in the pursuit of better performance, faster, higher, farther, revised to better, faster,

cheaper, quieter, cleaner, and greener. Modern aviation history started in the early 1900s and matured

considerably to eventually include the introduction of jet aircraft for commercial aviation applications in

1952. Young (2006) stipulates early aviation performance advancements motivated primarily by the

needs of war. As the aviation industry matures fewer designs, derivative configurations, and

technological improvements emerge. Young (2006) continues: the ability to take advantage of low

hanging fruit is behind those in the industry, greater effort needed order to make significant

improvements, but the law of diminishing returns carefully considered if an innovation strategy of

incremental improvement selected. Given the diversity of The Boeing Company’s commercial aviation

products, no single type or strategy of innovation can apply.

Innovation Systems Theory

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Dooley & O’Sullivan (2001) provide statistical data indicating a very high failure rate for the

management of innovation through, Business Process Reengineering, 40%-70% project failure rate, and

up to an 80% of processes involving the use of Total Quality Management initiatives fail to meet their

target objectives. Dooley & O’Sullivan (2001) indicate the primary reasons for failure include poor

alignment between goals and actions, poor participation in idea generation and problem solving, poor

planning and control of action implementation, poor management, and monitoring of overall process,

poor leadership of the innovation process, and poor integration of the key elements of the process.

There are a number of factors that affect an organization’s ability to effectively manage the
innovation process. These include factors such as project management, team management, goal
management, and knowledge management. These factors facilitate the development of an
environment that encourages both innovation and its effective management, (Dooley &
O’Sullivan, 2001 p. 180).
Dooley & O’Sullivan (2001) theorize a system based conceptual model capture and collect

innovations, correlate actions with goals given the constraints of resources, results measured in relation

to actions taken, and adjustments made accordingly. Inputs such as stakeholder requirements, selection

of strategies and associated measurements, organizational benchmarking, SWOT analysis, and market

surveys will be a rich source of information when selecting goals to balance the innovation pipeline.

The Boeing Company has chosen to centralize its innovation efforts in a support division,

Boeing Engineering, Operations, and Technology sub division named Phantom Works.

Phantom Works is the advanced research and development unit and catalyst of innovation for
the Boeing enterprise. It is where dreams about the future of flight and space travel are turned
into reality (Boeing, 2009, Boeing in Brief, Boeing Phantom Works Section, para.1).

To efficiently address a broad spectrum of needs, Phantom Works is divided into advanced
systems teams and advanced technology teams. The former tend to focus on addressing
specific new business markets. The advanced technology teams, on the other hand, focus on
providing engineering, information and manufacturing technologies commonly needed by all
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the Boeing business units (Boeing, 2009, Boeing in Brief, Boeing Phantom Works Section,
para.4).

For meeting near- and medium -term needs, Phantom Works has technology "thrusts" focused
on the following: advanced platform systems; materials, structures, and manufacturing
technology; lean and efficient design processes and tools; support and services; and network
centric operations. Technologies from these thrusts are transitioned into both current and
advanced military and commercial programs to help reduce cycle time and cost while
improving quality and performance (Boeing, 2009, Boeing in Brief, Boeing Phantom Works
Section, para.6).

To enable the development of system solutions that meet medium and longer term needs,
Phantom Works has also identified and is working on a set of critical technologies it
appropriately classifies as "enabling" technologies. While most of these are of a proprietary
nature, they generally fall into such categories as intelligent systems, multifunctional
structures, advanced materials and processes, and more (Boeing, 2009, Boeing in Brief,
Boeing Phantom Works Section, para.7).

For the more distant future, Phantom Works also develops "new frontiers" concepts using a
disciplined process that identifies product lines or services not listed in the long-rang plans of the
business units but having potential for significant growth (Boeing, 2009, Boeing in Brief, Boeing
Phantom Works Section, para.8).

To achieve all these ambitious goals, Phantom Works collaborates not only with its internal
and external customers, but also with universities, research agencies and other high technology
companies around the world to ensure it is meeting its customers' needs with the best, most
innovative and most affordable solutions available today -- and in the future (Boeing, 2009,
Boeing in Brief, Phantom Works Section, para.9).

This author reasons: extensive citation directly from The Boeing Company web site and 2007

Annual Report necessary to avoid disclosure of proprietary information and depict the innovation

system in place at The Boeing Company. Phantom Works closely follows the concept model outlined by

Dooley & O’Sullivan (2001), utilization of systems to manage and measure innovation and maintain a

robust innovation portfolio, goal orientated that is flexible and able to coordinate results and actions to

achieve the best results.

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Challenges Faced

To define the challenges faced a short review: Young (2006) details significant effort is required

to deliver innovation of significance to the aviation community for industrialization. Given the product

diversity of the Boeing Commercial Aircraft Division, 747, 767, 777, 787, there is a requirement to

maintain innovation in all three forms, incremental for aircraft programs such as the 747, first flown in

1970, semi radical for derivatives of the 767 and 777, to radical for the 787, the world’s first commercial

composite aircraft.

Internal and external factors must be considered in the selection of an innovation strategy,

Davila, Epstein, & Shelton, 2006). Internal Factors include technical and organizational capabilities,

success of the current business model, available capital, and management vision. External factors

include capabilities of partners, industry structure, competition, and rate of technological change. These

factors are considerations for use in the selection of an innovation strategy Play-to-Win or Play-Not-to-

Lose. The author can only speculate The Boeing Company has chosen to a combination of each strategy.

Play-no- to- Lose is the consistent delivery of quality products and services with incremental

improvements as return on investment will allow and the Play-to-Win approach demonstrated by the

development and employment of the 787. The author speculates The Boeing Company manages the

application capture and application of innovation through the centralization of efforts at the Phantom

Works. This, as a concept, passes the common sense test; how else to manage the complexity of multiple

types of innovation, strategy, internal and external factors, and product diversity.
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SWOT

This section will compare and contrast a single strategy approach and a multiple strategy

approach. Citation and this author’s conclusions stipulate a multiple strategy approach is necessary to

maximize innovative capabilities by the use of Phantom Works and The Boeing Company innovative

culture reputed by David Swan (2007) and McNerney (2009). This compare and contrast SWOT done to

examine probabilities of innovation focus instead of diffusion across the Boeing Commercial Aircraft

product base.

SWOT 1

Single Strategy Application

Strengths

Single location / source

Flexibility to respond to organizational change

Reduced capital requirements for operation

Promotion of cross disciple communication

Weaknesses

Increase likeliness of group think

Reduced vision and challenges of multiple a multiple product base offers

Loss of innovative momentum

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Reduction in capabilities

Opportunities

Reduction in debt service to less capital to support Research and Development, R&D)

Availability of capital to offer customer financing

Reduction in unfunded R&D projects

Threats

Loss of market share

Loss of branding associated with current products

Gap in market innovations

Loss of revenue due to sale of new products

SWOT 2

Multiple Strategy Application

Strengths

Singular site approach (Phantom Works)

Diverse skill set of innovators

Multiple program challenges promote stretch solutions and breakthroughs

Cross training and communication

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Leverage of larger talent base for solution driven results

Possible reduction in project time

Increased resource flexibility

Weaknesses

Stipulated- increased capital expenditure to fund

Reduction in capital to organization for reserve

High legacy costs to maintain mature R&D

Stress to organization to support capital expenditure to achieve marketable breakthroughs

Reduction or loss of data control and or proprietary control of design data

Opportunities

Increased awareness of market needs

Possible increase in branding opportunities due to innovation

Maintenance of market share using multiple strategies as required by program

Threats

Increased trade conflicts with competition due to market introductions of multiple innovations

Lag in response to market conditions due to trade restrictions

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Multiple discipline includes military variations-Government Accountability Audits or contract

disputes resulting in loss production

This author will require more research to evaluate the efficiency, communication, coordination,

learning, and alignment of Phantom Works as the Innovation System at The Boeing Company. At this

time, the author has a bias for the multiple discipline approach but cannot sufficiently substantiate this

objectively. Review of other industry single disciple approaches to innovation may introduce sufficient

data to allow recommendations beyond the existing innovative practices currently in place at the Boeing

Company Phantom Works.

Ethics in Innovation

Martin, Johnson, & Cullen (2009) contend business activities that produce stress and radical

organizational reconfiguration can be contributory to the destabilization of ethical norms in an

organization promoting unethical choices. Innovation, as defined by McAdam & Taylor (2004) is

change. Implementation of innovation is change. Organizational stress associated with market forces,

economic conditions and management of the challenges faced do not relieve an organization of the

responsibility to deliver a safe product. The need for innovation and change must not be allowed to

destabilize normative organizational behavior.

Leadership Ethics

D’Intino, Boyles, Neck & Hall (2008) contend the list of corporate failures due to unethical

decisions and actions by leadership has greatly damaged the public perception of business executives

and Board of Director Members. The study author’s use historical information related to four Boeing
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aircraft designed, developed, and produced using innovative technologies central to The Boeing

Company. The study concludes:

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, D’Intino, Boyles, Neck & Hall (2008, para. 44).

Ethical commitment by leadership has historically offered the best results in relation to

application of innovation to product.

Literature Review

The literature review for The Boeing Case Study is divided by topic into three sections. The first

section, Boeing, consists primarily of information and citation from www.boeing.com and a supportive

journal article authored by a former Boeing Company employee.

Boeing

The Boeing Company web site section, About Us (Boeing 2009), provides company statistics as

to the size and structure of its components and products. Details such as number of employees, revenue

generated in 2008, countries operated in, divisional structure, commercial aircraft product information,
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and an overview of The Phantom Works operations and strategy. This allowed the author to structure

direct citation, as offered by The Boeing Company to present a collective narration of the scope and

complexity of operations, divisional responsibilities, and information about Boeing commercial aircraft

products and strategies to innovate each. The Boeing 2007 Annual Report (Boeing 2008) allowed

citation of W. James McNerney Jr., Chief Executive Officer, supportive of innovative practices at The

Boeing Company. Achieving R&D Leadership, Swain (2007) substantiated citations from each of the

two previous sources, The Phantom Works innovative practices, and McNerney’s statements as to

organizational culture which promotion innovation and application.

No studies conducted in the literature reviewed. Measurements, checks and balances, and gaps

are not applicable in this section’s evaluation. Limitations apply: all information presented is published

by to The Boeing Company or Swain, a former employee, and may include subjective statistics and

descriptions. The 2007 Boeing Annual Report is must follow Generally Accepted Accounting Principles

(GAAP), regulated by the Sarbanes-Oxley Act 2002, with accounting acceptations noted in the 2007

Boeing Annual Report.

Summary of Boeing

The author is an employee of The Boeing Company and ethical practice in preparation of this

case study required prudence as to not disclose proprietary information. Numerical values, divisional

descriptions, and citations are not peer reviewed but collectively provide information respective to topic

for academic evaluation of innovative practices at The Boeing Company.

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Innovation

Davila, Epstein & Shelton (2006), Making Innovation Work: How to Manage It, Measure It, and

Profit from It, published book, introduces the reader to the subject of innovation in business

applications. Continuation: considerations for the use of innovation and how it can be leveraged for the

benefit of an organization, types of innovation, strategies of implementation, organizational structuring

to support and captivate, management systems, rewards and incentives, learning models, and

organizational culture practices to promote and develop innovation.

Martin, Johnson & Cullen (2009), Organizational Change, Normative Control,

Deinstitutionalization, and Corruption examine organization change and the implications this may have

to normative behavior within. The study authors contend change introduces stress, the greater the stress

the more likely disruption is to structure, this eroding social controls.

Measurements used: no measurements used to conduct this study with the exception of concepts

previously published, theory applied, conclusions offered.

Checks and balances: Published in Business Ethics Quarterly, peer reviewed.

Limitations: theory based modeling used to substantiate possibilities.

Gaps: No measurements used in support of theory proposed.

Outcomes: the authors contend a greater understanding of disruptive factors will afford better

managerial challenges that will assist in implementation of actions to mitigate corruption.

Future research: None noted in the article. Research based on presented theories may have

application in the study of actions that may reduce disruption, stress, and organizational degradation.
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McAdam & Taylor (2004), Innovation adoption and implementation in organizations, defines

innovation as understood by the authors, adoption, influences, organizational characteristics, processes,

and framework that are conducive to innovation growth, adoption, and application.

Measurements used: no measurements used to conduct this study with the exception of concepts

previously published, theory applied, conclusions offered.

Checks and balances: none noted with the exception of this article published and peer reviewed.

Limitations: literature review basis for conclusions made.

Gaps: no measurements used in support of theory proposed.

Outcomes: application of theory proposed support the importance of organizational recognition

of innovation.

Future research: McAdam & Taylor (2004) contend future research needed to develop and test

framework models to increase the body of knowledge on the complexity, stages of development, and the

dynamics of innovation.

Sutton (2002), Weird Ideas that Spark Innovation and Young (2007), Aircraft Design Innovation:

Creating an Environment for Creativity, No studies conducted, measurements, checks and balances

used. Research gaps are not applicable in the evaluation of this article. Sutton (2002) posits ideology for

consideration when seeking to develop innovation. Young (2007), same concept as Sutton (2004) with

the overlay of historical development patterns in aviation and possible challenges in the use of

innovative techniques for future aviation development.

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D’Intino, Boyles, Neck & Hall (2008) Visionary Entrepreneurial Leadership in the Aircraft

Industry: The Boeing Company Legacy examines visionary leadership theory in relation to The Boeing

Company management decisions associated with historical information used for the selection,

development and production of four aircraft. Each reputed, by the study authors to be innovative and

risky to the point of complete company failure. This journal article is presented as a historical example

of the commitment to task, vision, and leadership challenges from the past that may be utilized to

influence future leadership challenges.

Measurements used: no measurements used to conduct this study with the exception of concepts

previously published, theory applied, conclusions offered.

Checks and balances: Published in Journal of Management History, peer reviewed.

Limitations: leadership theory based modeling used to substantiate conclusions to future actions.

Gaps: No measurements used in support of theory proposed. Historical aircraft design innovation

utilized which may not withstand the test of time, (Young (2007).

Outcomes: the authors contend application of leadership theory, as demonstrated by The Boeing

Company, may have application to current and future leadership challenges.

Future research: The article suggests focus on organizational leadership decisions and how these

decisions influence industry wide innovation.

Summary of Innovation

The body of literature reviewed has reoccurring definitions of innovation supportive of a refined

definition. Each article is based on theory without study data to substantiate application of respective

author promoted interest. Selection and citation of the articles in this section insert the concept of
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innovation and use of innovation by The Boeing Company and other organizational innovative concepts

respective to The Boeing Case Study.

Leadership1

Colbert, Kristof-Brown, Bradley & Barrick (2008), CEO TRANSFORMATIONAL

LEADERSHIP: THE ROLE OF GOAL IMPORTANCE CONGRUENCE IN TOP MANAGEMENT

TEAMS, is a review of collected survey data and objective review of financial indicators from 94 top

management teams, (TMT). The study focuses on the possible correlation between Chief Executive

Officers (CEO) and their established organizational goals as communicated to top management teams.

The purpose: study transformational leadership influence on TMTs and associated performance; the

closer CEO and TMT align to CEO established goals the better the organizational performance.

Methods: surveys administered to the CEOs and TMTs at onset and again four months later to evaluate

TMT’s retention of the CEO’s goals and subsequent financial performance in relation to mathematical

measurement of survey data as to how well the TMTs identified with the CEO’s expectations.

Measurements used: The Multifactor Leadership Questionnaire (MLQ Form 5X; Bass & Avolio,

1995) used to collect transformational leadership data, three other surveys to collect TMT data.

Mathematical weights placed on the categories: transformational leadership, goal importance, dyadic

goal importance congruence, within-team goal importance congruence, Vice President (VP) attitudes

and, VP performance. Objective review of organizational financial performance and control variables

such as organizational size and age considered to establish a table of means, standard deviations, and

correlation of individual-level variables for analysis.

1
Portions of the Leadership Section previously submitted, by author, course work in support of
dissertation research topic to Argosy University; Advanced Research and Writing.
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Checks and balances: the use of weighted survey data and a statistical data table allowed

regression analysis of the collective results. Adjustments made to control variables used to analysis

different size and age compensate for variation between organizations in an effort to measure the

categories independent of organization variables.

Limitations: study outcome predicated on survey data that is individually subjective in nature,

the outcome data is comprised of individual opinions and perceptions in each category. Sample

population size limits this variation.

Gaps: this study, conducted exclusively on credit unions, may have influences of industry

specific occupational culture related to that industry. Other organizations will have different

occupational traits that could perceive and rate organizational goals differently effecting outcome data

and interpretation.

Outcome: the mathematical data in each of the seven categories measured supported the

hypothesis transformational leadership offers compelling evidence to support CEO and TMT alignment

produce better organizational performance. The closer the CEO and TMT relate the better organizational

performance.

Future research: goals measured included: financial, Customer, market, organizational, people,

competitive, and, strategy making. Study if different goals should explore how and why different goal

types differentially affects individual and organizational goals.

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Agle, Nagarajan, Sonnenfeld & Srinivasan (2006), DOES CEO CHARISMA MATTER?AN

EMPERICAL ANALYSIS OF THE RELATIONSHIPS AMONG ORGANIZATIONAL PERFORMANCE,

ENVIRIONMENTAL UNCERTANTY, AND TOP MANAGEMENT TEAM PERCEPTIONS OF CEO

CHARISMA, This study very closely mirrors Colbert, Kristof-Brown, Bradley, & Barrick (2008) in its

purpose, measures, checks and balances, and outcome. The sample population is larger in scope, 128

CEOs heading public firms from different industries, and 770 TMT respondents. This study used the

MLQ Form, (MLQ Form 5X; Bass & Avolio, 1995), for CEO data and surveys for TMT data.

The key differences: One survey administered instead of four, greater emphasis placed on

measurement of financial performance and, higher sample population.

Limitations / Gaps: the central focus is on financial performance as key indicator of

organizational performance. Market conditions could introduce variations in results substantially not due

to CEO and TMT alignment. Economic conditions, technological advancements, product obsolescence

can affect industry sectors but may not affect all 128 the same.

Outcome: the mathematical data in each of the categories measured was inconclusive as to the

effect of CEO charisma in relation to TMT and organizational performance.

Future research: This study contends more research needed to understand CEO charisma.

Strategic leadership research: Moving on, conducted by Kimberly Boal of the Institute of

Leadership Research, Texas Tech University, and Robert Hooijberg then member of the International

Institute for Management Development (Boal & Hooijberg 2001). The journal article purpose, stated in

the conclusion, is for the purposes of promoting different avenues of research into Leadership.

Specifically: exploring how leaders can increase absorptive capacity, adaptive capacity, and managerial
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wisdom. Boal and Hooijberg hold these to be key competencies, central throughout the article, for

effective strategic leadership. This article sets the framework for application of each by establishing:

Conditions, When, How, and Criteria sections, which apply presented theories. Each section is rich in

citation of previous works to substantiate conclusions made.

Eleven research propositions, offered between sections, promote logical application of the

material presented, used to apply / demonstrate the validity of conclusions made. The study contends

previous research efforts cited are limited due to demographical limits set on the selection of test

subjects instead of focusing on interpersonal skill sets of C– level executives at strategic inflection

points. Foundation theories set on the applications of increased absorptive capacity, adaptive creativity,

and managerial wisdom presented and solidified to suggest further research should explore different

approaches to the leadership topic. These to measure behavioral complexity, cognitive complexity and

social intelligence by the use of interviews, company information such as reports, policies, and

procedures, board memberships, value streams, personal beliefs, and values.

Measurements: not utilized in this article, just review of previous research and substantiations

offered from the application of this data theory using the researcher’s interests.

Checks and balances: Peer reviewed, published, and presented at the Leadership Quarterly /OLE

Miss Frontiers in Leadership Symposium.

Limitations / Gaps: Statistical data not utilized, no form of measurement used to substantiate

theory provided.
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Outcomes: No measurable outcomes presented in this study. Boal and Hooijberg concluded the

addition of absorptive capacity, adaptive capacity, and managerial wisdom in relation to strategic

leadership can have a positive effect on the essence of strategic leadership.

Future research: Boal and Hooijberg (2001) suggest “possible exploration of creative avenues to

assess the behavioral complexity, cognitive complexity, and social intelligence of strategic leaders” (p.

539).

Choi (2006), A Motivational Theory of Charismatic Leadership: Envisioning, Empathy, and

Empowerment, Builds on the peer accepted traits of transformational leadership, cited in the

Transformational Leadership section of The Boeing Case Study, and purpose is the introduction of

Envisioning, Empathy and, Empowerment to charismatic leadership. This author contends

transformational and charismatic leadership are interchangeable terms not different leadership styles.

Envisioning as defined by Choi (2006) is the ability of the leader to see the desired future-state then

create and communicate the necessity for the organization to achieve that end-state. Empathy related as

the ability to garner trust from followers by demonstrating empathy to the follower base of its member’s

interests. It is this relation of feelings that create a bond or trust between leader and follower.

Empowerment in this article, expressed as the leader’s trust in the follower, to take action in relation for

the collective good of the organization. This self-efficiency promotes elevated feelings of self-worth in

the followers and results in increased performance.

Checks and balances: Peer reviewed, published.

Limitations / Gaps: Statistical data not utilized, no form of measurement used to substantiate

theory provided.
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Outcomes: No measurable outcomes presented in this study. Choi (2006) restates theory and

posits the application of these three addition traits to charismatic leadership will enhance feelings of

self-perception of followers.

Future research: Choi (2006) suggests research of these three additions will offer a more

comprehensive understanding of the field of charismatic leadership.

Läms & Pučėtait (2006), Development of organizational trust among employees from a

contextual perspective, reviews two concepts of individual trust, cognitive-based trust and affection-

based trust in relation to organizational trust. Cognitive-based trust founded on “evaluation predictions

and calculations, e.g., on the probability of reciprocal behavior of the other party” (Tyler & Kramer

1996:10). Affect-based trust examined from the context: this type of trust is relates to the emotional side

of trust and the mutual expectation of fair and honest behavior by the individual from the organization.

Purpose: to examine a variety of models to demonstrate Läms & Pučėtait (2006) theories of high trust

equating to high morale; low trust equating to low morale.

Checks and balances: Peer reviewed, published.

Limitations / Gaps: Statistical data not utilized, no form of measurement used to substantiate

theory provided.

Outcomes: No measurable outcomes presented in this study. Organizations must invest heavily

in the development of personnel to improve trust. Both types of trust studied must be addressed by this

in order to have a balance. Mismatch of too much of either trust component can have similar

consequences as low trust in either or both.

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Future research: Läms & Pučėtait (2006) “our contribution and the development model and (sic)

processual approach require empirical investigation in the future” (p. 139) are the sole reference to

possible future research by the authors on this topic.

Cicero & Pierro (2007), Charismatic leadership and organizational outcomes: The mediating

role of employees' work-group identification, is a study conducted using 200 public and private sector

employees to measure transformational leadership effectiveness on organizations as perceived by the

employ, referenced to work identity not organizational financial indicators. Purposes: to measure

transformational leadership across a strata of employees with reference to each test subjects perception

of their work identity.

Checks and balances: Peer reviewed, published. Survey questionnaire used to standardize

collection of data and, sample population diverse.

Limitations / Gaps: Self rated performance and level of satisfaction of employment subject to

daily variation. One survey administered without reapplication to measure daily variance possibility to

affect test results.

Outcomes: The researchers concluded those that had a collective sense to their work social

identity performed better.

Future research: none specified, however the researchers concluded-

Our results enlarge the knowledge of the dynamic that may affect work outcomes and underline

the tangible relevance of social identification processes and, in particular, the relevance of

employees’ identification with the work-group to the organizational life.

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Arnold, Turner, Barling, Kelloway & McKee, (2007), Transformational Leadership and

Psychological well-being: The Mediating Role of Meaningful Work, uses two studies to investigate the

relationship between transformational leaders and the meaning employees attribute to work identity and

task.

Purpose: the study attempts to link and evaluate the extent of transformational leadership traits

effect on emotional, work related, well-being.

Checks and balances: Peer reviewed, published. A survey form used to collect data, 319

employees in sample population.

Limitations / Gaps: The survey from used was a modified version of the MLQ (Bass & Avolio

1995), which may have introduced immeasurable variables. Low response rate 35% (p.198).

Outcomes: Arnold, Turner, Barling, Kelloway & McKee, (2007) concluded meaningful work

contributed to well being, transformational leadership contributed to meaningful work but

transformational leadership had the lowest probability of contributing directly to well-being which

supported accepted trends in transformational leadership.

Future research: None specified.

Summary of Leadership

A balance of leadership studies in this section use collected survey data and theory to

demonstrate the feasibility and methodology to measure CEO charisma, organizational performance,

and TMT perception with statistical probabilities. The leadership section is presentation as an assortment

of journal articles in relation to leadership or transformational leadership in an organizational setting

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with the end goal to increase organizational performance. Each study is not intended as an all-

inconclusive definition of transformational leadership but extension of theory additive to

transformational leadership effectiveness.

Core Aspects of Leadership

The Boeing Case Study contends transformational leadership traits are required to deliver value

to all Boeing stakeholders, suppliers to buyers by the use of innovation. Core competencies of

transformational leadership: lead by example, strong beliefs, ability to engage the collective, vision,

charisma, empowerment of followers, high performance expectations, intellectual stimulation, and trust

are the most noteworthy (Colbert, Brown, Bradley & Barrick 2008; Arnold, Turner, Barling, Kelloway

& McKee 2007; Agle, Nagarajan, Sonnenfeld & Srinivasan 2006; Choi 2006; Cicero & Pierro 2007).

Principles and Practices for Implementing Innovation

Davila, Epstein, & Shelton, (2006) provide a list of best practices for the implementation,

promotion, and use of organizational innovation. Strong leadership is required for the clear definition of

the innovation strategy to use and portfolio of innovations selection for advancement that add the

greatest value. The company must select the best strategy that matches innovation capabilities with

market conditions. Play-to-Win or Play-not-to-lose are the two choices. Promote innovation as a

company core competency. Manage resources to support this concept. Balance resource allocation to get

the best return on innovation and capital investment. Establish policies and procedures to eliminate

innovation barriers such as the lack of communication or training of personnel. Utilize cross talk, which

embraces diversity of thought. Organize networks between divisions and other organizations to support
 The Boeing Company
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generation of ideas and ways these could become profitable reality. Establish clearly defined procedures

and policies that reward the effort and ideology supportive of free thinking and innovation application.

Hindrance to Innovation

Hindrance defined by The Boeing Company Case Study: inability of a company to implement

concepts or processes that result in successful manufacture, production, sale, and commercial operation

of a passenger jet aircraft. The concept of supersonic commercial aircraft originated in the 1950’s,

Winchester (2005) and eventually was inherited the label supersonic transport (SST). Aircraft

manufacturers worldwide considered the possibilities and profitability of making the world even smaller

by the use of supersonic transportation. Tupoloev Design Bureau, French Ae′rospace combined with

British Aircraft Corporation, Lockheed, and The Boeing Company embraced the innovative concept of

supersonic air travel in an attempt to produce a commercially viable product. Each company received

government sponsorship to design and manufacture an SST. The United States would select which

design to produce from proposals fielded by Lockheed and the Boeing Company.

Tupoloev Design Bureau is a Russian government owned and operated aerospace and defense

company headquartered in Moscow. Tupoloev’s Tu-144 achieved first flight status December 31, 1968,

entered government service December 26, 1976, grounded with the discontinuation of operation in 1990.

On April 9, 1969, the Anglo-French Concord took to the air for the first time April 9, 1969. Extensive

modification was required to refine the Concord to increase performance, reduce vibration, noise,

landing gear binding, and increase wing efficacy. The French received certification for commercial

operation October 13, 1975, the British December 5, 1975. British Airways and Air France fielded seven

Concords each. The last fight of the Concord, end of service, was November 26, 2003. Lockheed and the

Boeing Company designed, tested, and built various systems to substantiate prototype aircraft concepts.
 The Boeing Company
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The United States government selected The Boeing Company prototype 2707-300 for further study and

continued to subsidized supersonic transport research, Goebel (2009). Winchester (2005) and Goebel

(2009) speculate Soviet government agents stole a large portion of the Concord design to produce the

Tu-144. Soviet agents arrested in France possessed system designs for the landing gear, flight controls,

and structural components. Tupoloev used unethical methods to advance its version of the SST and did

not have the technological talent to refine brake systems of sufficient strength to stop the aircraft upon

landing, reduce the high cost of operation, and increase reliability enough to allow a broader scope of

operational capabilities beyond government official transportation, Winchester (2005). This author can

only speculate, research not available, Tupoloev failed to create innovative networks inside and outside

the organization to allow transfer of ideas, balance creativity to capture innovation to get the maximum

return on investment, or implement a matrix of incentives to promote innovation.

Tupoloev may have improved its design by correcting the impediments to the deficiencies noted.

Topic specific research or even the most general information cannot be located to substantiate this

conclusion.

It is estimated total development through, second prototype first flight costs, for the Concord

exceeded 18 billion United States dollars at today’s monetary equivalent value. Government funds were

used to develop, improve, maintain, and operate the only commercial SST fleet in the world. Both Air

France and The British Airways were nationalized for most of the operational flight life of the Concord,

thus insulated from the high operational costs of supersonic transportation. Winchester stipulates the

total loss to the British and French taxpayer to be in the billions, never to be fully calculated. Due to

specific research or credible documentation but an understanding of smart innovative practices, Davila,

Epstein & Shelton, (2006), this author deduces reliance on the availability government funds allowed the
 The Boeing Company
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Concord to enter production and operation without any hope to realize a profit. Leadership was not used

to define and direct innovation to improve the Concord efficiency enough to allow reduced maintenance

and operational costs. Pan American cancelled 78 purchase options due to projected operational costs

and increase in fuel prices in the 1970’s, Goebel, (2009).

Anglo-French corrective actions may have prevented Pan American’s cancelation of the 78

purchase option orders making the Concord profitable. Goebel (2009) indicates much of the Concord’s

internal structure was comprised of steel. Innovative corrections and technology available at that time, as

demonstrated by the SR-71 may have allowed this structure to be replaced with lighter titanium or other

high strength alloys. Elimination of weight would have reduced the operational (fuel) costs considerable.

These conclusions also unsubstantiated but based on this author’s aviation industry experience and

commercial aircraft product knowledge.

Lockheed had fielded the SR-71 Blackbird to the United States government in 1966. This

supersonic reconnaissance aircraft was capable of reaching speeds of over Mach 3 but required the

extensive use of titanium, special fuel, and special engine inlet modifications, Kucher (2007), Goebel

(2009). The Boeing Company continued to research supersonic transportation but ended the 2707-300

when Congress ended funding March 24, 1971. The Boeing Company initial SST design had variable

geometry wings that would allow them to sweep back during high-speed flight significantly reducing

fuel consumption Goebel, (2009). Profitable commercial operation of SSTs has yet to be demonstrated,

thus no commercial sale opportunities. Research is not available to substantiate the idea author posited;

Lockheed understood innovation and had the right personnel, as demonstrated by the SR-71, but failed

to depart from proven SR-71 technology to propose a more cost efficient commercial SST.
 The Boeing Company
34

Lockheed corrective actions proposed depart from specialized engines, fuel, and titanium skin to

construct a titanium structure in combination with Boeing’s swing-wing concept may have produced a

profitable SST design that may have allowed the sale of enough aircraft to warrant production.

Research Summary

Boeing and Innovation

The Boeing Company is a multi-national manufacturer of complex commercial aircraft.

According to the 2007 Annual Report-Leading the Way (2008) The Boeing Company contends it is able

to profitably conduct operations because of the dedicated efforts of the organizations people. Innovation,

study defined, is the collective utilization of complementary skills of personnel to improve customer

service, reduce costs, and generate new ideas that become reality. A broader definition of innovation:

something, when implemented, adds value to the organization. Value can be a new product or service,

changed product, process, or procedure (McAdam & Taylor 2004). According to McAdam and Taylor,

(2004), Organizations that promote innovation value their employees by rewarding innovation, opening

information and learning channels, and provide professional and personal development. According to

David Swain, (2007), a retired Boeing engineer and technology vice president, The Boeing Company

demonstrates organizational recognition and creation of innovative practices. Swain contends Boeing

does this by: “Emphasizing educational opportunities, recognition programs, challenging work

assignments, sharing the lessons learned, and communication” (p.60).

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35

Aviation and Innovation

According to Young (2006) aviation history shows aircraft undergoing radical and rapid

improvements in the pursuit of better performance, faster, higher, farther, revised to better, faster,

cheaper, quieter, cleaner, and greener. Young (2006) stipulates as the aviation industry matures fewer

designs, derivative configurations, and technological improvements emerge. Young (2006) continues:

the ability to take advantage of low hanging fruit is behind those in the industry, greater effort needed

order to make significant improvements, but the law of diminishing returns carefully considered if an

innovation strategy of incremental improvement selected. According to D’Intino, Boyles, Neck & Hall

(2008) The Boeing Company management has historically demonstrated innovation and sound

leadership for the selection, development, and production of at least four aircraft, these considered to be

leaders of innovation in their time. Each reputed, by the study authors to be innovative and risky to the

point of complete company failure.

Innovation System and Boeing

Dooley & O’Sullivan (2001) theorize a system based conceptual model capture and collect

innovations, correlate actions with goals given the constraints of resources, results measured in relation

to actions taken, and adjustments made accordingly. Inputs such as stakeholder requirements, selection

of strategies and associated measurements, organizational benchmarking, SWOT analysis, and market

surveys will be a rich source of information when selecting goals to balance the innovation pipeline. The

Boeing Company uses a centralized division, The Phantom Works, to concentrate efforts across multiple

disciplines
 The Boeing Company
36

Ethics and Leadership in Innovation

Martin, Johnson, & Cullen (2009) contend business activities that produce stress and radical

organizational reconfiguration can be contributory to the destabilization of ethical norms in an

organization promoting unethical choices. Innovation, as defined by McAdam & Taylor (2004) is

change. Implementation of innovation is change. The Boeing Case Study contends transformational

leadership traits are required to deliver value to all Boeing stakeholders, suppliers to buyers by the use of

innovation. Core competencies of transformational leadership: lead by example, strong beliefs, ability to

engage the collective, vision, charisma, empowerment of followers, high performance expectations,

intellectual stimulation, and trust are the most noteworthy (Colbert, Brown, Bradley & Barrick 2008;

Arnold, Turner, Barling, Kelloway & McKee 2007; Agle, Nagarajan, Sonnenfeld & Srinivasan 2006;

Choi 2006; Cicero & Pierro 2007). Transformational leadership traits, ethical practices, innovation

culture, and the rewarding of employees are necessary, The Boeing Company Case Study substantiated,

to profitably design and produce commercial passenger aircraft.

Conclusions

If one is were to judge innovation from company outputs, the 787 Dreamliner would be a clear

sign that innovation exists at The Boeing Company. The world’s first commercial aircraft made mostly

of carbon fiber composite is set to take to the air in its first test flight. No other aircraft has had more

orders placed than the 787, Swain (2007). Innovation at the people level, Swain (2007) has it right:

education, communication, and recognition are essential to the promotion of innovation at the individual

level. This Case Study has quoted The Boeing Company, used published quotes to create a detailed

picture of what Boeing’s core competencies are, the size of the organization, centralization of innovative

systems at the Phantom Works, CEO quotes to answer the substantiate that Boeing promotes
 The Boeing Company
37

innovation. Research outlines the history innovation has played in the aviation industry and what will be

necessary to make profitable advancements, (Young 2007). Young (2007) research and conclusions

substantiate the types of innovation and strategy in use at The Boeing Company, centralization of

resources, Phantom Works, to manage internal and external factors with goals, driven by multi-

disciplined advancements across functions to be a best practice. Examination of the history of

commercialization of supersonic transport aircraft has reinforced Young’s (2007) conclusions.

Future Research

Future research: Review of other industry single disciple, compared and contrasted

against multiple disciple innovation application approaches to innovation practices may introduce

sufficient data to allow recommendations as to which is more efficient, concentrated single effort or

broad spectrum effort in the use of innovative practices.

References
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empirical analysis of the relationships among organizational performance, environmental

uncertainty, and top management team perceptions of ceo charisma. Academy of Management

Journal, 49(1), 161-174.

Arnold, K. A., Turner, N., Barling, J., Kelloway, E. K., & McKee, M. C. (2007). Transformational

leadership and psychological well-being: The mediating role of meaningful work. Journal of

Occupational Health Psychology, 12(3), 193-203.

Boal, K. B. & Hooijberg R. (2001) Strategic leadership research: Moving on, Leadership Quarterly, Vol

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Choi, J. (2006). A motivational theory of charismatic leadership: Envisioning, empathy, and

empowerment. Journal of Leadership & Organizational Studies (Baker College), 13(1; 1), 24-43.

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of employees' work-group identification. International Journal of Psychology, 42(5), 297-306.

 The Boeing Company
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Colbert, A. E., Kristof-Brown, A., Bradley, B. H., & Barrick, M. R. (2008). Ceo transformational

leadership: The role of goal importance congruence in top management teams. Academy of

Management Journal, 51(1), 81-96.

Davila, J., Epstein, M. & Shelton, (2006). Making Innovation Work: How to Manage It, Measure It, and

Profit from It. Upper Saddle River, New Jersey: Wharton School Publishing.

D’Intino R., Boyles, T., Neck, C. & Hall, J. (2008).Visionary entrepreneurial leadership in the aircraft

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 The Boeing Company
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McAdam, R & Taylor, J., (2004). Innovation adoption and implementation in organizations: a review

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Sutton, R. (2002, Winter2002). Weird Ideas that Spark Innovation. MIT Sloan Management Review,

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Bibliography

Bibliography listings in addition to references listed above. Additional material researched supportive of

The Boeing Case Study and intended as sources for topic expansion.

The Boeing Company Web Site Links

http://www.boeing.com/companyoffices/aboutus/execprofiles/mcnerney.html (CEO)

http://www.boeing.com/companyoffices/aboutus/execprofiles/bell.html (CFO)

http://www.boeing.com/companyoffices/aboutus/execprofiles/carson.htm (VP Commercial

Aircraft)

http://www.boeing.com/aboutus/culture/index.html

http://www.boeing.com/aboutus/diversity/groups.html

http://www.boeing.com/history/index.html (Boeing background)

http://www.boeing.com/aboutus/sustainability/index.html

http://www.boeing.com/news/releases/2009/q1/090128a_nr.pdf (2008 Year End financial

Information)

http://www.boeing.com/companyoffices/aboutus/brief/pw.html

http://www.boeing.com/news/feature/sevenseries/737.html
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http://www.boeing.com/news/feature/sevenseries/747.html

http://www.boeing.com/news/frontiers/archive/2005/june/i_lm.html (Boeing vs Airbus)

http://www.boeing.com/news/feature/sevenseries/777.html

http://www.emeraldinsight.com/Insight/ViewContentServlet?

Filename=Published/EmeraldFullTextArticle/Articles/1580140103.html

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database.

Fuglsang, L., & Sundbo, J. (2005, September). The organizational innovation system: Three modes.

Journal of Change Management, 5(3), 329-344. Retrieved March 14, 2009,

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Flambard-Ruaud, S. (2005, July). Relationship Marketing in Emerging Economies: Some Lessons for

the Future. Vikalpa: The Journal for Decision Makers, 30(3), 53-63. Retrieved March 14, 2009,

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Son, J. (2005, May). Organizational Innovation: Studies of Program Change in Community Agencies.

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Complete database.