How Boeing is changing the way it works around the world

BY KATHERINE BECK, WITH PAUL PROCTOR, TOM DOWNEY AND JUNU KIM

The word "Boeing" is recognized in dozens of languages. To many people around the world, it's even used as a common noun for one of the company's main products, commercial airliners. People all over the planet know Boeing in much the same way as they know Coca-Cola or Nike.

This international name recognition, combined with the fact that Boeing has customers in 145 countries, makes a powerful statement about the success the company has had selling its products internationally. It also reflects the historic role Boeing products have played in connecting and protecting people in times of calm and of crisis.

But name recognition and international sales do not make a company global in the modern sense of the word. Today, a global company is recognized as a local part of the communities, regions and countries where it does business. And for Boeing to survive and thrive, it too must become a global enterprise.

"A global market is inevitable. So is global competition," said Boeing Chairman and CEO Phil Condit. "If we're going to continue creating value and opportunity, including jobs for Boeing people, we need to be global. It is no longer enough to arrive with a great product or service and expect to make a sale. Boeing must become part of the fabric of the communities in which we do business. In fact, if any big company is to be successful in the future, it has to be global," he said.

A classic example is Nestlé, which began its globalization efforts in 1905. Today it sells its products in practically every country in the world. In the United Kingdom, it's perceived as a British company, in France, as a French company, in Brazil, as a Brazilian company.

Actually, it's a Swiss company. But an American child enjoying a glass of Nestlé's Quick doesn't think of it as a Swiss product. Nestlé's successful globalization has allowed it to realize tremendous growth. As the world's largest food company, it has more than 225,000 employees and 500 factories around the world. It couldn't have done that if it hadn't looked for opportunities outside of Switzerland, or if it simply sent out sales representatives on missions to sell products.

In addition to access to markets for a company's products and services, globalization typically opens doors to new technologies and the ideas of talented people with different cultures, backgrounds and experiences. During the mid 1990s, Mercedes-Benz built its first U.S. auto plant in Tuscaloosa, Ala., where the automaker would assemble its new M-class sport utility vehicle. Since production started, Mercedes' annual U.S. sales have jumped from 122,265 vehicles in 1997 — the year the Tuscaloosa plant opened — to 206,638 in 2001. That increase came about in large part from M-class sales, which in 2001 totaled 45,655, or 22.1 percent of the automaker's annual total. The model and the facility have been so successful that Mercedes has expanded the plant twice and is undertaking a third expansion program, which will boost employment from about 2,000 to 4,000.

Part of the plant's success stems from an implementation of new ideas. Typically, the U.S.-based factories of non-U.S. auto-makers run just as the plants do in the company's home country. But for its Alabama facility, Mercedes shunned its traditional labor-intensive production techniques, and sought to instill a production process that incorporated continuous improvement, employee involvement and other efficiency-oriented practices. It also hired North American auto industry employees who had the experience to create an efficient workplace. The result: Mercedes took the lessons learned in Alabama and created a standardized rulebook on operating proce-dures for its factories worldwide.

"One main benefit of globalization is the leveraging of enterprise-wide capabilities and resources across borders," said Tom Pickering, senior vice president, International Relations. "No one nation or people has a monopoly on good ideas. If we're going to be the best, we have to include the best people, ideas and technologies from around the world in our business, products and services."

The Boeing approach

Boeing is actively pursuing a strategy for globalization and global value creation through new partnerships, joint ventures, mergers and acquisitions, supplier relationships and a greatly expanded international presence.

Currently some 5,300, or about 3 percent of the 174,000 employees of Boeing and its subsidiaries, are based outside the United States. They are distributed throughout 61 countries and territories, including approximately 3,000 in Australia with hundreds more in Britain, Germany and Russia, combined. Indeed, Condit predicts that Boeing will have "significant operations inside other countries in the next five years."

Key to the pursuit of this expanded global strategy was the January 2001 establishment of Boeing's International Relations organization led by Pickering (see profile). At the time, Condit said, "We clearly understand that we need to bring greater focus to our global presence." A year before, he set the stage for the global push when he told Aviation Week & Space Technology magazine, "I think we're on the threshold of having a very global, mobile world, and the implications for aviation are huge."

One of the major thrusts of International Relations is to establish new country or regional executives and country strategy teams. In the past, there were no full-time enterprise-wide country executives. "Overseas" offices were mainly individual business unit operations focused on one activity such as sales or procurement with someone doubling as a country executive.

This, however, is changing rapidly. Five country executives (see sidebar, below) have been hired in the past year; more are planned. Pickering and his staff are aggressively identifying qualified candidates, high-caliber people who are knowledgeable about local culture and language, to head up a network of as many as 25 country or regional offices by 2005.

These new executives will work with business units to identify supplier, partnership and joint-venture opportunities, and address regulatory and governmental issues that can affect Boeing. They also will advise and aid marketing campaigns. But sales, Pickering said, should be made by the people who design and build the products.

Country leaders also will increase Boeing's visibility and broaden its commitment to countries where they serve. They'll actively communicate that commitment to audiences in those countries — industry, media, government, academia and other stakeholders — and build strong relationships with them. They'll also help deliver the Boeing message clearly across cultures, to do business in sensitive and effective ways.

With country teams in place, according to Pickering, Boeing people from all over the enterprise will be able to count on the expertise of knowledgeable, in-country experts who can smooth their way, brief them on appropriate local business practices, and put them in touch with key business and government contacts.

A bigger, better Boeing

To U.S.-based Boeing employees concerned about jobs going abroad, Pickering said that many people think of Boeing as a pie, and believe that moving some activities overseas leaves a triangular empty shape on the plate.

"But actually, by working strategically around the world we are growing the pie so there is more value to be shared by shareholders in terms of profit and by employees everywhere in terms of job opportunities. In fact, it is estimated that between 20 percent and 30 percent of all new jobs in the U.S. over the last decade have essentially come from [the U.S.] ability to be a major player on the world scene," he said.

Several recent Boeing acquisitions exemplify both the company's growing global reach and the resulting advantages this strategy brings the company and its workforce: Australia's Preston Aviation Solutions, with offices in Washington, D.C., and London, provides sophisticated simulation, decision support, and scheduling software for airlines and airports worldwide. Its intellectual capital and products are expected to contribute to a strategic advantage for the new Boeing Air Traffic Management business unit.

Jeppesen Sanderson Inc., a Boeing subsidiary since October 2000, is the world's leading supplier of flight information, flight planning services, aviation weather services, maintenance information and aviation training systems. It has an 85 percent global airline market share for its core navigation services such as aeronautical charts and electronic navigation data. Jeppesen products are a key component of Boeing's growing customer information services business. Jeppesen has offices in the United States, the United Kingdom, Germany, Australia, China and Russia.

As Boeing produces globally, it also is sourcing globally. Although some procurements are required as a condition of purchase for major Boeing buys by non-U.S. customers, most are accomplished as part of a search for high quality and lower cost supplier-partners that add value to the Boeing enterprise and increase overall competitiveness.

One example: Almost 400 Russian engineers work for Boeing in Moscow, and are linked electronically to a design team in Seattle. This effectively creates two engineering shifts a day in Moscow, working back-to-back with one in Seattle due to time zone differences. Not only does this give Boeing an around-the-clock engineering capacity, it provides access to scarce aeronautical engineering talent.

The recent establishment of a new Phantom Works research and technology center in Madrid will allow Boeing to tap European expertise in areas under study there — environmental and air traffic management technologies. More research and technology centers in other countries are planned.

Another example of Boeing's increasing international role is the series of Boeing-sponsored International Technology Summits that have been held in Tokyo, London, Paris and Madrid. More are scheduled for Berlin, Seoul, and other locations. These events bring together decision makers from important regions to discuss key topics such as air traffic management, aerospace and the environment, international co-operation in defense, future aircraft concepts, advanced manufacturing and more. These summits allow Boeing leadership to meet with and exchange views and information with leading members of international academia, government and industry. Representatives from Phantom Works, Boeing country leaders and country strategy teams, and Boeing's London-based International Communications organization organize the summits.

The people side

With increased global activity also comes a new human resources approach, departing from the model that made more sense in the years after World War II, when America faced very little competition from an outside world whose industrial base had been devastated.

Common practice then at Boeing and at many other American companies was to send out American employees to run a foreign office staffed with bilingual or multilingual locals.

Sometimes the American employees knew or learned the language, became familiar with the culture, and developed long-term relationships in the countries where they represented Boeing. Sometimes, the American managers didn't speak the language or know much about the culture. Continuity often came from the local staff that got new arrivals up to speed as they rotated through.

"We're looking at where we can help harmonize global processes and enable all of Boeing to leverage and develop resources around the world on a common basis," said Paulina Bendaña, Director of Strategy for International Relations.

This means establishing processes for attracting, hiring, and retaining Boeing employees based outside the United States. Planning to meet that challenge is Joyce Tucker, vice president Global Diversity (see related sidebar below).

Tucker and human resources professionals at Boeing World Headquarters in Chicago and across Boeing business units are currently conducting an extensive study of the countries, cultures and laws where Boeing does business — and plans to do business — worldwide. "It's critical that we create a diverse and skilled workforce," said Tucker. "In addition, we must also create an environment that supports the cultural differences within the organizations where we work, the customers we serve and the communities we live in." This also means adhering to local rules and practices while meeting the U.S. laws under which Boeing operates, Tucker said.

Boeing, too, must be more inclusive of employees from all over the world, so that they feel more a part of the Boeing global enterprise, as well as providing them with opportunities for mobility within the company. It also must improve the way in which Boeing selects American employees for international assignments, make such international assignments career-enhancing opportunities and best use their expanded knowledge after they return to their homeland, according to Tucker.

Boeing's Global Leadership Program also is helping company executives develop and broaden their global mindset. This 27-day course takes managers on certain career succession tracks to Europe, Asia or South America to learn about Boeing suppliers, customers and competitors in their own surroundings. A key goal is to sensitize these executives to the history, politics, culture and traditions of a specific region. With this background, course participants study the business practices, competitive dynamics and market opportunities within these areas and report back to the company's Executive Council.

Working smarter

Another piece of the globalization strategy is the speedier delivery of in-depth global knowledge to Boeing leadership. Pickering and his staff regularly write articles and analysis pieces about the world's political and economic situation. These are forwarded to members of Boeing's Executive Council, providing timely information and insight on world business prospects and political changes that could affect business units and Boeing markets.

As part of her job, Bendaña is tasked with finding ways to augment this information with knowledge from country teams and country team leaders around the world as Boeing globalization progresses.

World full of customers

In the end, according to Pickering, globalization gets down to people — Boeing people — on the ground and up to speed.

"From the human resources point of view, globalization increases our pool of talented resources manyfold. And, it also will give us a different outlook on the world — a world full of the customers, the technology and the production opportunities we need to build value and stay prosperous. As we operate more effectively globally, we will become more knowledgeable, more flexible, and more open to new ideas — and ultimately more successful as a business," Pickering said.

Transforming Boeing from a company that sells successfully internationally to an established global enterprise won't happen overnight. It could be years before Boeing achieves the global depth and localization it needs to sustain long-term competitiveness. However, with strong backing from the Boeing board of directors, the Office of the Chairman and business unit leadership, the company is marching ahead with its strategy to develop a global mindset and global presence.

"We must move quickly," said Condit. "The world will not wait, and our competitors will not wait. A global Boeing is a winning Boeing."