Lost Altitude: The Role of Client Mismanagement in Boeing's Turbulence
The recent business failure of Boeing, one of the world's most renowned aerospace companies, reverberated across the globe. It's not in my interest to find out why the 737s crashed. Instead, I'm going to find out what it is that they didn't do from the client management perspective, before and during the crisis. After all, their clients are almost all the airlines in the world!
So it's a case of a renowned B2B enterprise and how they mismanaged their client relationships.
The Good..
Boeing was an engineering-first firm whose history is that of the gold standard when it comes to safety and quality. They created products that made Boeing part of America's pride, and with some of the greatest technical advances made during the 20th century, they had a tremendous impact on the country's economy. Their legacy includes military airplanes, unmanned vehicles, spacecraft, and, most notably, commercial passenger jets. The streak of fortune started in the late '50s with the 707, followed by the 727s and 737s in the '60s, and many more until the current controversial 737 Max series was commercialized in 2017.
The Bad...
In the early 2000s, when Airbus overtook Boeing to become the largest commercial aircraft manufacturer, Boeing gave in to market pressure and shifted focus to speed and delivery at the cost of quality. This was followed by many changes, including the acquisition of McDonnell Douglas, the shifting of their headquarters, management changes, policy changes, cultural shifts, etc. All we need to remember is that the company underwent a metamorphosis over the decades. Such changes are very common when we look at the history of large corporations.
The Ugly...
Two Boeing 737 Max aircraft crashed within 5 months, and 346 people lost their lives. As a result, Boeing was grounded. In fact, it is the first aircraft to be grounded by the President of the United States, Donald Trump.
At the time of the grounding, Boeing had 4,636 unfilled orders worldwide for the 737 Max, valued at an estimated $600 bn. Analysts estimated that each month of the grounding delayed $1.8 bn in revenue for the company. Boeing has put the total cost of the two deadly crashes of its 737 Max airliners at nearly $19bn and slumped to its first annual loss in more than two decades.
Finally, after investigations, the flaws in the engineering systems were found to have led to the accidents, but Boeing avoided a trial by agreeing to pay $2.5bn as compensation.
What Client Mismanagement?
A flawed Value Proposition that can't be kept
When Airbus delivered a highly fuel-efficient model called the 320 Neo, Boeing didn't have a match. Because a new design takes a decade to productionize, they upgraded their existing 737 with fuel-efficient engines and added some digital tech. Here is the catch. If the 737 Max was any different from the 737, this would mean all 737-certified pilots of all the airlines would have to be re-trained and certified in the simulator. And such training is a major operating cost for any airline and a logistical bottleneck. So even before the product was redesigned, Boeing went ahead and promised its customers that there would be no retraining required for existing pilots. This value proposition happened to be both a boon and a bane. It was an easy selling point, and orders poured in.
But at the center of the 737 Max crashes was a system in their aircraft called MCAS. What is its role in making false promises? Technically, due to heavier engines, they needed a system called MCAS to help the pilot level the plane out if it went nose-up, something like the parking-assist or cruise control systems in our cars. This was a new mechanism that needed pilot training. But because they already promised, they decided to conceal the new MCAS system and disguise it as an upgraded mechanism of the old design called 'Speed Trim'. This deceitful act was a ploy to cover up the need for additional training requirements.
When they knew they couldn't keep up their promise to clients, it would have been apt to offer free training or something to that effect.
Boeing's handling of the 737 Max situation left many airlines feeling betrayed and disillusioned. Lack of transparency, delayed acknowledgment of system flaws, and inadequate communication with clients eroded trust.
Blaming the clients for one's problems
When the Indonesian airline crashed, an elaborate PR campaign was run to shift the focus to Lion Air's spotty safety record. They started blaming the country, the airline, and the pilots. It was centered around their incompetence. Boeing highlighted issues related to pilot error and inadequate pilot training, which led to the aircraft's tragic outcome.
Within 5 months, another crash occurred. This time, an Ethiopian Airlines flight crashed shortly after takeoff from Addis Ababa, killing all onboard. In this case too, Boeing tried to push the focus onto the Ethiopian pilots, saying that they did not do everything precisely as they were supposed to. They were blaming the foreign pilots from third-world countries and shifting the focus again to pilot qualifications and training.
In business, particularly in B2B, things can go wrong due to either of the parties, and many times, it's the other party that bears the brunt. Finger-pointing should be avoided, as the long-term damage is borne by both parties.
Ultimately, regulators and aviation authorities around the world scrutinized Boeing's safety practices and the regulatory oversight process, leading to questions about the adequacy of aircraft certification and the relationship between manufacturers and regulators.
As a leader, you can ask for your team members to share a MBF (Management By Fact) report, when they come across challenging situations. If you haven't used them before or haven't heard about it, then check out my coming week's post, I'll be sharing a free MBF template that you can use.
Since then, Boeing has been able to turn the tide by fixing the technical issues as well as retain a part of the canceled orders.
Lessons Learnt for Other B2B Companies
The Boeing 737 Max crisis serves as a cautionary tale for other B2B companies, particularly those operating in safety-critical industries. Some key lessons to take away from this episode include:
Transparency is key: Open and honest communication with clients is paramount. Concealing information or downplaying risks can lead to severe consequences.
Client-Centric Approach: Prioritize clients' needs and concerns and maintain open channels for feedback. Understand that long-term success is built on strong client relationships, and it's not about who is right.
Safety First:Â In industries where safety is critical, prioritize safety over competitive pressures. Ensuring the safety of products and services is non-negotiable.
Effective Risk Management:Â Identify and address potential risks early, proactively engaging with clients to manage concerns and mitigate potential crises.
Regulatory Compliance and Accountability:Â Work closely with regulatory authorities and adhere to certification processes to maintain credibility and build trust.
If you are interested to know more about Client Centric Business Growth Strategies, you can visit here for more free information. You can also contact us at Business.Support@collaborat.com.
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As always, happy to hear your views in the comments.
Hi Niel, As always, you are master of client centric approach. You did brought into light some of the client centric approach into this case too which is really excellent way of reinstating the need of "customer first". I think in this case of Boeing, there were several factors, however, client centric approach was handled poorly with the new management. Actually, from the details I had on this topic, it was the new management that had to be finger pointed for the entire mishap. This also shows the need to relook into the Organization culture, a need to understand the same when a new management takes over and decide to unleash a culture revision. In a way Organization culture are not bed rolls that can be replaced either by cleaning them or buying them new, its something that is build over years of thorough employee engagement. Unfortunately, every time whenever management change happens, they always want to change the organization culture in no time.