Why Competitive Advantage is a Useful Way to Understand Boeing’s Predicament

Boeing’s leadership is now backed into the corner. Crisis management continues. It is unlikely to stop soon. We seem to have a company in disarray. Criminal investigations. Death. Accidents. Loss of market share. 25% stock price drop. Trending in the wrong way.

Many have seen this coming for years, including me. Here’s my analysis of how Boeing leadership culture created this mess. 

To sum up, Boeing’s current situation is a consequence of a leadership culture that values financial return over other critical performance metrics. Nothing wrong with profit, but leading a company requires more. These other metrics specifically include: 

1.      Market Potential

2.      Operational Scalability

3.      Business Model Sustainability

4.      Financial Return

These are the Four Metrics for Competitive Advantage. It is a useful framework for navigating strategic tradeoffs on leadership teams. I won’t go into all the details here (we have a white paper that you can download to learn more). 

Boeing has for years prioritized the fourth metric for competitive advantage. This captured my attention about five years ago when a 40-year Boeing employee and close friend complained to me that management was laying off long-time employees to cut costs. He said, ‘They are systematically eroding the culture of safety and quality.'

We hear much about the culture at Boeing, of the erosion of safety and quality. But what tradeoffs were being made by leadership to create this culture. We know that Boeing leadership was systematically cutting labor costs. But what is less clearly articulated is that these profit driven choices were strategic tradeoffs made at the expense of sustaining the other key metrics required to sustain competitive advantage.

Take Market Potential, the first and most important metric. It is comprised of things like Provider of Choice and Employer of Choice. Gamble with these, and it is quite hard to sustain a winning culture with happy customers. Similarly, recent reporting has exposes supply chain issues (the Alaska Airline door that blew out.) So too, it appears, that cutting costs in Operational Scalability has impacts competitive advantage. 

I suppose the same leadership mindset of favoring financial return explains to a significant degree the 737 Max tragedies. 

Here’s what is helpful to consider. The Four Metrics for Competitive Advantage are listed in order of importance for long-term business success. Obviously, at any given moment, one will be more important than the others. 

But continually prioritizing financial return - the metric that is in fourth place - will erode the overall competitive advantage of a company. 

Remember the GM Chapter 11 Filing in 2009? They emphasized profits and Toyota ate their lunch. Same story, though perhaps less tragic. 

Read the white paper here. It’s a powerful framework that provides leadership teams a lens for making better decisions.