The 777 is incredibly important to Boeing. It has no real rival, and delivers an estimated $1.2 billion in revenue per month. Airbus is working on a competing jet, and according to the Wall Street Journal, customers are buying fewer planes as they expect a revamp.
That means Boeing’s in the middle of one of the hardest choices in business — how to change a core product.
They face a classic strategic choice.
They can take a faster, cheaper route and offer the plane at attractive price, but risk falling behind a more advanced competitor in the future.
Alternatively, they can invest heavily in a higher performance jet, risking the cost overruns and delays that have plagued some of its other projects.
The long lead time and single major competitor make Boeing’s situation somewhat unique, but other companies show how dangerous this sort of crossroads can be.
Taking too long with a new product can lead to a situation like that at Research in Motion, where ongoing delays saw the company lose market share and get left behind by competitors.
Playing it safe leaves a company open to disruption, as is easy to see in the giant gap between Nokia and Apple.
Misjudging customer desires can lead to expensive PR disasters, like the New Coke debacle.
A story in the Wall Street Journal reveals exactly how complex these decisions get. Boeing was on track to take the more expensive approach, but is now reevaluating its plans due to cost and customer concerns.
Internal arguments over the cost and slow progress of the new planes lead to the departure of a key engineer in June.
Delays and reevaluation aren’t a good sign in a program as vital as this. Boeing may soon see a stronger, larger competitor in both defence and air travel if the proposed BAE/EADS merger goes through, raising the stakes for the company.
It’s a difficult choice, but Boeing needs to commit. In the long run, having a better, more fuel efficient jet will both help hold off competition from Airbus and make the new product relevant for much longer.
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