Greatest Biz Decisions of All Time #2

from Fortune Magazine 2012, enhanced by Peter/CXO Wiz4.biz 4/13

#2. Boeing first big bet was on the 707 Aircraft in 1952 that launched their dominance of the Aircraft industry for 50 years

Lesson Learned: When CEO Bill Allen decided to launch the 707, he had no orders in hand. He simply believed customers would buy. It takes courage to wager a company’s future on a vision.

Humble beginnings. Here’s a shocker to even the casual student of aviation history under the age of, say, 75. At the dawn of the Jet Age, Boeing, one of today’s dominant makers of commercial aircraft, was a non-entity in the business of building planes for airlines. That’s right. In the years following World War II, when U.S. industry was retooling for civilian production, Boeing was primarily a maker of military aircraft. Its famous B-52 bomber and a companion tanker had proved that the Seattle company had the right stuff when it came to jet aircraft technology. But for the airlines, jets weren’t commercially viable: Converting to jet technology would require a massive investment that could pockmark their bottom line.

Taking a Risk. The safe choice for Boeing would have been to stick to the defense-industry. That, however, wasn’t the plan of Boeing’s postwar president, William Allen, who made a proto-typical great decision, a bet-the-company move on civil aviation in the form of a single product. He was convinced that consumers would like the speed, convenience, & comfort of jet travel and that the real growth would be in the civilian sector of the booming global economy. Allen was so sure of his conviction that he was willing to risk Boeing’s financial future on it.

Bet big on the Future. In 1952 he persuaded the Boeing board of directors to invest $16 million ($300M in today’s $$) in what would become the Boeing 707, the first U.S. transatlantic commercial jetliner and the plane that would alter the course of Boeing’s history. The 707 grew to become as much a cultural icon as a transportation vehicle. The swimwear company Jantzen called its swimsuit line the 707. Every U.S. President from Dwight D. Eisenhower to George H.W. Bush flew on an Air Force One that was a modified version of a 707.

Bet more than you have. All told, Boeing invested $185 million in the 707 (that’s $3.7B in today’s $$) . According to a 1957 article in Fortune, that was $36 million more than Boeing’s net worth the previous year. It was just one plane, but it remade a company, an industry, and the very culture of its time. The 1970’s 737 & 747s are still being built today. Boeing has been the industry leader for 50 yrs, until AirBus took over in last 10 yrs – but it’s partly financed by European government. That’s unfair, but that’s the way business is sometimes.

Comments: What do you think of Boeing’s dominance for 50 yrs?