ALAN MULALLY Former CEO of Ford and Boeing Commercial Airplanes says all companies are becoming digital, connected
In a 45-year career, Alan Mulally helped engineer the first commercial airliner built without physical prototypes and then led both Boeing Commercial Airplanes and Ford Motor Company. Now a board member for Google and Carbon3D, the high-energy Mulally shares his enthusiastic perspective on how the futures of traditional and new-age industries are converging.
Alan Mulally is not your average retiree. At 71, he’s one of the very few business leaders who has had the opportunity to change the business world twice: At Boeing, where he was CEO of Boeing Commercial Airplanes, he pioneered the use of a new generation of computer-aided design (CAD) software that revolutionized manufacturing; then, before retiring as president and CEO of Ford Motor Company in mid-2014, he led the 112-year-old automobile maker’s turnaround from a US$17 billion loss at the end of 2006 to profitability by 2008 – without the aid of government bailouts.
Today, Mulally is still very much in demand for his talent, his ideas and for knowing how to gain competitive advantage through organizational culture, serving on the boards of two high-tech companies. When he speaks people listen – and his insights about the future of business might be best described as provocative.
Ford Motor Company lost US$17 billion in 2006. In 2008, after two years under Alan Mulally’s leadership, the automaker turned a profit.
For example, Mulally believes that the distinction between well-established companies that participate in more traditional industry sectors – ones that existed long before the start of the dot-com era – and so-called “new economy” companies heavily involved in the technology sector will become increasingly blurred.
“I find the whole discussion about digital versus non-digital companies very interesting, but it’s just not true,” he said in a wide-ranging interview exclusive to Compass. “Digital technology, the Internet, information processing and the ever-improving quality and miniaturization of sensors and robotics will enable the quality, productivity and transformation of all industries around the world. All companies will be brought together by databases and systems thinking. Individual companies simply will need to decide which things they are working on to add value in which industry. The enabling technologies will be exactly the same.”
“DIGITAL TECHNOLOGY, THE INTERNET, INFORMATION PROCESSING AND THE EVER-IMPROVING QUALITY AND MINIATURIZATION OF SENSORS AND ROBOTICS WILL ENABLE THE QUALITY, PRODUCTIVITY AND TRANSFORMATION OF ALL INDUSTRIES AROUND THE WORLD.”RETIRED CEO, FORD AND BOEING COMMERCIAL AIRPLANES
The most important lesson that business leaders can learn from broad societal and business trends, he said, is the power of operating systems that deliver connectivity. “Information is going to be ubiquitous, and everybody around the world will have access to it,” Mulally said. “Can you imagine what’s going to happen when people get a chance to access that information and work together to create even more value for all of us? Embracing the integration of hardware, software, sensors and systems absolutely will be the key to the future for everybody.”
As one of the first executives to bring a traditional heavy industry into the digital age, Mulally sees a parallel between the digital-driven transformation he discerns on the horizon today and what he experienced 25 years ago, when he employed the power of digital technology to break the decades-old paradigm of how commercial airplanes were designed and built.
The year was 1990. Boeing had kicked off development of the “Triple Seven” jet from scratch in 1988, and Mulally was director of engineering. Prior to the 777 model, engineers created physical parts from two-dimensional drawings on paper. Specialists in various departments would design them, but it was up to manufacturing to figure out how to produce and assemble them. Testing form and fit was impossible until the first physical prototype was built.
In Boeing’s previous development of the 767 model, the paper-to-prototype approach had required about 13,000 individual design changes to the door assemblies alone. Management knew that if Boeing was going to deliver the capabilities and quality its customers wanted and complete the even larger 777 project on time and on budget, the company’s approach to designing and building planes needed to change radically.
Boeing had been following trends in computer-aided design and computer-aided manufacturing (CAD/CAM) technologies, in which Mulally had taken a special interest. “We knew that if we could find a breakthrough in how parts are created, so they could be assembled quicker and more easily, we could make a tremendous improvement in the quality of the end product and in our productivity,” Mulally said.
In Boeing’s global search for solutions, Mulally and his team tapped Dassault Systèmes, the developer of CATIA (and the publisher of Compass), which enabled engineers to simulate the assembly of any product – an aircraft, an automobile – in three dimensions in a computer, prior to actual physical production. This capability allowed engineers to verify that all the parts would fit properly before they were manufactured. Theoretically, by virtually eliminating the trial-and-error approach to building and fitting parts, the software could save Boeing substantial time and money.
But could the software be scaled up to simulate and build an entire airplane? Mulally and Bernard Charlès, who was Dassault Systèmes’ president of strategy, research and development in 1990 and is now the company’s president and CEO, thought the case for designing and virtually pre-assembling parts in three dimensions – bypassing paper blueprints altogether – was so compelling that it was worth the risk.
To prove their point, Boeing built a mock-up of the 777’s nose section. The test verified the concept and demonstrated that CATIA could be scaled up to simulate an assembly of the entire airplane. The test was so successful, in fact, that all planned physical mock-ups were canceled.
“Unheard of – never been done!” Mulally exclaimed with as much excitement and pride as if the achievement happened yesterday – not 25 years ago. “It was probably one of the biggest single improvements in the design and manufacturing of airplanes in the last 100 years.” The gamble was such a success, United Airlines accepted the very first production airplane virtually defect-free and on time, a remarkable accomplishment for such a large, complex engineering effort.
“UNHEARD OF – NEVER BEEN DONE! IT WAS PROBABLY ONE OF THE BIGGEST SINGLE IMPROVEMENTS IN THE DESIGN AND MANUFACTURING OF AIRPLANES
IN THE LAST 100 YEARS.”
During his 37-year career at Boeing, starting as an aerodynamicist fresh out of the University of Kansas, Mulally held engineering and management positions on design teams for every Boeing commercial jet aircraft. He hoped he would have the opportunity to help design one more, but fate had other plans: a telephone call in 2006 from Ford President, CEO and COO William Clay Ford Jr., great-grandson of Ford founder Henry Ford, who offered Mulally the chance to lead the company his family had run for generations.
Mulally’s first questions to Ford centered on the extent of the company’s problems. All of the major US automotive producers were in dire straits, caught in a perfect storm of poor business strategy, eroding market share, too few fuel-efficient models, a worsening credit crisis and lackluster execution. Leaving Boeing, Mulally admits, was a wrenching decision. “The reason I decided to accept Bill Ford’s offer was that I felt like I was being asked to help transform and save a second American icon, and that idea was compelling to me,” Mulally said. “To get a chance to have Ford profitably growing with the best product line in the world was very exciting.”
When Mulally was put in charge, the company was on the verge of bankruptcy. But he had a vision for rallying the workforce around an overarching goal: focus on the Ford brand and become best-in-class with a complete family of cars, trucks and utility vehicles serving all markets worldwide.
“I FELT LIKE I WAS BEING ASKED TO HELP TRANSFORM AND SAVE A
SECOND AMERICAN ICON.”
Despite his stellar track record at Boeing, Mulally was widely perceived as an outsider in Detroit – an airplane guy, not a car guy. Combined with the daunting task he faced, industry observers in both the automotive world and the aerospace world openly doubted whether Mulally would succeed.
However, he brought the same obsessive focus on motivating the entire Ford team to work together as he had done at Boeing – managers, production people and suppliers. By the time Mulally left Ford, the company had achieved one of the most extraordinary corporate turnarounds in the modern history of business.
Retirement doesn’t sit well with the high-energy Mulally, however. Soon after leaving Ford, he joined Google’s board of directors. Mulally said that the search giant, which makes almost any information available in a nanosecond and is moving aggressively to help build a global Internet of Things, shares his passion for cutting-edge ideas, rigorous accountability and a strong belief in the power of democratized information and computation. They also share a passion for talented and motivated employees, working together, and contributing to economic development, energy independence and environmental sustainability.
But continued advances in global connectivity aren’t the only technologies that Mulally believes will upend business and change the way the world’s populations live. Additive manufacturing, also known as 3D printing – a process of fusing layered materials to create complex three-dimensional objects – also sparks his excitement, which makes his position on the Board of Directors of Carbon3D, a pioneer in 3D printing technology, a natural. “Imagine being able to make products when you need them instead of having warehouses full of inventory,” Mulally said.
He also expects big data to be a disruptor. As tools and processes are developed to analyze massive amounts of information in real time – from the consumer all the way through manufacturing – companies will be able to improve not just the quality of goods and services they deliver to customers, but also boost their productivity, he said.
Mulally foresees virtual reality (VR) extending the digital revolution further into the physical realm and deeper into everyday life. VR has the potential to be even more of a problem-solving tool than it is now – think of applying the technology behind flight-training simulators to the world at large. Predicts Mulally: “Virtual reality will be applied to more industries with greater precision.”
But it is the ubiquity of information and access to it that Mulally thinks will have the greatest overall impact. “Everything will be connected, and that is the essence of what this world is going to look like,” he said. “The whole idea will be to make products that improve the quality of people’s lives and do it in less time and with fewer resources. That’s where this digital Internet revolution is going.” (See “Beyond the Internet of Things” starting on Page 52.)
As for the measure of companies’ success, Mulally said it starts with understanding the purpose of a business. “If the leader is clear about what the vision is for the product or business, and that person helps everybody understand what the strategy is for achieving that vision, and if you’re reviewing the status against the plan in regular review meetings, it’s possible to achieve an unbelievable cultural change in how people work together to create a profitably growing company based on great products and great services.”
To Mulally, leadership is about authenticity, getting things done, and the way you treat people. Most important is that leaders hold themselves and their teams accountable for coming together around a compelling vision, comprehensive strategy and plan, and adopting a relentless implementation process with clearly defined “working together” behaviors. The latter – which are at the heart of Mulally’s management philosophy – include principles such as putting people first, including everyone and setting clear performance goals. “That is the essence of leadership, and it really served all of us well at Boeing and at Ford. It was an absolute honor to serve both.”
Such a management style, paired with his trademark humility, has earned Mulally almost universal praise from the broader business community. Tom Captain, vice chairman and US and global Aerospace and Defense leader, Deloitte, for example, characterizes Mulally as “the gold standard” of business leaders.
“He uniquely possesses the X factor that characterizes an extraordinary leader,” Captain said of Mulally. “His superb ability to motivate and connect with customers and employees is topped off with his positive outlook and boundless enthusiasm. He is one of a kind.” ◆
Tony Velocci is retired editor-in-chief of Aviation Week & Space Technology magazine and a
frequent contributor to Compass.