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Case Study $1$

In defense of criticism of Boeing$$s $787$ production delays, CEO Jim McNerney explained: We are trying to come up with the strongest set of partnerships we can with the people that supply our major systems and structures. In defense, we are trying to respond to the pressures of governments buying fewer things at lower prices, with less favorable contract terms. And that pressure cannot just stop at Boeing. We have to find willing partners $[$to share the burden$].$ And on the commercial side, low$-$cost carriers and a very flattish global economy leads you to the same conclusion. So the $$no$-$fly list$$ is people who don$$t want to play ball, who only want to hide behind the contractual language of their current programs. We$$re going to give those who do want to work with us more business$$or we$$ll move some things in$-$house. This is a not a rape, pillage and plunder exercise. This is the reality we all face. The majority of $[$suppliers$]$ are beginning to have productive discussions with us$.$ We have some holdouts, people who take the position that the pressure should only be absorbed by Boeing, notwithstanding the fact that $65$ percent of most of our airplanes are built by suppliers...we both have to demand lots of productivity $[$improvements$]$ to offset price pressure. Those that work with us in that way will find more volume. We are the biggest player. My message is$,$Don$$t bet against us$.$

The Boeing Dreamliner Boeing Corporation was one of the world's largest manufacturers of commercial aircraft, ranking $27$th on the Fortune $500$ list in $2016.$ When it announced the delivery of its first $787$ Dreamliner transporter to its first customer, All Nippon Airways, in September, $2011,$ it was almost $40$ months later than originally planned, after a long series of unexpected delays. The actual development cost of the project had been estimated at about US$$40$ billion but came in over twice the original estimate. One year later, a malfunction was discovered in one of the aircraft's lithium batteries, which caught fire after takeoff. These problems led to months of grounding, imposed by the FAA $($Federal Aviation Administration$),$ of the entire Dreamliner fleet already in service.

The Dreamliner was designed to be a revolutionary project in terms of physical characteristics, technology, management style, financing, design and engineering management, quality assurance, and assembly processes. Many of these initiatives were intentionally taken on to benefit from new developments in aviation technology and to speed up design and development; however, they posed unexpected challenges for both the company and the project team. $1$ This case is based on Shenhar, A$.$J$.,$ V$.$ Holzmann, B$.$ Melamed & Y$.$ Zhao. $(2016).$ The challenge of innovation in highly complex projects: What can we learn from Boeing$$s Dreamliner experience? Project Management Journal, Vol. $47,$ No$.2$; $62-78.$ A New Organizational Paradigm Boeing adopted a new organizational paradigm for the development of Dreamliner and decided to outsource an unprecedented portion of the design, engineering, manufacturing, and production to a global network of $700$ local and foreign suppliers.

With more than $70\%$ foreign development content, this decision turned Boeing's traditional supply chain into a development chain. Tier$-1$ suppliers became responsible for the detailed design and manufacturing of $11$ major subassemblies, while Boeing only did system integration and final assembly. Figure $1$ lists the project's major subassemblies and their tier$-1$ suppliers. Furthermore, Boeing came up with a new risk and revenue sharing contract with its suppliers, called the $$build$-$to$-$performance$$ model $($as differentiated from the more typical $$build$-$to$-$spec$$ or $$build$-$toprint$$ models$).$ According to the model, contract suppliers bore the non$-$recurring R&D cost up$-$front, owned the intellectual property of their design, and got paid a share of the revenues from future aircraft sales. Table $1$ summarizes the main features of this model. Under this model, the suppliers$$ roles were dramatically changed from mere subcontractors to strategic partners who had a long$-$term stake in the project. This model created some risks, which caused extensive integration problems and additional delays. Finally, Boeing employed a new assembly method. Subcontractors were required to integrate their own subsystems and send their preassembled subsystems to a single final assembly site.

The goal was to reduce Boeing's integration effort by leveraging subcontractors to do more work compared with previo