Making Big Bets

In April 1952, Bill Allen convinced his board of directors to commit $16M to develop the company’s first commercial jet airliner. That sum amounted to nearly every dollar the company had made in profit since the end of World War II.

What inspired the Boeing CEO to take such a huge risk?

It wasn’t based on a history of success in commercial aviation. At the time the company was known for building great bombers, period. The major airlines had expressed little interest in a commercial jet from Boeing and it could not find any airlines willing to underwrite the project.

Despite the magnitude of the risk and the unwillingness of the airlines to participate in the project, Boeing still took the risk. Why? Below are three filters that helped Boeing make this decision. Consider these when you have big decisions to make for your organization.

In Line with Purpose

Boeing existed to be on the cutting edge of aerospace technology and was committed to tackling huge challenges. Making this kind of bet was part of its DNA. Projects like this are what caused the organization to perform at its best.

Bill Boeing had entered the aviation industry as an ex-lumber merchant after becoming fascinated with aeronautics. His first airplane, the B & W seaplane, failed its Navy tests. The company was built on taking risks like this in the pursuit of aeronautical innovation.

Part of an Inspiring Vision

Boeing’s vision was to become the dominant player in commercial aircraft and to bring the world into the jet age. But, Boeing had a problem. 80% of its revenue came from one client – the Air Force.

Despite this fact, the leadership at Boeing knew they could leverage the expertise it had in building military aircraft to dominate the commercial aviation market. It was a huge bet, but they knew that following the other aircraft manufacturers into the jet age was unacceptable for an organization that was founded to be on the cutting edge of aviation.

Built on Competitive Advantage

Boeing had been building jet bombers for the Air Force. They knew the technology and they knew they could adapt it to commercial flight. The leadership at Boeing felt strongly that jet aircraft were the future of aviation and that someone had to lead the industry into the jet age. Boeing accepted the challenge, leveraged the competitive advantages it had developed working for the military and left the rest of the industry in its wake.

On July 15, 1954, the Dash 80 (as the project had become known) made its first flight. By 1955, Pan Am had ordered 20 of the planes. At the time, Douglas Aircraft was leading the commercial aircraft market with its piston engines. Douglas chose to hold tight to its dominance in propeller driven aircraft and was lapped by Boeing.

By 1957, Business Week declared that the airlines were falling over themselves to replace their propeller aircraft with jets. Douglas Aircraft was unable to release its first jet aircraft until 1958.

Markets are often taken over by smaller, nimbler competitors willing to take risks that the incumbents see as too hazardous.

Think about your market. What types of risks are new entrants taking to disrupt the market? What risks should you be taking?

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