Volume 161: Bad Boeing. Blame Jack.
1. Bad Boeing? Blame Jack.
tl;dr: Boeing under spotlight again.
Rather than planes falling out of the sky, this time, it’s pieces of plane falling out of the sky, which begs the question of what exactly is going on over at Boeing.
However, if we look back at the recent history of Boeing, there’s something else we should probably pay attention to. The perils of the “Neutron Jack” Welch management philosophy.
As a quick refresher, Jack Welch was GE's much-feted celebrity CEO and Chairman from 1981 to 2001. At the time, he was viewed as nothing less than the savior of capitalism as he transformed the company from a sleepy industrial titan into the most valuable corporation on earth.
And, as happens with all successful corporations, GE executives then became much in demand as leaders of other companies, which served to spread the Welch gospel far and wide.
One of these executives was Harry Stonecipher, who, after leaving GE, became CEO of Boeing (via McDonnell Douglas) in 2003. In 2005, Jim McNerney, a former protege of Welch, replaced him. And current CEO and Chairman David Calhoun was also a Welch-era GE executive. (Dennis Muilenburg, a Boeing lifer, was sandwiched between McNerney and Calhoun).
This means Boeing has been led by CEOs who grew up under the Jack Welch philosophy for 17 of the past 21 years. As a reference, the first variant of the 737 MAX was introduced in 2011, so it is very much a product of the Welch philosophy within Boeing management.
Having consulted with GE after the retirement of Welch, I’d characterize his management philosophy in one sentence: Be ultra-aggressive, especially on costs, and grow the quarterly stock price no matter what.
The problem with this approach is that it drives business leaders to markedly increase the risk of long-term catastrophe in the interest of short-term results. For GE, this risk unfolded with almost corporation-ending ramifications during the 2008/9 financial crisis when it became apparent that the hundreds of sub-prime finance acquisitions made during the Welch era had materially changed the corporation's risk profile. (As an aside, when I worked with GE, financial services represented 50% of total revenue, and the model was simple: Buy a sub-prime lender with junk-rated credit borrowing at, say, 15% and lending at 30%, plug in the GE AAA-rated credit hose, and now you’re borrowing at 5 while still lending at 30, pocketing the difference as profit. Rinse/repeat).
Other corporations led by GE alums have also experienced the negative side of the Welch philosophy. Robert Nardelli, a longtime GE exec who’d hoped to become CEO upon Welch’s retirement, went to Home Depot, where his controversial tenure was characterized by shifting Home Depot from a focus on innovation to a focus on cost control, including the firing of the tradespeople who’d made Home Depot a customer service leader. Eventually, the higher performance of direct competitor Lowes, which had taken up the customer service slack left by Home Depot’s focus on costs, led the board to remove Nardelli. (He then had the dubious distinction of leading Chrysler into bankruptcy).
Anyway, back to Boeing for a second. It’s often quoted that the leadership battle Stonecipher won when made CEO in 2003 cemented the victory of former McDonnell Douglas accountants (Which Boeing had recently acquired) over Boeing engineers:
“McDonnell Douglas bought Boeing using Boeing’s own money”
And there’s clearly truth in this when we consider the shift from engineering excellence to financial engineering over the past twenty years. However, I think it’s overly simplistic to frame this simply as a takeover of the Boeing engineers by McDonnell Douglas accountants.
In reality, Boeing, like GE before it, is experiencing the long-term catastrophic cost of the Jack Welch philosophy of management.
While plenty of books focus on the problems within Boeing itself, if you’re interested in learning more about what’s happening, I also recommend reading about GE and Welch. Two worth checking out are “The Man Who Broke Capitalism” by David Gelles, which focuses singularly on Jack Welch, and “Power Failure” by William D. Cohan, which takes a broader view of the GE corporation.
2. New Year, New…Something.
tl;dr: What’s ahead.
Hello, Happy New Year, and welcome to the first Off Kilter of 2024. Since so many of you are new around here (subscribers grew by over 30% last year. Thank you so, so much), I figured I’d start by giving you a little more information on myself and this newsletter.
I started Off Kilter in November 2019. Initially, it was just to keep in touch with my network after I’d moved from NYC to Cambridge, MA, and was feeling a bit out of sight, out of mind. So I sent the first edition to 90 people I knew and, on a whim, put a signup box on the Invencion website.
And people signed up. A surprisingly large number of you, from all over the world, no less, which compelled me to continue.
In addition to keeping in touch with former clients, colleagues, and friends, I was also driven by a need to rebut the nonsensical drivel being peddled by so many talking heads out there that just made me mad.
I remember looking at such commentary and thinking to myself, “Wow, if you actually followed this advice, you probably wouldn’t be in business for very long,” and then there’d be a pit in my stomach as I looked at the comments and realized people were lapping it up.
From those early days, my goal has been to try and navigate the world of business through a brand, marketing, and design lens. To seek the signal in the noise and to try and provide commentary and advice that will be value-additive rather than value-destructive. And to do so with a healthy dose of humor and fearlessness.
It’s not for everyone, as I’ve learned over the years. But there are already enough milquetoast agency newsletters out there. The world doesn't need another one.
As for me, newsletter writing is a passion project done at night and on weekends. By day, I run a consultancy called Invencion that helps clients think differently about their businesses. This is delivered through the lens of competitive and corporate brand strategy, and the focus is very much on the idea that differentiation starts from the top.
A client once described me as “the antidote to groupthink,” which I’ve always loved.
Prior to this, I spent 10 years at global brand consultancy Wolff Olins, first in the UK and subsequently in the US, where I was a client principal and head of strategy.
Originally, I’m from the Shetland Islands in Scotland, which has roughly a 10:1 ratio of sheep to humans, which probably says something about me that I lack the self-awareness to describe.
These days, however, I live in the New York ‘burbs with my family and dogs.
As for what’s next. Well, there are a couple of things in the mix.
First, a new Invencion website is being built that will ship sometime in the next month or two. A huge part of this change is turning the Off Kilter archive into a useful resource, which should make finding, sharing, and navigating so much easier.
Beyond that, we shall see. Please let me know if there are any topics you’d like to see covered.
3. Blah, Blah, Theory, Blah.
tl;dr: Byron Sharp taking issue with the wrong orthodoxy?
At business school many moons ago, I remember a professor making the point that while theory and practice should be mutually reinforcing, reality tends to demonstrate the opposite - a divergence.
His lament was that while business academics tend to navel gaze, leading to theory so abstract as to have little or no practical application, practitioners tend toward the JFDI (Just F’ing Do It) school of management, where there’s little or no thoughtfulness or reflection, just activity.
It’s a mental construct that’s stuck with me throughout my career and is writ large in today’s marketing environment.
The shift of the theory/practice debate toward online channels did little to reconnect theory and practice. Instead, it accelerated their divergence. This happened because online discourse, particularly social media, “flattens debate.” In other words, social media channels don’t lend themselves to reasoned conversation involving subtleties, especially among people who may disagree, instead functioning more as a platform for simplistic and binary win/lose arguments.
The marketing academic most in tune with this flattening of debate appears to be the Dumbledore of Marketing Science, Professor Byron Sharp of the Ehrenberg Bass Institute of Witchcraft and Wizardry. Unfortunately, I can’t help but feel that he expends too much of his considerable intellect on win/lose arguments against the theories of Philip Kotler than on creating more valuable debate around the practices of marketers who’ve never heard of Kotler. (Before I go any further, I want to say that I think Prof Sharp’s book, ‘How Brands Grow,’ is a critical reference that everyone should flick through at least once and that marketers should probably keep under their pillow).
Although many practitioners may not have heard of him, academically, Kotler is a giant of marketing theory and has been required student reading for decades. Marketing Management, first published in 1967, was a required text during my undergraduate degree in the ’90s, and I’m sure Kotler is still a core part of university reading lists today.
I mention this because of a recent academic paper by Prof Sharp that shows his continued zeal for taking direct aim at Kotlerian orthodoxy. It’s a reasonably interesting read, and there’s already an excellent critique available, so please forgive me for not doing a blow-by-blow here.
That’s because my real point is a macro one. Marketing theory and practice are probably more diverged now than at any time in the past fifty years, to all of our detriment. And if, like me, you believe they should be reconnected rather than disconnected, we’ve got our work cut out because neither the most influential academics nor the loudest braying practitioners appear interested in playing ball.
For me, as a practitioner with an interest in academic theory and a desire to see it put to greater practice, what I see is something you won’t find in Sharp’s paper, which is that rather than his “Market-Based Assets” theory being a replacement of Kotlerian “Segmentation, Targeting, Positioning,” they instead feel complementary.
In other words, there may be more practical value in layering these concepts than in viewing them as binary opposites.
Why do I say this?
Well, let’s take one example. One of the concepts Sharp has been most vocally critical of is positioning. He claims it to be unnecessary and irrelevant. Meanwhile, Kotler, who puts positioning upon a pedestal, doesn’t directly address what Sharp views as the most crucial thing - mental and physical availability - at all.
But why does this have to be binary? If I put my over-simplifying practitioner hat on, I don’t see these as competing theories of how the world works at all. Instead, I view them as complementary tools to be placed within the mental toolbag.
Is positioning valuable? I’d unequivocally say yes. Do consumers often mistake how a brand is positioned? Yes. Do consumers often see brands as being somewhat undifferentiated from each other? Also, yes. Does this mean we should ignore positioning as irrelevant? No.
Why? First, Sharp fails to address how vital a clear positioning can be in guiding the organization’s internal behavior and sense of self, especially ensuring that its marketing activities don’t become chaotic. While this is less of a concern within his preferred CPG/FMCG environment, it’s a persistent issue across large corporate brands that encompass portfolios of hundreds, sometimes thousands of products, experiences, and customer journeys. Second, he doesn’t consider the role of positioning in helping guide and shape ongoing product, experience, and portfolio innovation. Done well, positioning isn’t just about what the consumer perceives through advertising; it’s also a strategic tool the organization uses to guide a broader suite of actions. Third, there are times when positioning dictates an entirely different way of thinking about an organization that, in turn, might drive fundamental business decisions. To take an example from my own career, I once worked with a client that saw itself in the publishing business. Based on our work together, we re-positioned the company as being in the learning business. This mental reframe led to a significant change in corporate strategy and M&A behavior and which business lines to divest from and invest in, ultimately leading to a fundamental transformation of the company and its value proposition. Fast forward to today, and based on this re-positioning, the company now has an entirely different competitive strategy and customer base and finds itself on a completely different growth trajectory relative to where it was before.
Equally, mental and physical availability clearly matter. And while the language may be new, the practice has been ongoing for years. Just think of Coca-Cola, which has overtly connected Coke to thirst for over 100 years while continually seeking to make it as readily available to as many people in as many places as possible.
So, if these connections seem obvious to me, you might well ask why Prof. Sharp doesn’t present his work this way.
While I have no insight into his thought processes, as I mentioned earlier, he does seem quite attuned to capturing attention within a world of flattened debate. And in a world of flattened debate, it typically behooves you to position yourself as a challenger of conventional orthodoxy rather than someone who builds upon it.
I just can’t help but feel that in a world where so many marketers haven’t even heard of Kotler because they’ve never experienced marketing academia, Sharp is choosing the wrong orthodoxy to oppose. It might have been better for us all had he focused on modern marketing's vacuous tactical dogma instead.