by Bob Lewis

For in that sleep of outsourcing, what Dreamliners may come … and when?

Mar 15, 2011
IT Leadership

When executives ignore their engineers, the only questions are when disaster will occur, and what the disaster will be.

When executives ignore their engineers, the only questions are when disaster will occur, and what the disaster will be.

ManagementSpeak: What do you think would be best for the company?

Translation: Tell me what is best for me and what I want to hear.

KJR Club member Sam Jackendoff tells us what’s best for our vocabulary.

The Senate just passed patent reform legislation.

So here’s a thought: Rather than reform the Patent and Trademark Office (PTO,) why not just outsource the sucker to the European Patent Office? It would be cheaper and far less risky than fixing the one we have.

This follows the usual but unadmitted reason businesses outsource. Shorn of all the academic fur that surrounds the subject, businesses outsource when they’ve given up on their own ability to be competent at whatever-it-is.

And so, they turn over responsibility for it to another company, figuring their shortcomings will be magically transformed into superior competence when the relationship they’re managing is with another company instead of a fellow executive.

But not always. Sometimes, businesses outsource just to be trendy. Or something.

Take Boeing and its approach to building the Dreamliner. As detailed in “787 Dreamliner teaches Boeing costly lesson on outsourcing,” (Michael Hiltzik, Los Angeles Times, 2/15/2011), Boeing decided to increase the number of externally sourced components six-fold compared to the 747.

Boeing’s Dreamliner mess was structurally dissimilar to a typical IT outsource — as much a strategic supply chain bungle as a botched functional outsource. Still, the article is well worth your time, because it provides a near-exact specification of how to engineer a failed outsource of any kind. Boeing’s failures included:

  • Poor due diligence.
  • Too-loose specifications.
  • Not managing its outsourcers once their contracts were signed.
  • Mistaking price for total cost.
  • Being incredibly stupid. I don’t say this lightly. By incredibly stupid I mean Boeing gave away both the high-margin parts of the original manufacturing, and the highly profitable replacement parts business that follows the sale of an expensive and long-lasting passenger plane, keeping mostly the low-margin final assembly work in-house. Incredibly stupid.

And finally, there’s this week’s subject: Boeing’s top executives ignored their in-house experts — their top engineers. One of them, Senior Technical Fellow L.J. Hart-Smith, had watched a similar fiasco play out at McDonnell-Douglas during the creation of its DC-10 and predicted the mess long before the decision to aggressively outsource the project began.

Boeing’s executives ignored him. And so, predictably and as predicted, the Dreamliner is now three years late and several billion dollars over budget.

It isn’t as if Boeing is alone in the ignore-your-engineers field. Long before, NASA’s engineers assessed the risk of catastrophic failure during space shuttle launches as being 1,000 times more likely than NASA management. As Richard Feynman pointed out in his classic analysis of the Challenger disaster, the management assessment depended almost entirely on this logic: It hasn’t failed before, therefore it must be safe.

More recently we had the Deepwater Horizon oil spill — another case of management ignoring engineers who warned of impending calamity, only to be ignored because of the exact same management “logic.”

What’s the solution — uncritical belief in whatever your engineers say? Of course not, although it’s a common challenge to the points made above — not surprising given how popular false dichotomies are these days. Halfway between ignoring your engineers and accepting whatever they have to say without question is the optimal mid-point: Listening to them, doing your best to understand what they’re doing their best to explain.

And, as part of this effort, making their competence, good judgment and positive intentions your default assumptions, to be accepted unless and until they give you reason to conclude otherwise.

Here’s why these should be your default assumptions: You, or your management team, or your colleagues elsewhere in the company hired these engineers and continue to employ them. Which means these really aren’t assumptions at all. They’re something quite different: Inferences, based on an assumption — that you (I hope!), your management team, and your colleagues are making good decisions about who to hire and who to retain.

Which gets to what just might be the most pernicious consequence of Boeing’s Dreamliner outsourcing decision, and one it very much has in common with traditional IT outsourcing arrangements: brain drain.

Companies tend to forget that outsourcing has more than one outcome. There’s the desired one: Addressing a business responsibility of some kind. Imagine for a moment that this happens as well as you can imagine.

And there’s this: The outsource means the outsourcing company no longer has important expertise required for its ongoing success on its payroll. That expertise now belongs to someone else.

So those experts you should be listening to, to caution you as to hidden consequences of your outsourcing plans? You don’t have them to listen to anymore.

You’ve replaced them with other experts, who have no loyalty to you.

And ulterior motives.


Thanks to John MacKenzie for calling the LA Times article to my attention.


Bob Lewis is author of Keep the Joint Running: A Manifesto for 21st Century Information Technology, Bare Bones Change Management: What you shouldn’t not do, and six other books on business, information technology, and where they intersect. He is president of IT Catalysts, Inc., a consultancy specializing in these and related areas.