4 ms·

The title should really be 787 Dreamliner teaches Boeing a costly lesson in due-diligence. This sort of thing has nothing to do with outsourcing and everything

The title should really be 787 Dreamliner teaches Boeing a costly lesson in due-diligence. This sort of thing has nothing to do with outsourcing and everything to do with poor decision making by management.

gnaffle 16y ago
Here's the problem, though: Who is capable of doing the due diligence? By outsourcing, you end up losing a lot of the in-house knowledge necessary to spot problems early on.
- gaius 16y ago
  That's not necessarily true; systems integration is a skill in its own right. It's just about what level of abstraction you work at. As software people we ought to understand this better than anyone.
  - varjag 16y ago
    You need freshmen code grunts first to become analysts later. Once you remove the low level design work, you lose (in time) the experts as well. You can't have someone figure out how to put wings to hull properly if he never ever drawn a single fastening bolt in his life.
    - gaius 16y ago
      You can hire those pre-experienced in that from your vendors. This happens tonnes in industry; if you want a well-paid senior networking job, get a low-paying entry-level job in Cisco TAC and wait to be poached...
      - stcredzero 16y ago
        You can hire those pre-experienced in that from your vendors. Just how loyal and committed are these folks one is poaching from vendors?
        gaius 16y ago
        Certainly no worse than any other employee. We're all grownups here.
        stcredzero 16y ago
        The implication here is that outsourcing is for companies with good processes and solid culture. On the other hand, it could be quite a bad move for a dysfunctional company. I could see many ways outsourcing would actually amplify dysfunctions.
        ssmoot 16y ago
        Given the context, this seems a bit absurd.
- CaptainZapp 16y ago
  Who is capable of doing the due diligence? Even if they're everybodies favorite wipping boy right now. I'd enter Nokia as the winner in the due dilligence category. There's a classic business case study about two handset manufacturers, a Philips fab in Mexico and a small fire in that fab. Details can be found here : http://www.ftpress.com/articles/article.aspx?p=1244469 http://www.ftpress.com/articles/article.aspx?p=1244469
  - akamaka 16y ago
    Fantastic article, thank you for sharing this!
  - mncolinlee 16y ago
    In light of Nokia's latest struggle with iOS and Android, aren't they both a success story and a cautionary tale for due diligence and proactive management. Nokia had a second fire-- a burning platform. By the logic of the book excerpt that I finally had time to read, they should have read the tea leaves about the iOS and Android universes much quicker than they did. Nokia's burning platform memo would not have been so dire if their response had occurred one year earlier. Nokia was already considerably left behind by the application universe at that point. iOS had momentum then and should have been considered a direct threat even though the Android userbase was only 1/10th of the size it is now. I still find that corporate cultures tend to sideline Android to this day because they underestimate the value of an open platform on commodity hardware with infinite hackability that intrigues developers. The same incredible growth occurred with Linux and Apache on the web as the 888% Android growth in the last year. Android will win partly for the same reason Microsoft beat Apple's superior UI in the 80s and 90s-- Apple is still tied to expensive proprietary hardware and the need to completely control their platform.
asdfj843lkdjs 16y ago
Well due-diligence seems to have been an issue in individual cases. But overall they seem to have missed two fundamental problems. 1. Manufacturing parts and then selling them throughout the life of the aircraft model has a high margin of profit. Assembling an aircraft form parts has the lowest margin of profit. 2. Outsourcing requires more coordination form HQ, not less. It seems like those two were pretty big and important. Especially #1, what kind of an executive does not understand the value chain of the business he's in? This is why I don't think CEO are stupid, but I do think they act economically rationally (perhaps not ethically) by increasing their compensation by pumping up the stock price in the short term. In this case the CEO raised stock prices in the short term by appearing to create cost savings. His compensation goes up, he leaves the company, cost savings turn out to be costs, but the old CEO has already been paid and is gone, this is the new guy's problem.

gnaffle 16y ago

Here's the problem, though: Who is capable of doing the due diligence? By outsourcing, you end up losing a lot of the in-house knowledge necessary to spot problems early on.

gaius 16y ago
That's not necessarily true; systems integration is a skill in its own right. It's just about what level of abstraction you work at. As software people we ought to understand this better than anyone.
- varjag 16y ago
  You need freshmen code grunts first to become analysts later. Once you remove the low level design work, you lose (in time) the experts as well. You can't have someone figure out how to put wings to hull properly if he never ever drawn a single fastening bolt in his life.
  - gaius 16y ago
    You can hire those pre-experienced in that from your vendors. This happens tonnes in industry; if you want a well-paid senior networking job, get a low-paying entry-level job in Cisco TAC and wait to be poached...
    - stcredzero 16y ago
      You can hire those pre-experienced in that from your vendors. Just how loyal and committed are these folks one is poaching from vendors?
      - gaius 16y ago
        Certainly no worse than any other employee. We're all grownups here.
        stcredzero 16y ago
        The implication here is that outsourcing is for companies with good processes and solid culture. On the other hand, it could be quite a bad move for a dysfunctional company. I could see many ways outsourcing would actually amplify dysfunctions.
        ssmoot 16y ago
        Given the context, this seems a bit absurd.
CaptainZapp 16y ago
Who is capable of doing the due diligence? Even if they're everybodies favorite wipping boy right now. I'd enter Nokia as the winner in the due dilligence category. There's a classic business case study about two handset manufacturers, a Philips fab in Mexico and a small fire in that fab. Details can be found here : http://www.ftpress.com/articles/article.aspx?p=1244469 http://www.ftpress.com/articles/article.aspx?p=1244469
- akamaka 16y ago
  Fantastic article, thank you for sharing this!
- mncolinlee 16y ago
  In light of Nokia's latest struggle with iOS and Android, aren't they both a success story and a cautionary tale for due diligence and proactive management. Nokia had a second fire-- a burning platform. By the logic of the book excerpt that I finally had time to read, they should have read the tea leaves about the iOS and Android universes much quicker than they did. Nokia's burning platform memo would not have been so dire if their response had occurred one year earlier. Nokia was already considerably left behind by the application universe at that point. iOS had momentum then and should have been considered a direct threat even though the Android userbase was only 1/10th of the size it is now. I still find that corporate cultures tend to sideline Android to this day because they underestimate the value of an open platform on commodity hardware with infinite hackability that intrigues developers. The same incredible growth occurred with Linux and Apache on the web as the 888% Android growth in the last year. Android will win partly for the same reason Microsoft beat Apple's superior UI in the 80s and 90s-- Apple is still tied to expensive proprietary hardware and the need to completely control their platform.

asdfj843lkdjs 16y ago

Well due-diligence seems to have been an issue in individual cases. But overall they seem to have missed two fundamental problems. 1. Manufacturing parts and then selling them throughout the life of the aircraft model has a high margin of profit. Assembling an aircraft form parts has the lowest margin of profit. 2. Outsourcing requires more coordination form HQ, not less. It seems like those two were pretty big and important. Especially #1, what kind of an executive does not understand the value chain of the business he's in? This is why I don't think CEO are stupid, but I do think they act economically rationally (perhaps not ethically) by increasing their compensation by pumping up the stock price in the short term. In this case the CEO raised stock prices in the short term by appearing to create cost savings. His compensation goes up, he leaves the company, cost savings turn out to be costs, but the old CEO has already been paid and is gone, this is the new guy's problem.