When Boeing Global Services (BGS) launched last year on July 1, Boeing CEO Dennis Muilenberg set a $50 billion annual revenue goal for the group within a decade. One year into the operation, BGS President and CEO Stan Deal says the group should hit that mark in the next 5-10 years.
He has reason to be optimistic. If customer orders are a vote of confidence that a business is doing something right, in 2017 BGS logged $16.5 billion in orders, which “outpaced the year before, and I think we’re on an equally big trajectory this year,” says Deal. “I like the conversion of the investments we’re making to the orders, and we’re going to continue to put a sharp focus on that.”
Investment involves taking steps to boost organic growth as well as acquisitions, including the announced plan to purchase parts distributor KLX by the end of the year—and the intent to establish a joint venture with Embraer, comprising its commercial aircraft and services business in 2019.
Bringing Boeing’s commercial and defense service portfolios together also has facilitated a tight working relationship and the pursuit of common objectives for Kevin McAllister (Boeing Commercial Airplanes president and CEO), Leanne Caret (Defense, Space and Security president and CEO) and BGS. The services leader credits this collaboration as being an important enabler of BGS’ success.
By focusing on the common capabilities that it takes to market in a unified way, Deal says: “I believe we’re on the verge of showing the value to the defense world of the analytics portfolio and unlocking value in that customer set.”
When asked about his goals for BGS in year two, Deal points out that striving toward $50 billion in revenue is a pretty big objective already, but as part of that “there will be big investments, the vertical integration, select merger and acquisition activity, and a continued focus to ensure that we have a strong linkage as we productize.”
One piece of “productize” is Boeing’s new midsize airplane (see page MRO 17), which would replace the Boeing 757. As McAllister actively surveys the market to ascertain the new aircraft’s configuration, Deal says, “The discussions at the table with customers are about life cycle as much as they are about what the airplane can do in terms of fundamentals like fuel burn and payload range. We’re putting a great focus on the overall life cycle.”
He says this life-cycle approach is very different from how the company developed the 787.
Part of that different approach includes Boeing’s vertical integration strategy, driven by customers’ pain points—and areas that create value across the life cycle for customers and Boeing. So far, the vertical integration has included avionics, seats and, more recently, auxiliary power units based on a June 3 announcement with Snecma to jointly design, build and service APUs. “There is more on our agenda,” says Deal, without elaborating, although he emphasizes that “we’re not going to infinitely vertically integrate.”
Addressing why Boeing wanted to get into the APU business, he said APUs were a “major pain point for our customers.” Boeing launched the joint venture with Safran, feeling that partnership was the right approach instead of going it alone, as it is doing in avionics, to “produce APUs that are differentiated around their performance and have a superior life-cycle support network” to provide service value.
Would Boeing consider diving into the engine vertical, given the various engine program problems that are delaying delivery or grounding aircraft? Deal did not comment, but don’t read too much into that. He says: “We’d love to see the engine industry as a whole become more predictable and reliable. We hate to see the pain in the marketplace.”
In terms of future investment, Deal says Boeing has a fast-paced investment tempo around things that could boost organic growth across its defense, space and commercial platforms—or services. Organic growth, including unlocking things from the manufacturing environment that can be used in the services area, is a big part of what Boeing leaders have said will propel BGS to $50 billion in annual revenue. “There is an equal, or greater, focus internally on investments we can make to continue to extend new service offerings or refresh the offerings that we have,” says Deal. That includes focus on digital tools under Boeing AnalytX such as self-service analytics tools.
The views expressed are not necessarily shared by Aviation Week.