The military muscle of Boeing's Integrated Defence Systems is driving the company's revenue projections. And its network-centric concepts could find wider applications.
When, in 1996, Boeing's then new chief executive Phil Condit outlined a strategy to diversify and balance the business to offset the notoriously cyclical nature of commercial aviation, few envisioned the depth of the downturn to come. His thinking has proved sound because, despite the current state of the civil aircraft sector, Boeing's revenue has more doubled since 1993 and topped $54.1 billion last year. This growth has been driven by the recently merged Integrated Defense Systems (IDS), which accounted for just under half the company's total revenue in 2002.
"I think Phil Condit's strategy has been right on the money," says Jim Albaugh, president and chief executive officer of Boeing IDS. "This year, IDS will do $26-27 billion and, for the first time, the defence business is going to be a little bigger than the commercial aircraft business. This is both good and bad. It's bad because the commercial aircraft market has softened, but good because we've been able to build up the defence side of the business."
IDS's expansion has come mainly from the growth of three distinct businesses in missile defence, integrated battlespace and intelligence systems, each currently generating about $3 billion in annual sales. With the company projecting further double-digit growth, it is looking to develop new revenue streams in the emerging homeland security and unmanned systems markets. As diversified as these activities are, they all draw heavily on a common network-centric approach to transforming capability.
"I'm a big believer in the network," says Albaugh. "It is being able to share data and capabilities between people and platforms within a theatre to provide effectiveness well beyond what any system or person can do as an individual. Part of this is not just selling platforms that can talk to each other, but reaching back to the national ISR [intelligence, surveillance and reconnaissance] capability to get information. This is what excites us and these are the things we're trying to position our business for."
The biggest repositioning exercise came last July with the "internal" merger of St Louis, Missouri-based Military Aircraft & Missile Systems and Seal Beach, California-headquartered Space & Communications into a single IDS entity with 78,000 employees. This brought a largely platform-centric organisation with a deep-rooted McDonnell Douglas heritage on one side together with a more network-focused business built on the former Hughes Space & Communications and North American Rockwell companies.
While observers point to the loss of the Joint Strike Fighter competition as the main driver behind the merger, Albaugh insists there was a much broader issue. "We had a situation where the Space & Communications people were providing the network and information, but then had to throw the solution over the wall to Aircraft & Missiles," he says. "Where our customer wanted us to go was towards an integrated solution, gathering data, correlating data, turning data into information and knowledge with which to take action."
Talking tankers
The concept is to take existing Boeing platforms such as the F/A-18E/F Super Hornet fighter and C-17 transport and enhance their capabilities by making them part of the overall network. One of the first manifestations of this approach will be the 767-based 'smart tanker' which, as well as dispensing fuel, will act as a communications relay node within the US Air Force's new command and control constellation.
Boeing is not stopping at simply enhancing existing platforms, but is now delving into areas traditionally outside the aerospace realm. Having a network solution to hand enabled Boeing to secure the pivotal position of lead systems integrator (LSI) for the $14.9 billion Future Combat Systems (FCS) programme, centrepiece of the US Army's transformation into a lightweight, transportable and networked force. "If your strategy is to perpetuate what you've been doing on programmes in the past, you're eventually going to go out of business, because someone is going to come up with a better solution," says Albaugh. "We want to be market requirement-driven and to think about capabilities, not just platforms."
The Ground-based Midcourse Defence (GMD) programme first gave Boeing an insight into the potential power of the network for solving complex problems. Boeing is not only the prime contractor for GMD, but has a leading role in defining the US Missile Defense Agency's (MDA) overall architecture and is developing the 747-based Airborne Laser, as well as supplying key components for other non-Boeing missile defence systems.
Missile defence also provided IDS with the model of how to reorganise and group its other activities into similar customer-facing business units. "Boeing is in a unique position in the industry," says Jim Evatt, senior vice-president Missile Defense Systems (MDS). "It is the only company with all missile defence activity under a single division. We are literally a one-stop shop."
Three years ago, MDS had one $600 million contract as the LSI for the National Missile Defence programme, and is now in the $3 billion annual revenue range and looking to grow substantially. Boeing has teamed with Lockheed Martin for the Kinetic Energy Interceptor Terrestrial competition - to be decided late this year - which will evaluate the ability to perform boost-phase interception, initially as a ground-based system and later sea-based. Boeing is also planning to bid as prime contractor for the Space-Based Interceptor demonstration.
MDS is one of nine IDS business units, which also include Aerospace Support, Air Force Systems, Army Systems, Homeland Security & Services, Launch & Satellite Systems, NASA Systems, Naval Systems and Space & Intelligence Systems. These form part of what Albaugh describes as a "three-dimensional organisation" that is directed by a Strategic Business Council and supplied by Enterprise Capability Centres.
The idea is to provide the customer, whether one of the services, intelligence agencies or NASA, with a single point of entry to Boeing. Air Force Systems (AFS) senior vice-president George Muellner, a former USAF head of requirements, recalls: "I had been Boeing's biggest customer, but I heard so many voices that I never knew where Boeing stood on issues. Now the air force knows immediately who they should email with ideas or complaints."
Long Beach-based AFS is the single largest IDS business unit, generating sales of $7.8 billion last year, and is split into five divisions - airlift & tankers; fighters, bombers & weapons; unmanned systems; battle management; and strategic systems & space systems. Having just secured the $16 billion KC-767 tanker lease deal with the USAF, Muellner has his eye on other "must-win" programmes, including the planned joint US Air Force/Navy unmanned combat air vehicle, the Transformational Communications Architecture, and the battle management, command and control element of the USAF's 767-based Multi-sensor Command & Control Aircraft (MC2A).
The initial ground-surveillance version of MC2A will not be fielded before 2013, and the air force is pushing for an interim transformational capability. Boeing is offering a transitional solution within two years with similar networked capability, but using existing platforms. "In reality, transformation is the horizontal integration of sensors, shooters and decision-makers," says Muellner. "It has nothing to do with the platform and more to do with the communications networks. We could give the customer a 'Spiral ¯' capability and put him on the same path as MC2A when it is finally realised."
One key stipulation Albaugh lays down for his business unit leaders is that they build close working relationships with their customers. In the case of joint programmes or joint commands, such as the US Special Operations Command (SOCOM), the organisation facing the customer is likely to rotate with the change in military leadership. Aerospace Support currently handles SOCOM because its vice-president and general manager David Spong has the closest relationship with the US Air Force commander. If, as expected, a US Army general takes over, responsibility within Boeing will probably pass to Army Systems senior vice-president Roger Krone, who says: "It's an access relationship, where credibility and trust are critical and where the customer is able to call up and say 'I need these Chinooks, which have come back from a place I can't talk about, repaired'."
In the army now
Army Systems is today a relatively small business, bringing in $1.4 billion, but this will expand rapidly as FCS development picks up, with about one-third of the work expected to come to Boeing. The Boeing Sikorsky RAH-66 Comanche combat helicopter is already in development, while downstream the company is eyeing the Joint Common Missile replacement for Hellfire and the networked Future Soldier System, which "will not only tell who and where I am, but how I am doing", says Krone.
Another guiding philosophy instilled by Albaugh into the business units is to tap into the best that industry can offer and not confine themselves to Boeing. Mike Mott, vice-president and general manager of the $1.3 billion NASA Systems unit, says: "Our fundamental strategy is to offer NASA the best answer and best solution possible, whether we end up having the contract with 100% of the work or just 15%. Our role as systems integrator doesn't mean Boeing has to do all the work."
Comparatively little is published about IDS's fourth-largest business unit, Space & Intelligence Systems, other than it is a rapidly growing revenue stream, currently $3.3 billion. Its customers are primarily the Central Intelligence Agency, Federal Bureau of Investigation, National Reconnaissance Office (NRO) and National Security Agency as well as the National Imagery and Mapping Agency. Known programmes include the NRO's Future Imagery Architecture (FIA). It is also bidding on the Transformational Communications Architecture and Space-Based Radar. Recent acquisitions have bolstered capabilities in the areas of imagery exploitation and geospatial information.
Within IDS, the Strategic Business Council (SBC) develops integrated strategies, identifies new business opportunities, and funnels resources to different units. Sub-councils oversee the seven key markets in which Boeing has decided - based on internal capabilities, perceived growth areas and customer feedback - it must excel: homeland security, integrated battlespace, launch and orbital systems, missile defence, mobility, precision engagement and sustainment.
Roger Roberts, in addition to being senior vice-president Space & Intelligence Systems, chairs the integrated battlespace sub-council. "We define the strategy for the company and define the programmes that are critical to go after," he says. "We go through the programme win strategy, we go though the review cycle in order to provide funds, and then put a master strategy together to say where we're going. After winning a programme, it is allocated to individual business units to run - and the profit and loss associated with it."
The SBC is also tasked with developing synergies, leveraging capabilities and promulgating best practices horizontally across the nine business units. Aerospace Support, for example, is working closely with AFS and local partner Marshall Aerospace as the UK Ministry of Defence considers a through-life support concept for its Boeing E-3D AWACS fleet, as well as pursuing its Future Strategic Tanker Aircraft requirement.
Aerospace Support, at $4 billion, ranks second in sales after AFS, and revenues are expected to double in five years. The organisation predates the Boeing merger, having been formed by McDonnell Douglas in the mid-1990s. "It was born out of a classical necessity at the time," says Spong, "when we were not doing a wonderful job of supporting the customer. A combination of a military mindset and platform-centric viewpoint resulted in aircraft being flown off and operators left on their own."
The business unit has five main lines of work, including spares and data, training systems and services, and maintenance and modifications. The Wichita, Kansas-based modernisation and upgrades unit handles the USAF Lockheed C-130E/H avionics modernisation programme. The contractor logistics support and services unit is chasing through-life support opportunities on the CH-47 in the Netherlands and UK, and recently joined Fokker Services to open a European centre as part of a global support network offering total life-cycle maintenance.
The C-17 remains Boeing's poster programme for through-life support, and the company claims it has saved the USAF $800 million in depot investment, with the potential for a further 10% reduction in total ownership cost. The next step will be autonomic logistics. "If you know where everything is and what it is doing, then you ought to know what it needs when it comes back," says Spong, who also chairs the sustainment sub-council. "That is the path we want to head down and where everyone has to go."
Driving commonality
The SBC's other major goal is to drive commonality across the different service and intelligence-agency programmes to ensure interoperability. Naval Systems is leveraging Army Systems' lead on FCS and the $2 billion Joint Tactical Radio System (JTRS) Cluster 1 programmes to help define the US Navy's FORCEnet and bid on JTRS Cluster 3. "The advantage is that no other contractor has organised themselves today to be able to take this integrated multiple customer approach," says John Lockard, senior vice-president of the $3.7 billion unit.
FORCEnet is intended to provide the "glue" for the three pillars of the navy's Sea Power 21 concept, bringing ships, sensors and weapon systems into a single network. "The navy is looking to buy a capability and that's exactly what you see with FORCEnet," says Lockard. "They need an interoperable force structure that lets them fight better tomorrow than today. We want to use our knowledge to put a foundation under that word."
Boeing has competed for or won 21 programmes using a common information infrastructure and architecture. Apart from FCS, FIA, GMD and JTRS, recent successes include the prime contract for the USAF's Future Beyond Line of Sight Terminals programme to produce a common satellite-communications system. The company has won work on the USN's next-generation DD(X) destroyer and will be weapon system integrator on Increment 1 of the USAF's E-10A MC2A.
Programmes that originate with or are overseen as concept demonstrations by the Integrated Defence Advanced Systems (IDeAS) part of the Phantom Works normally move to the business units once they enter development. FCS shifted into system development and demonstration last month and, within Boeing, responsibility passed from IDeAS to Army Systems.
Internal suppliers
Feeding the individual business units with knowledge and hardware are the Enterprise Capability Centres (ECCs), comprising: airborne intelligence, surveillance and reconnaissance; battle management, command and control; lasers and electro-optics; rotorcraft; satellites; tactical aircraft; unmanned systems and weapons. Each is headed by one of the business unit general managers, based on capabilities and the preponderance of work, but their products cross multiple customers and in practice the ECCs act as internal suppliers. Muellner oversees the weapons ECC in St Charles, Missouri, which supplies Lockard with the navy's SLAM-ER, while Krone's rotorcraft ECC in Philadelphia, Pennsylvania, helps build the V-22 tiltrotor for both Air Force and Naval Systems.
Boeing's $2 billion Launch & Satellite Systems business unit includes not only expendable launchers, the Sea Launch joint venture and Rocketdyne Propulsion & Power, but also the former Hughes satellite factory at El Segundo, California.
"I am responsible via the ECC to provide satellites to the rest of Boeing, as well as supplying launch vehicles," says vice-president and general manager Bill Collopy. "Because of the depressed commercial satellite market, the air force is the main customer for the Delta IV rocket. We manufacture the rocket and satellites, but are represented through Air Force Systems."
In June 2002, Boeing and Siemens won a $1.37 billion Transportation Security Adminis-tration contract to install and maintain 6,000 explosives detection systems at 438 US airports and train 25,000 people to use them.
"The next step is to leverage network-centric operations, and bring our large-scale systems integration expertise to bear," says Rick Stephens, vice-president and general manager Homeland Security Services. "The key approach is to take concepts used today to support the transformation of the Department of Defense and translate them to the Department of Homeland Security [DHS]."
Boeing sees a much broader application for its networked solutions than just integrating the battlespace, of which linking together the 22 former agencies making up the new DHS is just one example. The company is also eyeing opportunities in the areas of materiel tracking, energy management and other Boeing developments such as the planned next-generation 7E7 commercial aircraft. "We will remain an aerospace company, but we're going to redefine what aerospace means," says Albaugh. "It will be a lot more than just building aircraft - it will be how you make aircraft more capable through the sharing of information and knowledge."
Source: Flight International
