One of the Greatest Business Decisions: Boeing bets big on the 707 (1952)

Posted on: August 5th, 2017 by bobmorris

The material that follows is adapted from The Greatest Business Decisions of All Time: Apple, Ford, IBM, Zappos, and others made radical choices that changed the course of business, by Verne Harnish, CEO of Gazelles, and the editors of Fortune, with a foreword by Jim Collins

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Lesson learned: When CEO Bill Allen decided to launch the 707, he had no orders in hand. He simply believed customers would buy. It takes courage to wager a company’s future on a vision.

Here’s a shocker to even the casual student of aviation history under the age of, say, 75. At the dawn of the Jet Age, Boeing, one of today’s dominant makers of commercial aircraft, was a nonentity in the business of building planes for airlines. That’s right. In the years following World War II, when U.S. industry was retooling for civilian production, Boeing was primarily a maker of military aircraft. Its famous B-52 bomber and a companion tanker had proved that the Seattle company had the right stuff when it came to jet aircraft technology. But for the airlines, jets weren’t commercially viable: Converting to jet technology would require a massive investment that could pockmark their bottom line.

The safe choice for Boeing would have been to stick to its defense-industry knitting. That, however, wasn’t the plan of Boeing’s postwar president, William McPherson Allen, who made a prototypical great decision, a bet-the-company move on civil aviation in the form of a single product. He was convinced that consumers would cotton to the speed, convenience, and comfort of jet travel and that the real growth would be in the civilian sector of the booming global economy. Allen was so sure of his conviction that he was willing to risk Boeing’s financial future on it.

In 1952 he persuaded the Boeing board of directors to invest $16 million in what would become the Boeing 707, the first U.S. transatlantic commercial jetliner and the plane that would alter the course of Boeing’s history. The 707 grew to become as much a cultural icon as a transportation vehicle. The swimwear company Jantzen called its swimsuit line the 707. Every U.S. President from Dwight D. Eisenhower to George H.W. Bush flew on an Air Force One that was a modified version of a 707.

All told, Boeing invested $185 million in the 707. According to a 1957 article in Fortune, that was $36 million more than Boeing’s net worth the previous year. It was just one plane, but it remade a company, an industry, and the very culture of its time.

Contributor: Adam Lashinsky

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