SONIC CRUISER
Boeing, the world leader in aerospace industry and also the largest combined manufacturer
for commercial and military aircraft is currently developing a new midsize (200-250
passengers) jet called “œSonic Cruiser. The company which has the longest tradition of
leadership and innovation in aerospace (Boeing, 2005) is attempting to build an airplane
which radically change the way airline and passenger travel by air than it should be.
(Schilling, 2005). The Boeing Sonic Cruiser or so called the 7E7 (attributed as efficient,
economical, environmental friendly or even enabled) as described by Corliss (2003)
reduces fuel travel time from 15 to 20 percent, speed between 0.95 to 0.98 near to the
speed of sound and fly 10,000 feet higher than typical commercial airplane. The applied
research of Boeing Sonic Cruiser is building an airplane for the demand of airlines and
passengers that will save cost and reduce travel time, and at the same time reduce
pollutions. It reduces the time-consuming transit and costly stops at major hub called
point-to-point service. (Boeing, 2005).
The timing of entry of the innovation is a main concern for Sonic Cruiser to launch and
being sellable in the market. Research and Development (R&D) of this radical innovation
brought Boeing high expenses to develop which it also incur the complement goods that
are still unavailable for Sonic Cruiser. Complementary goods for that technology are
necessary to operate the Sonic Cruiser. The failure producing this new innovation could
possibly reach up to 95 percent according to statistic, said Schilling (2005) because of the
high expenses and risks. These complements consist of different types, the consistency to
train pilots and engineers to ensure safety and airplane parts need to be kept in the
inventory. Although the complement goods are available, it has not been fully developed to
its purpose as seen in Figure 1, the S-curves in technological improvement.
Strategic Management of Technological Innovation. Schilling, 2005.
Briefly, the complement goods are still immature during the early stage. It may pose a
barrier for this innovation to be adopted for the early movers. While supplies and
distribution channels are still limited or unable to produce the Sonic Cruiser components.
The firm can suggest putting it off by investing in development of its own component
production plant. Steinke (2001) further explained that it entails a lot of pioneering work
followed by high expenses of development and hence constitute a risky project. First
mover will initially face market uncertainties of airline companies requirement. For
example, the airline company fears that its operating cost could cost more than operating
its present Boeing 767 that it would replace. Passengers would be slow to accept the new
ideas of air traveling and this fearsome radical innovation can be described in how the
diffusion of innovation is adopted in Rogers five adopter categories. The innovators will
throw their own self to the new innovation initially and later lead by early adopters and
followed by early majority, late majority and finally the laggards. (Surry, n.d.). Presently,
Boeing is rivaling with a tough commercial plane competitor, the Airbus that able to learn
the failure and weaknesses of Boeing for being the first mover in aerospace industry. The
weaknesses learned from Boeing could help advance Airbus technologies as it poses a
main threat to Boeing commercial jet market.
Despite of that, Boeing reputation is important to influence its best in timing of entry. In
term of leadership and quality in innovation, Boeing stands stronger to attract its customers
and suppliers. Thus, it gives an idea that Boeing has an additional factor that will attract its
adopters. Boeing further explains that the company is premiered in manufacturing
commercial jetliners for more than 40 years. It combined with the lineage of Douglas
airplane on a heritage of 70 years of leadership in commercial aviation. (Boeing, 2005).
To make a firmer decision whether to continue developing and launching the Sonic
Cruiser, Boeing have to assess its current position in the industry. The tools generally used
to analyze the external environment are the Porter five force model and stakeholder
analysis. Sometimes a sixth competitive force occurred in the force, which is the
government (12Mange.com, 2005). Boeing has a strong rivalry between Airbus which is
launching a larger capacity airplane in year 2007 to compete with Sonic Cruiser (size
versus speed). The existing aerospace industries are termed as oligopolistic industries
because they are few large competitors to compete. The two major firms strongly
anticipated that commercial jets demand will grow as much as $1 trillion by 2019. (Labi,
2001). When the demand increases, competitive pressure will become lesser. The two
industries players are both equally in strength and size but Boeing is competing in speed
while Airbus is competing with its size. Thus who will win to compete in their core
competency is hard to predict.
Figure 2: Michael Porter Five Force Model (12Manage.com, 2005)
The threat of potential new entrants does not likely to affect the development of Sonic
Cruiser. Boeing airplanes represent three quarters of the world fleet with 12,000 jetliners in
service. (Boeing, 2004). To effectively compete with a large, well-established and efficient
firm, new or current smaller firm requires a large scale of capital to manufacture, advertise
and distribute in order to be competitive. However, this can be done through partnership by
joining small firms together. Boeing strong selling points were quality, reliability, customer
service and value for money. (Condom, 2005). It seems not easy for new entrants to grow
and enter into the industries. The height of entry barriers is also the main obstacle for new
