Brian Kenny: In September 1893, Frank Duryea, a bicycle repairman from Chicopee, Massachusetts, made history by taking the first test drive of a gasoline-powered vehicle in the United States. The Motor Wagon, as named by Frank and his brother Charles, drove all of 600 feet before sputtering to a stop. But that short drive set the wheels in motion for an industry that today, represents 3.5 percent of the US GPD, which translates to roughly 264 million registered vehicles. Of course, this didn't happen overnight, in fact it took decades, from the invention of the gas-powered vehicle, to the emergence of a mass market for automobiles. Years of persistence and patience, invention and innovation. But can that be replicated? Will that recipe work for the next generation of personal travel? Today we'll hear from Professor Gary Pisano about his case entitled, Flying into the Future: HondaJet. I'm your host Brian Kenny, and you're listening to Cold Call.
Gary Pisano's teaching and research focus on strategy, innovation, management, and manufacturing. He's also the author of the forthcoming book Creative Construction: The DNA of Sustained Innovation.
Gary that sounds like a perfect title for this case. Thanks for joining me today.
Gary Pisano: Great to be here.
Kenny: I was thinking about “The Jetsons” when I read this case, you know, will we ever have the George Jetson personal flying car? This case doesn't answer the question, but it gets us pointed in that direction. Maybe you can start just by setting the case up for us. Who's the protagonist, and what's on his mind?
Pisano: Sure. The protagonist is a gentleman called Michimasa Fujino and the case starts in December of 2015, when [his group] is delivering their first jet. Honda developed a light jet to hold six to eight passengers. Their concept of it was the “Civic of private jets.” Something small yet roomy, fun to be in. He joined the project in 1985, so the case starts 30 years after he begins the program with delivery of the first jet. Now he’s thinking about all the new challenges after this 30-year odyssey of starting and running this program from nothing. They have a 100-jet backlog. How do I scale the organization?
"Their concept of it was the 'Civic of private jets.' Something small yet roomy, fun to be in."
Kenny: What prompted you to look at HondaJet?
Pisano: I came across it in a story somewhere in the news. It fascinated me because my research over the last 10, 15 years, has been about innovation in large companies, how you scale innovation, how large enterprises take on transformational innovation. And I see this case on Honda, big well-known car company, coming out with a jet, a really innovative jet. My first thought was that with everything we know and have been taught about innovation, this isn't supposed to happen. A company like Honda is not supposed to come up with this sort of radical, transformational innovation. This is supposed to be the domain of startups, a kind of Tesla-like story. How did that happen and what did they do? And it fit into the broader themes I was beginning to research for my book Creative Construction. I initially approached [Honda] about five or six years ago to do the case, and they politely declined. And then two or three years later, I approached them again, and they said, "We're not ready yet." And we persisted. Finally, once they got the jet approved and it was on the market, I think they felt comfortable talking about the project. They were incredibly open and fantastic to work with.
Kenny: I guess this is a thing, the notion of personal jets. What does that industry opportunity look like?
Pisano: Well, it could be quite large. Historically these will be the smallest private jets or corporate jets, generally pretty cramped—about six people… The market is like $370 million, a tiny, tiny market, because realistically, $4.5 million doesn't buy you much when it comes to a jet. Most corporate jets out there are $10 million and above, $30, $40, $50, $60 million, you get these large Gulfstreams and others. Honda's view was that there's potential at the low end of the market to develop something that would really be quite attractive to use, and more comfortable. And that's where they had this notion of the Civic.
If you think about what Honda did in the car market in the late '60s, early '70s, the market for sub-compact cars in America was quite small, because they were noisy, cramped, and not very comfortable, and not very fun. The Civic, while still a sub-compact car, was a little roomier, kind of cooler, and more fun to drive. It transformed the sub-compact market. And so they said, "Could we do the same thing in the jet market? Could we create the Civic of light jets so it would be roomier, more comfortable, and a more interesting product?" That was their bet, to get a jet that's about $4.5 million, hold six passengers but comfortably, be quieter, and that could extend the market. If we actually had a much better product, does that market get bigger? Are there small companies that will start to use private jets once they see the economics of it? Because for many small businesses, if you're not near a major hub, traveling is a pain. If you're in Greensboro, North Carolina, where they are located, you've got to make two stops sometimes to get to a place, and that is a huge drain on productivity. So their argument is, can we create a product that is now effective for these smaller businesses to use that might never have thought about buying a private jet and say, "Look, the per hour costs are the same as flying first class." Or, for wealthy individuals, who never saw themselves as wealthy enough to have their own jet to say, "You could have your own jet. Or, you could share this jet at a much lower cost than you thought," and maybe potentially expand it.
Kenny: This has been a long journey for the protagonist here. How did this journey unfold for him?
Pisano: It starts in 1985. He's a newly minted PhD in aeronautical engineering, who joined Honda. It's true that Honda and other Japanese auto companies would hire people with aeronautical engineering backgrounds, partly because the auto industry in Japan has always been much bigger, healthier, and stronger than the aircraft industry. Graduates wanted to go to work for companies like Honda because they wanted to work on cars, and some of them wanted to work on Formula One (race cars)—Honda actually had a Formula One team—so he was excited about working for Honda and doing car development. Really fascinating guy, Michimasa Fujino, because not only is he a PhD in aeronautical engineering, he was on the Japanese national ping pong team.
Kenny: Really?
Pisano: He was also a top baseball player in Japan. But he said in Japan unlike America, you can't go to university and be an athlete, there's no concept of student athletes, so you choose, and he chose school. He joins Honda right around 1984, 1985, and he starts working on cars, which he loves. Then he gets tapped for this new project that Honda launched, a secret research project to work on an aircraft. And it was really just an exploratory research program, and truth be told, he wasn't really that excited about doing it.
HondaJet aircraft fly in formation. Photo courtesy HondaJetKenny: It sounds risky. What does that mean if they decide not to move forward?
Pisano: Exactly, and it's a small team. And also, his view was, this isn't going to go anywhere, I want to see things get commercialized… But he's convinced to do it, I'm not sure how much bargaining power he has. He joins the project, and it starts as four Japanese engineers going off to Mississippi to learn aircraft design. They take flying lessons, and the project goes from there, and it grows.
Kenny: This team didn't even necessarily have experience in aeronautical engineering?
Pisano: They were newly minted graduates of PhDs in aeronautical engineering, but there's a lot of practical things that you need to learn and Honda as a corporation had no experience in it at all. That was the other thing that fascinated me about the case in terms of my research, which was how does a company build a capability from the ground up? Initially Honda thought, oh we can take a lot of the things from cars and apply them to aircraft. They learned very early on that airplanes are not cars with wings and you have to really build the capability from the ground up. So that's really what the story is about, how they built this capability for designing and manufacturing aircraft from the ground up.
Kenny: Can you talk a little bit about how difficult is it to be an entrepreneur in an established culture, where you're trying to push an idea forward, that maybe everybody else within that firm isn't necessarily on board with.
Pisano: Absolutely, it was very difficult at times. Today (Honda does) over $100 billion in revenue for cars. Honda's a car company. And yes, it's got motorcycles, garden equipment, generators and lawnmowers, but 99 percent of the revenue is cars. And so there you are, in this little team, isolated, and the car industry's cyclical—when things go down in the car industry, money gets tight. You can imagine sitting around a table and the head of Honda car division is wanting to ask why their budget is being cut. And they look across the table at the head of the aircraft project and say, “Why are we wasting money on that?"
So a number of times this project wavered in terms of how much support there was. That was one major challenge. Over this long period of time you have changes in senior management; who is supportive and who is not supportive of a project? And actually throughout, Honda kept saying, "Well we don't really want to commercialize this, this is just something to work on and we're exploring." There wasn't, until 2006, a commitment to build an aircraft and market it.
Kenny: What was the turning point?
"They look across the table at the head of the aircraft project and say, 'Why are we wasting money on that?'"
Pisano: The key turning point was Fujino himself. He starts out as one of this team of four, but relatively early on he officially becomes the project leader. He has these 20 engineers, and they're working in Greensboro, North Carolina, in a bunker. They spoke, from my understanding, very little English. They were working seven days a week.
Kenny: Was it all secret at this point, too?
Pisano: Maybe a little less secret, because it was a little bit bigger. Fujino realized they couldn't just create a jet that was like everyone else's, because they would just get clobbered. You can't compete with established players with the same concept, and that was this idea of the Civic. How do we create a transformational product? They had actually a very specific technical engineering challenge: there are only two places (at that time) where you could put aircraft engines. One is under the wings. But you need a big plane to do that because there has to be space. Or, you put them on the tail, or on the tail of the fuselage. On most private jets that's where the engines are. The problem is if you put them on the tail of the plane, you have to put in a lot of super-structure into the fuselage to support the weight of the engines, and that takes up space, so you take a small interior and you make it smaller. The second problem is the engines wind up right next to your head if you're a passenger, so it's really loud. Fujino describes it as like being inside a speaker. That's the reason this market is so small, you're spending $4.5 million dollars on a product which is really cramped. If you sit across from each other you sit with your legs interlocking. And it's loud, you can't have a conversation.
At the time, as he describes, on the first day of aeronautical engineering graduate programs you learn that you cannot put engines over the wings. That is accepted as a fact, because if the engines are over the wings you’ll create interference, you'll push air down, the airplane won't fly, which is a problem. And he challenges that notion.
One night he’s moving so he’s going through some old text books, and he in a text book from the fifties he looks at the fluid dynamics equations that govern the flow of air over the wing. He realizes that there are multiple flows over the wings, it's a convex equation, and his hypothesis is that if you can locate the engine just right over the wing, you can maybe get the two air flows to cancel each other out and then you don't have the interference—but it's just theory.
He builds a mathematical simulation model that shows it could work. He builds a prototype to test. His boss at the time, the official head of the program, calls it the single worst piece of engineering he had seen in his life, so hardly encouraging, right? Fujino takes it to Boeing. They had a deal to test their airplanes in Boeing's wind tunnels. The Boeing engineers looked at the prototype and immediately said, "You are not putting that in our wind tunnel. That thing's going to break apart. This is a $100 billion wind tunnel and you're going to destroy it." He showed them the simulations, he managed to convince them to try it.
Kenny: This is the persistence part.
Pisano: Yes, persistence, right? And it works. After the data comes in, the Boeing engineers change their views. They showed it worked, and they patented it. He published the article describing the design in a journal, was told it would end his career, that it was too ridiculous.
Kenny: Wow.
Pisano: The paper gets widely praised, and so he builds credibility outside of Honda, which helps him build a support inside Honda. But then at this stage, Honda is going to cancel the program because they're not sure they want to commercialize a jet. He's quite depressed but comes up with this idea. There's a famous air show every year in Oshkosh, Wisconsin, where all the new planes come. He convinces Honda senior management to let him take the test plane there and show it, but says explicitly he will not try to commercialize or sell it. "I know we're not going to commercialize this, but the team worked hard on this and it would be great for their morale, and it would show the world what Honda can do… , technically, be good for our reputation. He goes and of course what happens is that lots of people get really excited about the plane. In fact one gets so excited they send a check to the CEO of Honda and says, "I want the first one."
Kenny: Brilliant. That's a judo move.
Pisano: Right. I think all along he realized that I've got to get this plane in front of people, build momentum on the outside. At that point he has a number of discussions with Honda senior management, the CEO, and they agree to do it. He gets the support and in 2006 they form Honda Aircraft Corporation, he becomes the CEO, and then there's another 10 years of development work to get it all tested and certified. That takes us to 2015.
Kenny: Then he has a whole different set of problems, but they're probably the problems that you want to have, which is, how do you scale? How do you now build this team and build this company?
Pisano: Exactly, and that's where it gets into the leadership challenge. I think this case is a lot about the development of an airplane, it's about the development of an organizational capability, it's about innovation in large companies, but it's also about a career journey of Mr. Fujino. He's always run a very flat organization, so when he was running a team of 20, or 40, or even 100, it's like no meetings, everything went right to him, not a lot of hierarchy; that gets really hard to do when you have 1,800 people. So how do you start to build an organization where other people can make decisions about where you can grow? And I think that's been part of his transformation.
And then there's a commercial challenge which is, they are now number one in the very light jet market. They're more than 50 percent market share. They're doing well in that market. But if you do the math, it's still a very small drop in the bucket. How do you really grow this market? That's where you have to think about commercialization strategies, and new business models to get us to something like, as you said, The Jetsons, where you get to the personalized jet, or a much higher volume of mass market for these things.
Kenny: Right. And as the case winds down he's thinking about how he is going to make this more of a mass market product?
Pisano: Exactly. So one of the concepts that people have talked about for years is the idea of air taxis. Why aren't airplanes like taxis where if you had to fly between say Boston and New York, you could have some kind of service that would take you very quickly and more conveniently? A better example would be between Boston and some place in rural Vermont, where it's not easy to get to by aircraft but it's still pretty far. Or, Boston to upstate New York. If you try to fly it commercially, it's going to be a pain because you have to stop and change to an uncomfortable regional jet, it'll take you all day. This concept hasn't really taken off because there hasn't been the right plane for it. The economics have to be right, I mean when a jet is $10 million or $20 million for a jet and it's not used often, the economics are too poor; a taxi has to be used a lot. So is this a market where you can create an air taxi service? They're thinking about how to stimulate that, trying to create a demand segment for it because it doesn't yet exist.
Kenny: He's still in invention mode.
Pisano: He's still now having to invent. And this is one of the big themes of the case, and it's a theme of the book as well, that we have technological innovation, but it has to be coupled with business model innovation. And I think one of the things they didn't think about was, as they were developing the jet, they might have also have wanted to think about the business model innovation that was going to have to come for this plane to realize its full potential. That's an important lesson in all innovation. It's not just technology, it's sometimes the two together. It's technological innovation and business model innovation.
Kenny: As you discussed this in class what were the students' thoughts on this mode of travel? I bet they were kind of all in, right?
Pisano: I taught it last week to an executive education program for a company. They were senior executives but they didn't get to use the corporate jet. They all thought, gosh, this would be great for us.
Kenny: Of course.
Pisano: And some of the other ideas are interesting, like even for airlines now. The per hour costs of operating the plane are about the equivalent of domestic first class, so it's not outrageous. When you fly first class on an airline, he used an example from say, Tokyo to Chicago, but then going on to Greensboro. He said, "So you have this beautiful comfortable flight from Tokyo to Chicago, but then from Chicago to Greensboro, you're in a cramped regional jet, and that's not much of a first class experience…” He says, "Why shouldn't American Airlines or United Airlines have a fleet of these?... You're a first class passenger, you land in Chicago, we'll put you on one of these private planes and fly you to Greensboro."
Kenny: Perfect.
Pisano: So those are some of the ideas they're thinking about.
Kenny: I have to ask, did you fly on one of these jets?
Pisano: No, I flew a simulator. I'd love to fly in one, but they had a simulator there. Because you have to train pilots to fly these, and they're single-pilot planes, which is also part of the value of the economics. I had never been in a flight simulator before. It is so realistic. You get in this thing and you feel movement, you feel gravity, and they said, "We can make you sick in it if we wanted to." At one point the pilot turns over the stick to me. I tell you it's so realistic my hands are sweating flying it and it's like, okay, it's just a simulator, nothing really bad is going to happen, right? But it was so realistic. These things are phenomenal.
Kenny: In George Jetson's car, there were no nerves.
Pisano: Right, he just gets in and flies. I know. I know. We're changing the way we do transportation, and car companies have to think about, changes we’re seeing in the car industry. We've got autonomous vehicles, ride sharing, and people may be getting away from car ownership. If you're a car company, you need to extend what you do, and think about your business in terms of transportation. Is this going to be a mode of transportation that more of us will use?
Kenny: It's exciting.
Pisano: It's very exciting.
Kenny: Gary, thanks for joining us.
Pisano: Great, thank you.
Kenny: If you enjoyed this episode of Cold Call, you should check out our other podcasts. After Hours features Harvard Business School faculty dishing on the latest happenings of the crossroads of business and culture, and Managing the Future of Work features experts discussing how to survive and thrive in the age of artificial intelligence and learning machines. Subscribe to these and others on Apple Podcasts or wherever you listen. I'm your host Brian Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School.
Transcript edited for length and clarity. The interview was recorded October 29, 2018.
Brian Kenny: In September 1893, Frank Duryea, a bicycle repairman from Chicopee, Massachusetts, made history by taking the first test drive of a gasoline-powered vehicle in the United States. The Motor Wagon, as named by Frank and his brother Charles, drove all of 600 feet before sputtering to a stop. But that short drive set the wheels in motion for an industry that today, represents 3.5 percent of the US GPD, which translates to roughly 264 million registered vehicles. Of course, this didn't happen overnight, in fact it took decades, from the invention of the gas-powered vehicle, to the emergence of a mass market for automobiles. Years of persistence and patience, invention and innovation. But can that be replicated? Will that recipe work for the next generation of personal travel? Today we'll hear from Professor Gary Pisano about his case entitled, Flying into the Future: HondaJet. I'm your host Brian Kenny, and you're listening to Cold Call.
Gary Pisano's teaching and research focus on strategy, innovation, management, and manufacturing. He's also the author of the forthcoming book Creative Construction: The DNA of Sustained Innovation.
Gary that sounds like a perfect title for this case. Thanks for joining me today.
Gary Pisano: Great to be here.
Kenny: I was thinking about “The Jetsons” when I read this case, you know, will we ever have the George Jetson personal flying car? This case doesn't answer the question, but it gets us pointed in that direction. Maybe you can start just by setting the case up for us. Who's the protagonist, and what's on his mind?
Pisano: Sure. The protagonist is a gentleman called Michimasa Fujino and the case starts in December of 2015, when [his group] is delivering their first jet. Honda developed a light jet to hold six to eight passengers. Their concept of it was the “Civic of private jets.” Something small yet roomy, fun to be in. He joined the project in 1985, so the case starts 30 years after he begins the program with delivery of the first jet. Now he’s thinking about all the new challenges after this 30-year odyssey of starting and running this program from nothing. They have a 100-jet backlog. How do I scale the organization?
"Their concept of it was the 'Civic of private jets.' Something small yet roomy, fun to be in."
Kenny: What prompted you to look at HondaJet?
Pisano: I came across it in a story somewhere in the news. It fascinated me because my research over the last 10, 15 years, has been about innovation in large companies, how you scale innovation, how large enterprises take on transformational innovation. And I see this case on Honda, big well-known car company, coming out with a jet, a really innovative jet. My first thought was that with everything we know and have been taught about innovation, this isn't supposed to happen. A company like Honda is not supposed to come up with this sort of radical, transformational innovation. This is supposed to be the domain of startups, a kind of Tesla-like story. How did that happen and what did they do? And it fit into the broader themes I was beginning to research for my book Creative Construction. I initially approached [Honda] about five or six years ago to do the case, and they politely declined. And then two or three years later, I approached them again, and they said, "We're not ready yet." And we persisted. Finally, once they got the jet approved and it was on the market, I think they felt comfortable talking about the project. They were incredibly open and fantastic to work with.
Kenny: I guess this is a thing, the notion of personal jets. What does that industry opportunity look like?
Pisano: Well, it could be quite large. Historically these will be the smallest private jets or corporate jets, generally pretty cramped—about six people… The market is like $370 million, a tiny, tiny market, because realistically, $4.5 million doesn't buy you much when it comes to a jet. Most corporate jets out there are $10 million and above, $30, $40, $50, $60 million, you get these large Gulfstreams and others. Honda's view was that there's potential at the low end of the market to develop something that would really be quite attractive to use, and more comfortable. And that's where they had this notion of the Civic.
If you think about what Honda did in the car market in the late '60s, early '70s, the market for sub-compact cars in America was quite small, because they were noisy, cramped, and not very comfortable, and not very fun. The Civic, while still a sub-compact car, was a little roomier, kind of cooler, and more fun to drive. It transformed the sub-compact market. And so they said, "Could we do the same thing in the jet market? Could we create the Civic of light jets so it would be roomier, more comfortable, and a more interesting product?" That was their bet, to get a jet that's about $4.5 million, hold six passengers but comfortably, be quieter, and that could extend the market. If we actually had a much better product, does that market get bigger? Are there small companies that will start to use private jets once they see the economics of it? Because for many small businesses, if you're not near a major hub, traveling is a pain. If you're in Greensboro, North Carolina, where they are located, you've got to make two stops sometimes to get to a place, and that is a huge drain on productivity. So their argument is, can we create a product that is now effective for these smaller businesses to use that might never have thought about buying a private jet and say, "Look, the per hour costs are the same as flying first class." Or, for wealthy individuals, who never saw themselves as wealthy enough to have their own jet to say, "You could have your own jet. Or, you could share this jet at a much lower cost than you thought," and maybe potentially expand it.
Kenny: This has been a long journey for the protagonist here. How did this journey unfold for him?
Pisano: It starts in 1985. He's a newly minted PhD in aeronautical engineering, who joined Honda. It's true that Honda and other Japanese auto companies would hire people with aeronautical engineering backgrounds, partly because the auto industry in Japan has always been much bigger, healthier, and stronger than the aircraft industry. Graduates wanted to go to work for companies like Honda because they wanted to work on cars, and some of them wanted to work on Formula One (race cars)—Honda actually had a Formula One team—so he was excited about working for Honda and doing car development. Really fascinating guy, Michimasa Fujino, because not only is he a PhD in aeronautical engineering, he was on the Japanese national ping pong team.
Kenny: Really?
Pisano: He was also a top baseball player in Japan. But he said in Japan unlike America, you can't go to university and be an athlete, there's no concept of student athletes, so you choose, and he chose school. He joins Honda right around 1984, 1985, and he starts working on cars, which he loves. Then he gets tapped for this new project that Honda launched, a secret research project to work on an aircraft. And it was really just an exploratory research program, and truth be told, he wasn't really that excited about doing it.
HondaJet aircraft fly in formation. Photo courtesy HondaJetKenny: It sounds risky. What does that mean if they decide not to move forward?
Pisano: Exactly, and it's a small team. And also, his view was, this isn't going to go anywhere, I want to see things get commercialized… But he's convinced to do it, I'm not sure how much bargaining power he has. He joins the project, and it starts as four Japanese engineers going off to Mississippi to learn aircraft design. They take flying lessons, and the project goes from there, and it grows.
Kenny: This team didn't even necessarily have experience in aeronautical engineering?
Pisano: They were newly minted graduates of PhDs in aeronautical engineering, but there's a lot of practical things that you need to learn and Honda as a corporation had no experience in it at all. That was the other thing that fascinated me about the case in terms of my research, which was how does a company build a capability from the ground up? Initially Honda thought, oh we can take a lot of the things from cars and apply them to aircraft. They learned very early on that airplanes are not cars with wings and you have to really build the capability from the ground up. So that's really what the story is about, how they built this capability for designing and manufacturing aircraft from the ground up.
Kenny: Can you talk a little bit about how difficult is it to be an entrepreneur in an established culture, where you're trying to push an idea forward, that maybe everybody else within that firm isn't necessarily on board with.
Pisano: Absolutely, it was very difficult at times. Today (Honda does) over $100 billion in revenue for cars. Honda's a car company. And yes, it's got motorcycles, garden equipment, generators and lawnmowers, but 99 percent of the revenue is cars. And so there you are, in this little team, isolated, and the car industry's cyclical—when things go down in the car industry, money gets tight. You can imagine sitting around a table and the head of Honda car division is wanting to ask why their budget is being cut. And they look across the table at the head of the aircraft project and say, “Why are we wasting money on that?"
So a number of times this project wavered in terms of how much support there was. That was one major challenge. Over this long period of time you have changes in senior management; who is supportive and who is not supportive of a project? And actually throughout, Honda kept saying, "Well we don't really want to commercialize this, this is just something to work on and we're exploring." There wasn't, until 2006, a commitment to build an aircraft and market it.
Kenny: What was the turning point?
"They look across the table at the head of the aircraft project and say, 'Why are we wasting money on that?'"
Pisano: The key turning point was Fujino himself. He starts out as one of this team of four, but relatively early on he officially becomes the project leader. He has these 20 engineers, and they're working in Greensboro, North Carolina, in a bunker. They spoke, from my understanding, very little English. They were working seven days a week.
Kenny: Was it all secret at this point, too?
Pisano: Maybe a little less secret, because it was a little bit bigger. Fujino realized they couldn't just create a jet that was like everyone else's, because they would just get clobbered. You can't compete with established players with the same concept, and that was this idea of the Civic. How do we create a transformational product? They had actually a very specific technical engineering challenge: there are only two places (at that time) where you could put aircraft engines. One is under the wings. But you need a big plane to do that because there has to be space. Or, you put them on the tail, or on the tail of the fuselage. On most private jets that's where the engines are. The problem is if you put them on the tail of the plane, you have to put in a lot of super-structure into the fuselage to support the weight of the engines, and that takes up space, so you take a small interior and you make it smaller. The second problem is the engines wind up right next to your head if you're a passenger, so it's really loud. Fujino describes it as like being inside a speaker. That's the reason this market is so small, you're spending $4.5 million dollars on a product which is really cramped. If you sit across from each other you sit with your legs interlocking. And it's loud, you can't have a conversation.
At the time, as he describes, on the first day of aeronautical engineering graduate programs you learn that you cannot put engines over the wings. That is accepted as a fact, because if the engines are over the wings you’ll create interference, you'll push air down, the airplane won't fly, which is a problem. And he challenges that notion.
One night he’s moving so he’s going through some old text books, and he in a text book from the fifties he looks at the fluid dynamics equations that govern the flow of air over the wing. He realizes that there are multiple flows over the wings, it's a convex equation, and his hypothesis is that if you can locate the engine just right over the wing, you can maybe get the two air flows to cancel each other out and then you don't have the interference—but it's just theory.
He builds a mathematical simulation model that shows it could work. He builds a prototype to test. His boss at the time, the official head of the program, calls it the single worst piece of engineering he had seen in his life, so hardly encouraging, right? Fujino takes it to Boeing. They had a deal to test their airplanes in Boeing's wind tunnels. The Boeing engineers looked at the prototype and immediately said, "You are not putting that in our wind tunnel. That thing's going to break apart. This is a $100 billion wind tunnel and you're going to destroy it." He showed them the simulations, he managed to convince them to try it.
Kenny: This is the persistence part.
Pisano: Yes, persistence, right? And it works. After the data comes in, the Boeing engineers change their views. They showed it worked, and they patented it. He published the article describing the design in a journal, was told it would end his career, that it was too ridiculous.
Kenny: Wow.
Pisano: The paper gets widely praised, and so he builds credibility outside of Honda, which helps him build a support inside Honda. But then at this stage, Honda is going to cancel the program because they're not sure they want to commercialize a jet. He's quite depressed but comes up with this idea. There's a famous air show every year in Oshkosh, Wisconsin, where all the new planes come. He convinces Honda senior management to let him take the test plane there and show it, but says explicitly he will not try to commercialize or sell it. "I know we're not going to commercialize this, but the team worked hard on this and it would be great for their morale, and it would show the world what Honda can do… , technically, be good for our reputation. He goes and of course what happens is that lots of people get really excited about the plane. In fact one gets so excited they send a check to the CEO of Honda and says, "I want the first one."
Kenny: Brilliant. That's a judo move.
Pisano: Right. I think all along he realized that I've got to get this plane in front of people, build momentum on the outside. At that point he has a number of discussions with Honda senior management, the CEO, and they agree to do it. He gets the support and in 2006 they form Honda Aircraft Corporation, he becomes the CEO, and then there's another 10 years of development work to get it all tested and certified. That takes us to 2015.
Kenny: Then he has a whole different set of problems, but they're probably the problems that you want to have, which is, how do you scale? How do you now build this team and build this company?
Pisano: Exactly, and that's where it gets into the leadership challenge. I think this case is a lot about the development of an airplane, it's about the development of an organizational capability, it's about innovation in large companies, but it's also about a career journey of Mr. Fujino. He's always run a very flat organization, so when he was running a team of 20, or 40, or even 100, it's like no meetings, everything went right to him, not a lot of hierarchy; that gets really hard to do when you have 1,800 people. So how do you start to build an organization where other people can make decisions about where you can grow? And I think that's been part of his transformation.
And then there's a commercial challenge which is, they are now number one in the very light jet market. They're more than 50 percent market share. They're doing well in that market. But if you do the math, it's still a very small drop in the bucket. How do you really grow this market? That's where you have to think about commercialization strategies, and new business models to get us to something like, as you said, The Jetsons, where you get to the personalized jet, or a much higher volume of mass market for these things.
Kenny: Right. And as the case winds down he's thinking about how he is going to make this more of a mass market product?
Pisano: Exactly. So one of the concepts that people have talked about for years is the idea of air taxis. Why aren't airplanes like taxis where if you had to fly between say Boston and New York, you could have some kind of service that would take you very quickly and more conveniently? A better example would be between Boston and some place in rural Vermont, where it's not easy to get to by aircraft but it's still pretty far. Or, Boston to upstate New York. If you try to fly it commercially, it's going to be a pain because you have to stop and change to an uncomfortable regional jet, it'll take you all day. This concept hasn't really taken off because there hasn't been the right plane for it. The economics have to be right, I mean when a jet is $10 million or $20 million for a jet and it's not used often, the economics are too poor; a taxi has to be used a lot. So is this a market where you can create an air taxi service? They're thinking about how to stimulate that, trying to create a demand segment for it because it doesn't yet exist.
Kenny: He's still in invention mode.
Pisano: He's still now having to invent. And this is one of the big themes of the case, and it's a theme of the book as well, that we have technological innovation, but it has to be coupled with business model innovation. And I think one of the things they didn't think about was, as they were developing the jet, they might have also have wanted to think about the business model innovation that was going to have to come for this plane to realize its full potential. That's an important lesson in all innovation. It's not just technology, it's sometimes the two together. It's technological innovation and business model innovation.
Kenny: As you discussed this in class what were the students' thoughts on this mode of travel? I bet they were kind of all in, right?
Pisano: I taught it last week to an executive education program for a company. They were senior executives but they didn't get to use the corporate jet. They all thought, gosh, this would be great for us.
Kenny: Of course.
Pisano: And some of the other ideas are interesting, like even for airlines now. The per hour costs of operating the plane are about the equivalent of domestic first class, so it's not outrageous. When you fly first class on an airline, he used an example from say, Tokyo to Chicago, but then going on to Greensboro. He said, "So you have this beautiful comfortable flight from Tokyo to Chicago, but then from Chicago to Greensboro, you're in a cramped regional jet, and that's not much of a first class experience…” He says, "Why shouldn't American Airlines or United Airlines have a fleet of these?... You're a first class passenger, you land in Chicago, we'll put you on one of these private planes and fly you to Greensboro."
Kenny: Perfect.
Pisano: So those are some of the ideas they're thinking about.
Kenny: I have to ask, did you fly on one of these jets?
Pisano: No, I flew a simulator. I'd love to fly in one, but they had a simulator there. Because you have to train pilots to fly these, and they're single-pilot planes, which is also part of the value of the economics. I had never been in a flight simulator before. It is so realistic. You get in this thing and you feel movement, you feel gravity, and they said, "We can make you sick in it if we wanted to." At one point the pilot turns over the stick to me. I tell you it's so realistic my hands are sweating flying it and it's like, okay, it's just a simulator, nothing really bad is going to happen, right? But it was so realistic. These things are phenomenal.
Kenny: In George Jetson's car, there were no nerves.
Pisano: Right, he just gets in and flies. I know. I know. We're changing the way we do transportation, and car companies have to think about, changes we’re seeing in the car industry. We've got autonomous vehicles, ride sharing, and people may be getting away from car ownership. If you're a car company, you need to extend what you do, and think about your business in terms of transportation. Is this going to be a mode of transportation that more of us will use?
Kenny: It's exciting.
Pisano: It's very exciting.
Kenny: Gary, thanks for joining us.
Pisano: Great, thank you.
Kenny: If you enjoyed this episode of Cold Call, you should check out our other podcasts. After Hours features Harvard Business School faculty dishing on the latest happenings of the crossroads of business and culture, and Managing the Future of Work features experts discussing how to survive and thrive in the age of artificial intelligence and learning machines. Subscribe to these and others on Apple Podcasts or wherever you listen. I'm your host Brian Kenny, and you've been listening to Cold Call, an official podcast of Harvard Business School.
Transcript edited for length and clarity. The interview was recorded October 29, 2018.