Boeing Makes its Connexion
The airplane manufacturer was ready to ground its in-flight Wi-Fi service. Amazing what happens when a team has six months to live.
(Business 2.0) – In 2001, everything was looking up for Scott Carson, head of Boeing's Connexion division. Less than a year after launching the unit to outfit planes with Wi-Fi, the 31-year Boeing veteran had persuaded American, Delta, and United to install Connexion networks in 1,500 planes. There was talk of making Connexion a stand-alone company, and all three airlines wanted equity stakes. Boeing VP Harry C. Stonecipher—now the company's CEO—predicted that Connexion revenue would hit $5 billion in 10 years.
Then came 9/11. Within weeks virtually all of Connexion's orders disappeared as airlines abandoned pricey projects. Analysts called Connexion a distraction. Other Boeing divisions, hungry for Connexion's capital, called for its demise. "We became a virus that the corporate immune system wanted to eradicate," Carson says.
How he managed to save Connexion provides lessons for anyone with ambitions of entrepreneurial achievement within the framework of a larger company. To harness the flexibility of a startup in emerging fields, big corporations often turn to skunkworks projects like Connexion. But unlike venture capitalists, managers facing quarterly earnings pressure are more likely to pull funding when times are tough. For every OnStar or iTunes—scrappy corporate units that have achieved success—there are failures like Dow Jones's Telerate financial information service or Kmart's Bluelight.com.
With Boeing colleagues questioning Connexion's viability, Carson first set out to prove that demand for in-flight Wi-Fi was real. A former CFO of Boeing's commercial aviation unit, he was familiar enough with the balance sheets of domestic carriers to know that he would have to look overseas, where air travel was still robust. Impressed by strong passenger response to a Connexion trial in a Boeing 747-400, German carrier Lufthansa placed an order in early 2002 to outfit 80 planes. With the contract in hand, Carson went to then-Boeing CEO Phil Condit to ask for more money. He got $50 million, and an ultimatum: Sign up three more customers in six months, or Connexion was history. "It's scary when your VC is also your boss," Carson says.
To make the funds last, Carson cut costs, transferring nearly half of his original 600-member team to other Boeing divisions. Then he unleashed his salespeople to scare up new business in Europe and Asia. Armed with the Lufthansa contract, they scored a quick win, obtaining a letter of intent in June 2002 from British Airways, which soon began testing Connexion's service on one of its planes. Meanwhile, in Seattle, Connexion's marketing folks held regular meetings with counterparts from more than a dozen airlines, including United and Delta, to figure out how to make their offering more appealing. On whiteboards covered with a list of the service's features—ranging from pricing guidelines to censorship of pornographic websites—carrier reps put red dots next to the ones they liked. "Those meetings kept potential customers engaged while helping us hone the service," says Stan Deal, Connexion's VP for commercial aviation.
Just as important, Connexion executives also set out to win over colleagues in other areas of Boeing. Salespeople began attending weekly meetings with execs in the commercial aviation and integrated defense divisions. "The goal was to intertwine our destinies," Deal says. To that end, he showed other Boeing units how mobile broadband could help them grow their businesses. For instance, improved communication with the defense division—which handles Boeing's homeland security initiatives—led to outfitting the C-32 aircraft used by Vice President Dick Cheney with a Connexion-like service. The internal PR effort got other divisions thinking about how Connexion could bring their customers into the information age: These days executives around Boeing jokingly refer to Connexion as the company's research and development arm.
As Deal's sales team was signing a second letter of intent, this time with Japan Airlines, Connexion engineers were working to make their service more cost-effective. To provide Internet access to air travelers, the Connexion system grabs bandwidth from satellites orbiting 22,800 miles above the earth. The link is then broadcast to passengers via multiple Wi-Fi transmitters attached to the aircraft's roof. The original design was largely independent of other aircraft operations. But by tying into an airplane's avionics systems, Connexion can transmit maintenance data to ground crews during flight, avoiding expensive emergency diversions. As a result, Connexion can deliver not only entertainment but also cost-cutting and safety benefits.
Three's a Charm
The connexion sales force landed its all-important third customer, Scandinavian Airlines, in November 2002, just days before the six-month deadline. Since then Connexion has inked deals with four more carriers—including Singapore Airlines and China Airlines—covering 350 planes. But it has yet to win the heart of the industry, a big U.S. customer like United or American. "The home-run play—the major U.S. carrier—is still elusive," Carson says. With a third of the major U.S. airlines in bankruptcy, and several others in dire straits, Carson is focused on building demand through consumer marketing, like publicity-generating Connexion flights for journalists. Meanwhile, he's also launched Boeing's first foray into the $1 billion maritime communications market: In June, Connexion announced a trial with Vancouver-based Teekay Shipping to provide onboard broadband to its tankers, which transport more than 10 percent of the world's seaborne oil.
In fact, that industry provides a fitting metaphor for what Carson has achieved. On his office wall hangs a picture of a massive freighter being pulled by a tiny tugboat. That's the role he sees Connexion playing for Boeing: a diminutive division leading its corporate parent toward a connected future.