Source/Author (year): Ben Rich (1996)

• Overview
  • A biography of one of the most innovative organizations in the world; the Skunk Works branch of Lockheed. A great treatise on the aerospace industry, how military contracting works, the difficulties of bureaucracy, and how to manage people.
• Notes
  • Kelly Johnson: a top secret classification increases costs 25% and vastly decreases efficiency
  • Trusting a small team was key to Skunk Works success
  • Quality control happened daily, in the form of self-checking, rather than at the end of the project as was standard elsewhere in the industry
  • The Navy is far more stringent than the Air Force
  • Kelly’s most important principles of operation:
    1. Program manager needs full control of his project in all respects
    2. Number of people involved in any given project must be viciously restricted. Use few but very good people. When in doubt, leave another person out of the project.
    3. Reports must also be restricted viciously. Minimize number of reports filed.
    4. Perform monthly cost review and never surprise the customer with sudden cost overruns.
    5. Don’t pay people based on the number of people they supervise. Find other ways to compensate good work.
  • EEOC and affirmative action hiring policies hindered Skunk Works’ ability to do good work, since the businesses owned by minorities often didn’t have security clearances, and few minorities went to engineering school.
  • The SR-71 (renamed due to the mistake of the President) Blackbird is one of the most incredible feats of engineering. It was created in 1966 and still holds the speed record for fastest manned flight. It goes faster than a bullet (1800 mph vs 2200mph). In hundreds of flights over enemy territory, not a single plane was shot down. It simply outsped the enemy missiles. They had to build the body from titanium, which they secretly sourced from Russia.
  • Kelly’s advice on running a company
    • Be decisive: even a timely wrong decision is better than no decision
    • Kill problems dead: don’t half-heartedly wound them.
  • Skunk works type operations are so rare because the larger a corporation grows, the more it attempts to systematize and proceduralize, which is anathema to the independence that a place like Skunk Works requires.
  • When Kelly Johnson first proposed the idea of the Blackbird, it took two hours for the head of Strategic Air Command to sign off on it. The Air Force now very rarely took a manufacturer’s idea, and even rarer that manufacturers provided unsolicited proposals to the Air Force.
  • As of 1996, there were four main military aerospace manufacturers.
    • Largest to smallest
    • McDonnell Douglas, which built fighters for Air Force and Navy (F-15 and F-18)
    • General Dynamics, which built lightweight fighter F-16, commonly sold to NATO allies, and submarines, tanks, missiles.
    • Lockheed, which specialized in Polaris missiles, spy planes, satellites,
    • Northrop and Rockwell.
  • The Air Force had to play a balancing act by awarding contracts to the crappier manufacturers.
    • Ben Rich points to the example of the B-2 bomber contract. Skunk works proposed a model that would cost $200 million, which was supposedly as efficient as the much more expensive Northrop proposal. They proposed a larger more visible airplane that would cost $480 million a plane. However, as costs mounted, Congress decreased the request from 132 to 75 to 22 airplanes, meaning that the cost per airplane became $2.2 billion. Lockheed had 200 engineers where Northrop had 2000.
    • The DOD has 1200 drug enforcement agents, and 27,000 auditors for the aerospace agency.
    • Current manufacturing arrangements force different components of the airplane to be built by different manufacturers, rather than one entity. Unlike Skunk Works. This massively increases the cost of production.
    • One big problem at the heart of the defense industry is that manufacturers are punished for bidding for more money than they need, and forgiven for dramatically underbidding
  • Back in 1958, Skunk Works built their Jetstar in 8 months with 6 people for the mock-up wood full scale model. When the Navy contracted the highly similar S-3, 300 people needed for the mock up and it took 27 months to build.
  • Ben Rich’s management advice:
    • Built prototypes whenever possible
    • Form close relationships with the manufacturer
    • Good managers are harder to find than good leaders