Corrupted Culture: From Dieselgate to Boeing

I've been following Boeing's troubling saga of safety lapses. How can one of the world's two major commercial aircraft manufacturers be faltering so drastically? Boeing, known for its long-standing reputation as a quality and innovative company that literally shaped commercial aviation as we know it, now finds itself embroiled in a crisis that raises frightening questions. The roots are its corporate culture.

This situation reminds me of an earlier colossal and completely avoidable blunder by a globally respected brand, Volkswagen. This was a scandal similarly created by corporate culture dilution gone unchecked. This one was personal.

About ten years and a few cars ago we purchased a Volkswagen Jetta. We had been looking for a smaller, fuel-efficient car. I may have been repenting for the years with my Toyota Sequoia, a car I loved but was showing its age. Saving more than a few bucks on gas wouldn't be bad, either. We were attracted to the new “clean diesel” engines available in the Jetta.

The Jetta: 1) performed well on our test drive, promising to be fun to drive, 2) purported to get 40+ mpg, and 3) was advertised as a super-low carbon emitter. That last benefit, truth be told, wasn’t our number one priority at the time, but a definite bonus that we got excited about. And, it wasn’t a hybrid which was the only alternative at the time if we wanted a clean-running, fuel-efficient car, and of course, didn’t care about driving performance. It was no Porsche, but the Jetta seemed like a great choice since it delivered all three benefits.

Turns out, as we now know, this was a big lie. All three benefits together in one car—fun, fuel efficient, won't kill the planet—didn’t exist. Outside of the brochure in the real world, you could pick two of the three. Needed a car that performed and saved on fuel? Fine, but get comfortable with carbon. Liked the idea of saving both money and the Earth? If so, you couldn’t also be a person who liked some zip in your car. Volkswagen was marketing an alternative truth. They were really good at it.

After spending much of their multi-year R&D budget on developing clean diesel technology, it simply didn’t work. Our Jetta indeed turned out to be fun to drive at a lower cost (note: diesel and gas prices were closer to parity at the time). Low emissions too? Nope. Unlike driving performance and fuel efficiency which I could experience with my own eyes and wallet, my green itch could only be scratched by sheer trust that it was true. And why wouldn’t I trust it? That’s the sentiment VW was hoping I and millions of others would feel.

What did Volkswagen do after investing the equivalent of a small nation's GDP in something that didn’t work? They faked it. They knew that the actual emissions profile of the engine, which was at the core of the cars’ USP (unique selling proposition), wouldn’t be anywhere near target buyers’ preferences or expectations. In fact, the car ran so dirty that it might have had trouble passing most U.S. states’ inspection thresholds (more on this later). The idea was great but the product would be DOA in the U.S. market and likely much of Europe's too. To “resolve” the issue, the company instead added onboard computer code that could recognize when the car was being emissions-tested and then “defeat” the testing equipment by temporarily adjusting the engine performance to create the illusion of low emissions. When the test was complete the onboard computer reverted the engine back to its true filthiness. No one would be the wiser. Kinda genius, diabolically speaking.

Well, someone did get wiser. Some smart engineer types in California smelled a rat and figured out the fraud. The jig was up. (Note to self, don’t mess with California emissions compliance people.) A couple of years, an EPA notice of violation, and a whopper of a class-action lawsuit later, angry owners were given the opportunity to sell their cars back to Volkswagen. It took the better part of another year for the offer to be operationalized, but in the end it was a pretty good deal and a much easier transaction than we expected. Good for Volkswagen for figuring that part out, at (the very) least. We took the cash and ran, immediately converting it into another car, leaving VW in the rear-view mirror, so to speak, forever.

So ended our experiment with Volkswagen. I grew up hearing my father say how much he disliked and distrusted that company. I should’ve listened. Volkswagen would pay a fortune for their crime in restitution and fines (not enough IMO) but keep on living as one of the planet’s largest car companies.

I sometimes like to imagine the meeting—that one meeting where the decision to defraud the world was made—unfolding. There must have been one, right? In my mind it goes like this: the Head of Engineering or Innovation or Project Management or whatever announces to the other executives around the table that the whole thing is kaput (that’s German) and they’d have to start again. Chaotic, overly dramatic reactions ensue until someone jumps from their seat and exclaims, “Einen moment bitte (also German), I have an idea! We make people think it works but it actually doesn't.” A momentary silence is followed by crisp nods and high fives. “Ok, we go with Klaus’ idea,” directs the CEO, “Lunch?”

It probably didn’t happen exactly like that but at some point, someone thought that cheating the global car-buying public was a good idea and green-lit the whole thing.

How did Volkswagen get to such a place? As car buyers further prioritized the environment, Toyota, its top competitor in the small- to mid-sized car market, famously and phenomenally seized international imagination with hybrid technology and its breakthrough Prius (circa 2000). It was weird looking and certainly not the car to satisfy “drivers” (h/t to BMW for giving us that double-entendre).

It was a major breakthrough. Priuses (Prii?) screamed out of showrooms. Factories in Japan ramped up. Waiting lists grew. There were fights in the streets over them (ok, that part isn't true). In response Volkswagen, on the other hand, wanted to do one better by leveraging existing fossil fuel sources and infrastructure while also satisfying rising environmentally friendly demand while also reinforcing its sporty image. Its clean cars would be the anti-Prius: smart, sporty, and fun to drive. It's not-so-answer answer would be clean-diesel technology.

Volkswagen was moving fast. Every month that passed without an available offering meant ceding more share to Toyota and the other brands who fast-followed with their own hybrid entries. Was this industrial panic? A go-to-market strategy based on anxiety leads to problems, not least of which was an evident destruction of a double-loop feedback mechanism that might have redirected the project sooner. Where were the circuit breakers? Where were the brand champions? Their corner-cutting hunt for a solution trumped sound engineering, consumer welfare, brand integrity, and corporate values.

Boeing's current issues appear to stem from a similar competitive threat as Volkswagen's. Just as Volkswagen faced stiff competition from Toyota and the rise of hybrid technology, Boeing found itself being outpaced by Airbus in commercial aviation. With Airbus introducing more innovative planes at a quicker pace, Boeing felt the pressure to keep up and retain their leadership position. However, in their haste, Boeing found shortcuts, got sloppy, and out-maneuvered crucial regulations.

When your car pollutes more than you hoped it would? Bummer. When the airplane you're flying in malfunctions it's quite a different story.

Volkswagen mishandled their response to competitive pressures, but what truly enabled their wrongdoing was a corporate culture that had degraded to a level conducive to unethical behavior and poor governance. From the emerging reports, it seems Boeing may have followed a similar trajectory.

Corporate culture is at the core of a brand. A positive, embedded, self-perpetuating culture fills the sails, propelling a brand and the people it represents forward. The opposite is just as true: poor corporate culture creates low morale and inauthentic, tarnished brands. Purposefully breaking with established, positive culture out of convenience, panic and greed? That's criminal (maybe quite literally. We'll see).