JANUARY 14, 1965
Science and the Aerospace Industry
AN ADDRESS BY Mr. Thomas V. Jones,
PRESIDENT AND CHAIRMAN NORTHROP CORPORATION
Lt. Col. Robert H. Hilbom
Over a year ago Newsweek magazine wrote about our guest of honour in an article entitled "The World of the Renaissance Executive" and as a foreword it quoted from Volume V of Will Durant's "Story of Civilization" in which he defines the 15th century Renaissance Man as, "Bold in conception, decisive in deed, eloquent in speech, skilled in art, acquainted with literature and philosophy, at home with women in the palace and with soldiers in the camp." Here, fortunately, the quotation ends, for Durant goes on to speak of attributes that would more aptly apply to the earlier Tom Jones immortalized by Henry Fielding and United Artists, when he describes the same Renaissance Man as, "a realist who seldom talked nonsense except to a reluctant woman."
Our Mr. Thomas Jones is a native Californian, a state reputed to be much like Florida except that part of it isn't for sale. He was graduated magna cum laude in engineering from Stanford University. After association with Douglas Aircraft Company and the Brazilian Air Ministry he joined the famed RAND Corporation think factory where he authored a classic study on transport planes for the U.S. Air Force in 1953. In that year he joined Northrop as assistant to the chief engineer, rose to be president in 1959, chief executive officer in 1960 and chairman of the board in 1963.
When we read of Northrop technologies, capabilities and products, as all of us have in the notice of this meeting, we see the Corporation as apparent monarch of all it surveys in the aeronautical, communications and missile fields. In yesterday's press it was reported that the Spanish Air Force is to purchase at least 70 of their F5 jet fighter aircraft so it would appear that their reign in Spain is mainly in the planes.
Mr. Jones exemplifies the Renaissance Executive-a man who blends business leadership with extracurricular breadth and tempers the profit motive with a social conscience. He has the scope, skill and stamina to engross himself in a wide assortment of outside activities where he applies the same talent and single-mindedness which brought him to the corporate pinnacle.
A member of the Board of Trustees of the California Institute of Technology, the Boards of Directors of Stanford Research Institute, the Times-Mirror Company, publishers of the Los Angeles Times, the Los Angeles World Affairs Council; a member of the Industry Advisory Council of the U.S. Department of Defense, the International Science Foundation, the Council on Foreign Relations, the Board of the Aerospace Industries Association; an active worker for the Los Angeles Symphony and the Art Museum and a member of the Confrerie de la Chaine des Rotisseurs, a gourmet society founded in Europe in the 13th century. He may wish to comment upon the epicurean delights he has savoured today.
It is my high honour to present one who is described as one of the most broad-gauged and imaginative members of the top management community in the United States, the Chairman of the Board and Chief Executive Officer of Northrop Corporation, Mr. Thomas V. Jones.
It was very gratifying to me to receive the kind invitation of your president to speak to the Empire Club. A few weeks ago my associates and I were following with interest the discussions of the delegates to the annual meeting of the American Association for the Advancement of Science which was held at Montreal. As you know, they devoted themselves to a reappraisal of the role of science in the nuclear age. Dr. Allen T. Waterman, president of the Association and one of the world's leading scientists, concluded that scientists face a host of opportunities "to lead the world's nation-states into co-operative world-wide ventures such as exploration of space, the oceans, the earth's crust, the Antarctic; and such practical ventures as studying human population dynamics and control, and international economic development."
The broad trend of scientific effort interests us in the aerospace industry because, essentially, we are an advanced technology industry and our continued usefulness depends to a great extent on an informed understanding of how technical effort can best be applied. Along with Dr. Waterman's conclusions, I would add that we are becoming more sophisticated in what we demand of science and technology.
Five years ago the primary concern of the free world was to maintain a lead in the technological race. The launching of a satellite then was a great achievement in its own right as a technical feat. Now we have progressed to the point where we are asking that each satellite serve some specific purpose. We have research satellites, weather satellites and intelligence satellites. We have a communication satellite and with it-incidentally-the appearance of a new kind of business organization. Here, a useful orbiting device, commercially attractive to the financial community, has brought into being a new form of organization which includes the communications companies and the public at large. This is a case in which business organizing creativity has kept pace with technical advance itself, a good free enterprise solution. In the case of the supersonic transport we hear so much about today the problem is not technical but a problem of a sound business approach. Science is becoming more con cerned with deeper payoffs from its applications. From an economic and business standpoint, it is clear that it is in these deeper payoffs that the real leverage lies. It is important that we be able to offer transatlantic and transpacific air service that is twice as fast. But think also of the economic impact if we could offer even the present service for 50% less cost. This is a point I would like to discuss more fully in a moment.
Another change that is increasingly visible is that science and research are no longer a monopoly of big nations, or big industries, or the big universities. Technical projects have become so complex that no longer is the whole job done in one place. Rather, it is the joint effort of many specialists in many places, and the critical contribution may well come from an unheralded and unexpected source. This being the case, it is up to each of us to consider our strengths and weaknesses in relation to the strengths of potential partners.
No longer can a single company pretend to do everything itself. Instead it relies on a host of specialist firms of varied capabilities. And who is to say which element of a system is of lesser or greater importance than the prime contractor. Success comes with technical creativity and competence and the ability of management to make this competence available independently, or in concert with others.
In our company we have found it essential to let the demands of the job determine how we operate. It's up to a tough-minded management to create the organizational relationships that make the best use of the resources. While we are largely a prime contractor, a great and important segment of our business comes as an associate contractor, sub-contractor, and equipment supplier. We find ourselves seeking the talents of companies not only in the United States, but without regard to their location. The choice is simply one of competence and reliability.
On that basis, for example, I might point out that we are working with a number of extremely able Canadian companies on some of our key projects. To mention only a few, de Havilland Aircraft makes an important component for a satellite vehicle which we build for the U.S. Air Force; Ferranti-Packard Electric is supplying us with electronic components that go into a system for the Polaris submarines; Dominion Rubber makes the fuel cells, as sole source, for all of our aircraft; Jarry Hydraulics of Montreal builds other parts for these aircraft; and our space people have at various times had valuable assistance from the scientists at McGill University. In each case, the choice was based on the ability to deliver the right quality at the right cost and on the required schedule.
Developments such as these are part of the changing face of technical industry in general and the defence industry in particular. Another deep change in the character of the defence industry has been taking place over the past five years.
The high cost and complexity of modern weapons make it more important than ever to take into account the level of effectiveness we can obtain from the resources we commit to a particular mission. In most nations, as you know, defence planning and procurement have been characterized in recent years by searching examination and re-examination of the effectiveness, suitability, and cost of particular weapon systems in terms of the specific mission for which they are intended. Governments are less inclined to purchase extreme performance for its own sake if the procurement and operating costs are such that they limit the size of the force that can be acquired.
In the United States, there is understandable concern in some quarters about the possible effects on the aerospace industries, defence industries, and the nation as a whole, of shifts in defence expenditures. The big ballistic missile programmes are nearing completion. There is new emphasis on arms control and disarmament. As aggression takes new forms in various parts of the world, the military requirements change and the supporting industrial emphasis tends to shift, sometimes suddenly and drastically.
To cushion the economic effect of these shifts, we in the defence industry have been urged to find by-products of defence and space technology. We are advised to find appli cations by which our skills can be directed into new products to convert at least part of our capability and activity to other non-defence purposes.
I would like to present to you a point-of-view which is somewhat different. I believe that the technologies included in the industry's preoccupation with defence represent skills and areas of knowledge that are fundamental not only to military strength, but to economic strength as well.
Indeed, in thinking about the aerospace and electronics industries, I think we should not separate defence from non-defence as we are essentially being asked to do by some. We must consider them together. I hope I can show that they must be considered together-the military strength and the economic strength.
In the commercial field, as in the military, we as an industry cannot be regarded in the same terms as a manufacturer of consumer goods. The things we develop and build are not intended for the consumer. They provide the means by which others can be of service. Regardless of whether the service is to deliver a "kill" mechanism on an enemy in the case of our military, or whether it is to deliver economic cargoes to places where they are needed, we as an industryour laboratory and technical groups-provide the means. The fundamental value of our efforts to our economy and society should not necessarily be measured solely by some 'current visible pay-off. The more basic our work, the more likely it is that the pay-offs will be many and the more likely it is that our contributions will relate much more to the future than to the present. It is a natural tendency, however, to attempt to measure the usefulness of an activity such as ours in terms of the pay-off in the current environment rather than in the new future environments that the very advance we make will create.
Let me give an example: A high cabinet official was asked to testify before a committee of our Congress concerning the possible military usefulness of a new logistic system of national economic importance, for which government subsidy was being urged. The cabinet official said that in his opinion this particular logistic system would not be of much military value. In conducting a war of movements against an enemy, he said, you could not expect military operations to accommodate to the fixed characteristics of this particular logistic design.
Now, before any of you jump to the conclusion that I am talking about the supersonic transport, I am not. This particular piece of testimony took place in the 1850's. It was the testimony of the then U.S. Secretary of War, Stanton. And the logistic system which, by his criteria of the moment, appeared to have little military value, was the railroad system of the United States. I needn't point out the role the railroads played in the outcome of our Civil War. As another and much later example, in 1951 a high level committee was asked to study the future role of air cargo transport-the role it should play not only in military planning, but also commercially. At the opening of the first session when the ground rules of the study were being evolved, it was agreed quite readily that the group should stick to the proper use of air cargo transport-which they defined as "a very useful- emergency means of making up for the shortcomings of other more basic forms of transportation." I think you will agree that air transport has earned for itself a better estimate of its importance.
That approach failed to take into account the fact that a nation's technology and its technical strength are really a primary stimulus of economic growth. They do not merely follow and support the growth; they are the things that really make the growth occur in the first place. Seldom in terms of expenditure and pay-off does so little buy so much for a nation as the expenditures that we make on technical advances.
Take air transport as an example, recognizing that we could do the same thing in communications, electronics, and other areas. Twenty-five years ago, the common carrier for business travel between cities was the railroad and the bus. Today 60% of all common carrier transport between cities is by air. It is expected that this is going to grow to as high as 80-90% within the next few years. Even with this growth, only 10% of the population of the United States has ever flown in an airplane.
As advances in technology make possible lower operating costs, there is no question that there will be great increases in the movement of people between cities through out the world. In overseas travel the comparisons are even more pronounced. Before World War II, there was virtually no transportation by air from the United States to other countries. By 1952, 60% of all transportation of people to and from the United States was by air. Today it is 85% and it is expected to reach 90% by 1970. Yet this year only three million people out of 191 million Americans will travel outside the U.S.
Air cargo, perhaps even more than the movement of people, offers the most dramatic example of all. The average rate for air cargo today is 15 cents per ton mile. Despite the fact that you can ship things by truck at half the cost, and by railroad at one-seventh the cost, air cargo has in the past 10 years experienced a growth of 300%. At present, the anal-, ysts forecast that the annual rate of air cargo growth in international commerce will be at the rate of 20% a year with existing equipment and with no change in the rate structure. And yet, with all of this growth, today only eight one-hundredths of one per cent of all cargo carried in moving vehicles in the United States is moved by air-eight one-hundredths of one per cent. A curve of the increase in air cargo that can be expected with reductions in rates indicates that if the air cargo rates today were 10 cents instead of being 15 cents, a one-third reduction, 1 % of all cargo movement in the United States could be by air. That is a twelve-times increase just with a one-third reduction in rate. If we take into account the use of technology that we now possess-greater engine efficiencies, structural efficiences, airplane efficiencies--a rate of 10 cents a ton mile is easily possible. If we look at the next generation of technical advances, cargo rates of 5 cents a ton mile are foreseeable. The growth potential is obvious and tremendous. And, I repeat, it is only intended as one example of the kind of leverage that technology can have on our economies as a whole.
A few years ago our company acquired an important communications subsidiary. We did this because of a fundamental belief that improved communications would be very much in demand around the world for a long time to come. And that certainly has proven to be the case. Our venture was a sound one but its profitability is of minor significance compared to my thesis today. It is not so much that the thirst for knowledge and information around the world will improve the communications business. It is that the improvement in communications facilities will accelerate the spread of knowledge and information with great and farreaching economic and social effects. Information accumulated at central points in data banks and electronic libraries will be-indeed already are-as readily available to the smallest company in Los Angeles as they are to the largest company in Toronto.
It is not the impact of these things themselves that is important; it is the increased effectiveness they bring and the expanding effects on economic growth that follow from this increased effectiveness.
Whether the problem is military or economic, history shows that if we have the means-the technical means to provide a useful service growth will follow. Growth will not occur if the technical means are not provided ahead of the growth. The German nation did not build the Rhine river, the Rhine river built the German nation. The United States did not build the Mississippi river, the Mississippi river built the areas and the cities around its banks. The West didn't open up railroads in America, railroads opened up the West. In the same way, the St. Lawrence seaway means much to the development of your country and mine.
A truly fundamental advance in technology is comparable to a natural resource. Its existence attracts the minds, the talents, the enterprise of the vast number of people who are capable of using it to generate true military and economic growth and strength. And so, in thinking of how we, as an advanced technology industry, should conduct ourselves today in looking toward the future, we should not seek the negative approach of converting to something else, but accept the positive challenge to our management creativity. We should look closely to the fundamentals of what we are trying to do as nations, both on the economic and military fronts, and carry ourselves forward by increasing the advance of our technology.
In planning how technical resources can best be used, let us not at this point in time look merely for a detailed road map to find particular products and pay-offs which would be profitable only in terms of a need of today and this moment. Let us rather determine the correct compass setting that will lead us aggressively into the future, pushing those fundamental advances that I am certain will provide the means for continued growth and a better life on this continent and throughout the world.
Thanks of this meeting were expressed by Dr. Harold Cranfield, a Director of the Empire Club.