High Stakes, Big Bets

Tom Burbage and his 500-person team at Lockheed Martin went after the biggest military deal in U.S. history — and scored a $200 billion victory: a contract to build the Joint Strike Fighter. They didn’t play it safe; they played to win.

High Stakes, Big Bets

It was, recalls Tom Burbage, a high-anxiety moment. Shortly after the stock market closed on October 26, 2001, Air Force secretary James Roche stepped before a bank of microphones to announce the winner of the most lucrative competition in Pentagon history. At stake was a contract — potentially worth $200 billion — to build what could be the military’s last manned fighter jet.


Roche’s announcement would cap a five-year, winner-take-all battle between Lockheed Martin and Boeing to develop the Joint Strike Fighter (JSF), a radar-evading, sound-barrier-busting aircraft intended to serve as the go-to fighter for the U.S. Air Force, Navy, and Marines, as well as for the UK’s Royal Air Force and Royal Navy. The winning team would receive a $19 billion down payment to oversee development of the next generation of combat jets. Ultimately, it could build as many as 6,000 aircraft over four decades. The loser would be left to hope that it could get a piece of the action as a subcontractor.

At Lockheed’s vast fighter-jet assembly plant in Fort Worth, Texas, hundreds of employees packed into a conference center to view Roche’s announcement on a big-screen television. In the crowd was Burbage, a former Navy test pilot who heads Lockheed’s JSF program. This was arguably the most talked about, most closely watched fighter competition ever. After a lengthy preamble, Roche got to the point: “On the basis of strengths, weaknesses, and degree of risk of the program, it is our conclusion … that the Lockheed Martin team is the winner.” Burbage heard only the first syllable of “Lockheed.” Then, pandemonium. The room erupted with wild cheering.

The victory positioned Lockheed as the dominant U.S. supplier of tactical fighters, but Burbage and his senior team were more relieved than elated. They genuinely believed that they had built the better plane. But always, in the back of their minds, was the gnawing certainty that if Lockheed lost the JSF competition, it would be forced out of the fighter business. Failure was not an option: One of Lockheed’s major combat-aircraft programs, the F-16 Fighting Falcon, is slated to be replaced by the JSF. “We were competing for our future,” says Burbage, a tall, trim man whose easygoing demeanor belies the Top Gun stereotype of the hard-charging fighter jock. “This was a bet-the-company effort.”


To win the JSF contract, Lockheed had to do more than build the better plane. It had to overcome a perception among Pentagon brass that its management was a distant second to that of Boeing, whose stellar reputation was built on its ability to deliver such complex programs as the 777 commercial jetliner and the International Space Station. Hoping to add even more luster to Boeing’s JSF team, its lead spokesman seized on an oft-quoted comment made by Darleen Druyun, the Air Force’s blunt-talking acquisition chief: “This competition is not about an airplane. It’s about a management team.”

Lockheed has rarely been accused of being a risk-taking organization. But this time, it took big, calculated risks for a $200 billion reward. When Lockheed’s future in the tactical-fighter business hung in the balance, its JSF team stepped up to the challenge: to design a top fighter for the 21st century while attempting to reclaim its management franchise and reinvent its culture. “The Lockheed guys were like the patient who undergoes heart surgery while running for his life,” says Loren Thompson, a defense analyst for the Washington, DC-based Lexington Institute. “They had to fix themselves in the midst of the biggest battle they’d ever been in.”

Prelude: A Company at War With Itself

The core of Lockheed’s JSF team is based in a sprawling, windowless edifice located in the heart of the company’s Fort Worth facility, which employs 11,000 workers. At the plant’s epicenter is a milelong factory where the F-16 fighter is under production. During the next 18 months, the JSF team will grow from 500 project honchos and technical wizards to 5,000.


Lockheed acquired the Fort Worth division from General Dynamics in 1993, soon after the Department of Defense began soliciting design proposals for the JSF. The goal was affordability. The Pentagon calculated that if the Air Force, Navy, and Marines coordinated their planning and purchased the same plane together, they could slash the price tag to approximately $35 million. (The Air Force’s F-22 fighter tops out at $97 million.) But to meet the military’s complex requirements, contractors would have to produce a stealthy, supersonic fighter to meet the specific needs of the Air Force, Navy, and Marines. Such a multifaceted plane had been contemplated by many but realized by none.

That fact failed to deter Lockheed, Boeing, and McDonnell Douglas, each of which assembled technical teams to map out early design concepts for a prototype fighter. Almost immediately, a deep fissure threatened to split the Lockheed team. Its fault line ran from Palmdale, California, where Lockheed’s legendary Skunk Works team is based, through Fort Worth.

“A small war erupted within Lockheed over which team — Skunk Works or Fort Worth — would lead the JSF effort,” recalls Micky Blackwell, who led Lockheed’s military-aircraft business before leaving the company in 2000. “There was no doubt that Fort Worth should have the lead. But Skunk Works was extraordinarily innovative. Trouble was, both sides competed in Washington over who should be prime. The Pentagon got tired of it. They were unhappy that Lockheed couldn’t make peace inside its own house.”


In fact, the Pentagon’s JSF overseers were so angry that they awarded Boeing and McDonnell Douglas $20 million each for the second phase of the competition but funded Lockheed just half of that amount. The penalty, says Blackwell, “was a two-by-four to the head — a warning for Lockheed to get its act together.”

To settle the dispute, Blackwell drew up an agreement, which he dubbed the “Magna Carta.” The document stipulated that Skunk Works would take charge of the prototype but that Fort Worth would lead the program. Still, the damage had been done.

“The Pentagon’s memory runs deep,” says Blackwell. “All it took to reinitiate the dispute was one discordant note from one of our guys. Then we had to reassure the customer all over again that there was peace in the family. It was a constant battle.”


Situation Report: One-on-One With Boeing

Despite the early missteps, Lockheed never took its eye off of its biggest customer — the U.S. Air Force — which is slated to purchase 1,763 JSF aircraft. Instead of attempting a radical new design, Lockheed’s JSF technical team set out to produce the plane that the Air Force really wanted: a lighter, single-engine version that incorporates the technologies of the F-22. “We never forgot that the Air Force loved the F-22 dearly,” says a Lockheed executive. “They’d give their firstborn for that plane.”

In November 1996, the Pentagon gave Lockheed and Boeing the go-ahead to move to the final phase of the JSF competition. The third contractor, McDonnell Douglas, was eliminated — and therefore doomed as an independent company in the tactical-fighter business. The very next month, Boeing CEO Phil Condit met with McDonnell boss Harry Stonecipher in downtown Seattle’s Four Seasons Hotel. The two men shook hands on a deal that would make McDonnell a part of Boeing.

The Boeing/McDonnell combination created a big-league threat to Lockheed’s chances of winning the JSF contract. “At the outset, the JSF competition was a gross mismatch. Lockheed was the underdog,” observes a defense analyst with high-level Pentagon connections. “Boeing could bring all sorts of resources to a competition like this. Its strategy was to produce a plane that was far more visionary than anything Lockheed could safely afford to offer.”


Knowing that it lacked the manpower to compete one-on-one with Boeing, Lockheed’s JSF team took a dramatic, almost logic-defying gamble. It made a bid to partner with two of its mortal enemies: Northrop Grumman and British contractor BAE Systems. Northrop would add significant depth to Lockheed’s knowledge base in stealth technology. BAE would offer the team its expertise in short-takeoff and vertical-landing technologies.

“Running a three-partner team is not easy, but the deal bought us the power of three corporations to combat Boeing,” says Blackwell, who spent countless hours overseas courting BAE. “We realized that if we didn’t change the entire way we did business, we’d never beat Boeing.”

On the surface, a joint partnership to build the JSF was not so unusual. BAE and Northrop had teamed with McDonnell Douglas on the first round of the JSF competition. Lockheed had partnered with Boeing on the F-22 program. Typically, these projects consist of a prime contractor that doles out parts of the jet’s development to dozens of subcontractors and hundreds of smaller suppliers. But such arrangements encourage predictable behavior: The prime browbeats the subs, and the subs overcharge the prime, resulting in delays and cost overruns.


“We’ve all had bad experiences with teaming,” says Peter Shaw, who leads Northrop’s JSF program. “Our partnership with McDonnell Douglas on JSF was a prime-subcontractor relationship. McDonnell made it clear that they were in charge, and we made it clear that we could be treated like a sub.”

Lockheed proposed something different. It offered BAE and Northrop a full-fledged strategic partnership whereby the two companies would command a combined 30% stake in the program. Lockheed, Northrop, and BAE people would work shoulder to shoulder to develop the entire aircraft. And the “best athletes” would lead those teams — regardless of whether they were employed by the prime or by a partner.

Still, people had grave misgivings. “Lockheed and Northrop have battled each other for 60 years,” says Martin McLaughlin, Northrop’s JSF airframe manager. “In my career alone, we lost three out of four programs to Fort Worth. Those were knock-down-drag-out battles. At the time, I couldn’t believe it: We’re supposed to partner with these guys?”


Big Risk #1: Teaming With the Enemy

A retired Marine Corps lieutenant general named Harry Blot drove Lockheed’s decision to commit to the three-way teaming agreement with Northrop and BAE. Now the deputy program manager of Lockheed’s JSF effort, Blot previously directed the Marines’ aviation programs, which gave him an inside look at the big defense contractors’ programs. After arriving at Lockheed, he made a cold-eyed assessment of the JSF team.

“As the outsider, I was convinced that Lockheed didn’t have the total knowledge that it thought it had,” he says. “If you’ve spent your entire career at Fort Worth, you only know what Fort Worth can do. I had seen the best of what Northrop and BAE had to offer. They could make Lockheed better.”

Blot invited the top decision makers from Lockheed, BAE, and Northrop to an off-site in Aspen, Colorado, where he issued an appeal: We have different norms, different behaviors, maybe even different goals. So how do we work together? The question surprised executives from the two outside companies. “Lockheed wasn’t known for pulling teams together,” Martin Taylor, BAE’s program manager on the JSF project, says dryly. “We expected the discussions to revolve around how to divide the work. But as it turned out, Lockheed was more interested in how we’d build a relationship that would add value to JSF.”


Lockheed’s approach to team building was to stage a kind of catfight. Blot invited Northrop and BAE to challenge Lockheed’s design and then make proposals to improve it. Some of the brightest minds in aerospace engineering were gathered in that Aspen conference room. Few were shy with criticisms. “Our guys would come out of the room steaming, ‘Screw them — we’re going to do this ourselves,’ ” recalls Blot. “I’d tell them, ‘Wrong answer. Go back in. Probably all three sides will be unhappy when you come back out. But then I’ll know that we’ve reached the right point for forming these teams.’ “

Some of these catfights were captured on an electronic spreadsheet that’s still displayed occasionally in the JSF control room in Fort Worth. It’s more than 500 elements long. “Reopening that thing is a fairly bitter experience,” says Taylor. “Each line shows the history of compromises that had to be made just to move this project forward. At any point, it would have been easier to say, ‘This is too difficult. Let’s go back to the old way and split the plane up.’ But the management team made it clear that that was an unacceptable answer. And they were right. Neither of the three companies, individually, had the resources or the technology to make this happen. It took a collective team effort — pushing each other beyond our wildest dreams — to build this airplane.”

Big Risk #2: There’s a New Guy in Charge

A critical piece of Lockheed’s strategy to win the JSF deal was to press the Pentagon for a fixed-price contract for the program’s final demonstration phase. Such an agreement would cap the amount that Lockheed and Boeing could spend on the competition. “We knew that we couldn’t outfinance Boeing,” says a former Lockheed executive. “Our big fear was that Boeing would open its coffers and spend whatever it took to win the program.” It turned out that Lockheed’s fear was justified.


The defense department gave both Boeing and Lockheed $1.1 billion in funding to develop prototypes for the head-to-head fly off, and it set up a fire wall on the amount that each company could spend directly on the JSF. But in a 1999 meeting with Lockheed chairman and CEO Vance Coffman and other company executives, several senior Pentagon officials proposed torching the fire wall and initiating a cost-sharing agreement where Boeing and Lockheed would help fund the program.

For the Lockheed team, the cost-sharing proposal was a dagger. Coffman “blew his stack” and launched into a heated argument with Pentagon officials, according to people who are familiar with the situation. The blowup was another strike against the company. Later that night, a Lockheed executive met with a Pentagon official, who delivered his own broadside: “We ought to award JSF to Boeing right now.”

In an attempt to repair the damage, Blackwell arranged for Air Force acquisition chief Darleen Druyun, who would have a major voice in choosing the winner of the JSF competition, to meet with a group of Lockheed sector presidents and critique the company’s performance. Blackwell cataloged her views in an internal memo headlined, “The Good, the Bad, and the Ugly.”


According to the memo, which was first reported in Aviation Week & Space Technology, Druyun was effusive with her praise and withering with her criticisms. Druyun’s overall assessment of Lockheed’s performance on the JSF project was unsparing, although it was clearly intended as a challenge to management. “Sometimes I just want to smack you on the head … ” the memo quoted Druyun as saying. “Both [Boeing and Lockheed] have good designs. We ask, ‘Which team will deliver the product?’ “

Burbage, who was then head of Lockheed’s F-22 program, was untroubled by the feedback. He calls the session with Druyun “very good and positive. You need to get direct feedback from your customer.” But Druyun’s tongue-lashing forced some soul-searching in Lockheed’s Bethesda, Maryland headquarters. Lockheed had to win Druyun over.

And so Lockheed took another big risk. In November 2000, just one year before the competition’s end, Burbage was tapped to take the reins of the company’s JSF effort. He had worked for 10 years in Lockheed’s Marietta, Georgia office, where he had built a reputation as a knowledgeable and engaging leader. He had also worked closely with Druyun on Lockheed’s F-22 program. (In Blackwell’s memo, he quoted Druyun on Burbage’s leadership: “I almost lost my cool on F-22 one month and Tom Burbage said, ‘Sit down, relax, and we will work it out.’ “)


Bringing in Burbage to head the JSF team just when the competition with Boeing was entering its most critical phase amounted to an 11th-hour gamble. Now it was up to Burbage to help make things right with the Pentagon — and to help shepherd the program through the do-or-die fly off with Boeing.

Big Risk #3: Defying the Law of Gravity

While Lockheed may have been myopic in some of its dealings with the Pentagon, it displayed 20/20 focus on its customers’ technical requirements for the JSF. The Lockheed team understood that while the Air Force was the biggest customer, the Marine Corps was the bullish customer — the one influencing the JSF program. “The Marines are desperate to replace their Harrier jump jet, which is old and tired,” says Blackwell. “Plus, the Marines have great political influence in Congress.”

It was essential for Lockheed (and Boeing, for that matter) to fulfill one core requirement for the Marines’ version of the aircraft: It had to be able to take off in “tight” places and make vertical landings on aircraft carriers and on lighter Navy ships. Knowing this, Lockheed’s engineers walked right into a design minefield. They bet Lockheed’s entire JSF effort on an untried propulsion system for the Marine aircraft, while Boeing went with an updated version of the direct-lift system used on Harriers.

The laws of physics dictated Lockheed’s move. The Marine JSF aircraft, the X-35B (the “X” signifies a test plane), weighs in at about 30,000 pounds. But Lockheed’s direct-lift engine generates just 25,000 pounds of thrust. More than 1,000 engineers worked the problem and eventually patented a solution: Augment the thrust by pushing the lift engine to the rear of the plane, adding a thrust-vectoring nozzle to it and mounting a shaft-driven lift fan behind the cockpit. “No one had ever generated enough thrust to vertically lift a 30,000-pound plane,” says Burbage. “The hope was that the lift fan would let us break the physics barrier.”

An initial test was a near disaster. Lockheed mounted a prototype on a 30-foot-high cement pole. When they fired up the engine, it produced 35,000 pounds of thrust. But within an hour, the bearings’ temperature shot up, and it leaked oil at an alarming rate. “There were many fears, especially on the government’s part, that the shaft-driven lift fan was too complicated,” says Burbage. “This was a high-risk, high-reward proposition. If that lift fan failed, we were done for.”

But Lockheed’s partnership with BAE, Northrop, and its subcontractors paid off. The Lockheed team took the system down and called in its two partners’ top engineers, as well as transmission experts from Bell Helicopter and lubrication specialists from Penn State University’s Gear Research Institute. It took them three weeks to solve the problem: a flaw in the lubrication system.

Then came the day of reckoning. In the predawn hours of June 24, a team of Lockheed technicians readied the Marine version of the aircraft for its first-ever vertical flight. Lockheed had built X-35 jets in the high desert outside of Palmdale. Its Air Force and Navy X-35 aircraft had already logged 27 and 58 hours of flight time, respectively. But this was the make-or-break test for Lockheed’s entire JSF effort — the moment that would determine whether the shaft-driven lift fan could produce enough thrust to lift the Marine plane. Planned flight time: 30 seconds. Planned altitude: 24 inches.

Simon Hargreaves, the test pilot, had one thought as he powered up the aircraft’s engine: Don’t screw up. The plane rocked gently from side to side, and then it lifted. It rose 25 feet before Hargreaves could level off. And there, hovering above a tarmac in the Mojave Desert, was the proof. The Lockheed team had pulled an end run around the laws of gravity.

“Ten years of hard work culminated in that 30-second flight,” says Burbage. “When that plane took off, and it generated the thrust that we said it was going to generate, and the control system we had designed for it allowed the plane to be flown nicely, that was it. We had built the better plane. We didn’t know whether we would win, but we knew that we should win.”

In the end, Boeing helped Lockheed’s cause by choosing a design that looked like no fighter before: a stocky body with a large air inlet under the nose that resembled a gaping mouth. Air Force staffers dubbed Boeing’s plane “the Monica.”

Ultimately, however, Lockheed won because its three big bets paid off. It teamed with the enemy and successfully leveraged its team. It delivered a plane that the Air Force wanted but pushed the envelope on a plane that the Marines needed. And in the 11th hour, when it found itself in a dogfight with its customer, it brought in a leader who could make peace.

Four months after that 30-second flight in the desert, Air Force secretary Roche made it official by awarding the future of the U.S. combat-aircraft industry to Lockheed Martin.

Bill Breen ( is a Fast Company senior editor. Contact Tom Burbage by email (

Sidebar: From Postmortems to Premortems

Before heading Lockheed Martin’s Joint Strike Fighter (JSF) program, Tom Burbage led the company’s effort to develop the F-22 Raptor. By almost every measure, the F-22 is a standout program. But when Burbage reflects on his tenure, one event stands out: The F-22 team missed the critical first-flight date by four months. “There was hell to pay,” he recalls.

For Burbage and the JSF team, nothing is more sacred than a deadline. “If you can’t control your schedule, the implication is that you can’t control costs,” he says. “And if you can’t control costs, you won’t keep the services interested in funding your program.”

The critical deadline facing the JSF team is October 2005, when the Air Force expects to fly its JSF aircraft. To nail that date, the team must harness a program that encompasses 75% of the world’s fighter-development industrial base.

In a paper titled “JSF Management Philosophy,” Burbage highlighted the biggest potential speed bumps: coordinating the efforts of numerous U.S. agencies and nearly an equal number of UK Ministry of Defense agencies; meeting the expectations of the U.S. armed services, as well as the militaries of a growing number of allied air forces; and managing the collaborative efforts of hundreds of U.S. and foreign subcontractors.

The team’s best hope for staying on schedule is to anticipate problems and fix them before they occur. To do that, managers from Lockheed and its partner companies, Northrop and BAE, undertook an ambitious postmortem: They compiled an exhaustive database of setbacks and lessons learned on virtually all of the world’s modern tactical-aircraft development programs. Then they did a premortem: They plotted their lessons-learned analysis on a graph that runs from 2001 to 2011. The graph enabled them to identify 10 future inflection points — dates when the risk of a setback runs high.

“The techniques we have put in place allow us to measure our confidence in nailing these four- and five-year deadlines,” says Burbage. “If I really understand this program’s critical drivers, I can tell you today whether I’m confident that we’ll fly that plane in October 2005. Today, my confidence level is 50-50. We haven’t experienced any setbacks, but we haven’t submitted our detail plans to our suppliers yet. Six months from now, I’ll have a much better feel for our confidence factor. If it looks like we’re falling off the curve, I can take corrective action.”

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