Could established players fail in a new product? Could products with sophisticated technology fail? Airbus A380 stands as a perfect and exemplary response to all such queries and many more. Once hailed as the very future of aviation, the company’s revelation in February 2019 of their decision to end the production of the super jumbo jet is indeed too much a paradox – considering the fact the A380 was in commercial production for only 12 years. That’s too short-lived a model, too rapid a demise. So what could have gone wrong? To analyze (much has been already spoken and written, though), let us understand the important factors that are likely to have an effect on new product outcomes. Cooper’s (1979) identification of six important variables will serve as a framework for us in this process:
The Commercial entity – is what the firms brings to the market in the form of a product or service. This is the outcome of the new product process and includes the attributes of the product as well as its benefits.
Information acquired – refers to the market information that the firm acquired during the product process. Quality of information on market as well as buyers are critical.
Proficiency of process activities –refers to the way in which the product development process was carried out. Whether the activities were carried out and if so in what level of detail are critical.
Nature of the marketplace – looks at the characteristics of the new product’s market. The extent of competition in the market and the projections for growth are relevant in this factor.
Resource base of the firm – analyses the resource capabilities of the firm from the project perspective.
Nature of the project – understands the characteristics of the project itself – in terms of its magnitude, level and complexity of the technology among others.
A quick analysis of Airbus and its A380 product against the above factors will help us understand the situation better.
The Commercial entity
The most important product feature of A380 was its size. And that, Airbus, expected to be the biggest product differentiator. That worked only initially. Once the fancy was over, that attribute seemed to catch less attention compared to smaller aircrafts from its own stable or from rival Boeing’s.
Typically an optimistic marketer’s mistake – expecting the market to grow and grow so much that the product will find a place. Well, this never happened the way Airbus envisaged. They expected air traffic to grow and the airports to become heavily choked. The solution was to have a leviathan aircraft carry as much passengers out and reduce the burden. What happened was different – air traffic grew, but so did airport capacity. Big aircrafts therefore became redundant.
Proficiency of process activities
Airbus’s idea of A380 has often been designated as a ‘vanity project’ by the aviation world – one that was done to take on the might of its American rival Boeing. Aviation analysts have often discussed how the A380 was too heavy, consumed too much fuel and the structure was too much of a stretch. Lack of foresight such as the inability to take more cargo in lieu of unavailed passenger space are all examples of inefficient process activities that Airbus created for itself.
Nature of the marketplace
The market projections fell apart for Airbus and there have been lesser than 30 orders for the A380 in the past 5 years. So barring a few major airlines which were major buyers of the aircraft (then they changed sides too for the smaller ones in the market), the adoption of the product was too slow – or rather, slower than anticipated by the company. They were not entirely wrong in all their predictions, yet, the ability to take sound business decisions seemed to have shrouded by an innate belief in an expected-to-thrive market.
Resource base of the firm
An established player in the aviation industry, the company was formed out of the French-German partnership. It is the largest aerospace and defense company in Europe with a workforce exceeding 130,000 employees. The company has strong R&D and innovation focus.
Nature of the project
For Airbus, this was definitely a mammoth project. The plane was estimated at $25 bn in development costs. It involved huge R&D expenditures. And definitely the opportunity cost in investing other less riskier projects is not to be forgotten.
A very simple analysis shows us how even the most successful and ambitious projects by the most established players can be ideal choices of failure. Of course, A380 was a marvel in the skies and will continue to be so – for many years to come, till the last of its wings is shredded. But in management classes across the world, it will also be a name that will be discussed multiple times – especially in the context of new product development failure.
Cooper, R. G., 1979. The Dimensions of Industrial New Product Success and Failure. Journal of Marketing, 43(3).