Why Projects Fail In Airbus-A380 In Singapore Airline - Essay Example

Apply Relevant Theory to Analyse "Why Projects Fail In Airbus-A380” In Singapore Airline Executive Summary Project failure is a critical aspect faced by many organisations, which attribute to the poor management culture among other crucial factors. In any mega project, failure can lead to loss of time, money and reputation. Thus, in order to make projects successful, it is vital to understand the factors that may lead to the success or the failure in project. Focusing on this aspect, the research has been based on understanding Airbus A380 project failure. A case of Singapore Airlines has also been selected for understanding the impacts of project failure on the organisation as a whole. Various theoretical aspects has been applied in order to evaluate the A380 project and to recommend for improvements. Table of Contents Executive Summary 2 Introduction 4 Background 4 Literature Review 5 Theory of Project Failure 7 Methodology 9 Findings, Results and Discussion 9 Findings 9 Results 10 Discussion 11 Impact of Classic Mistake in Such Failure 13 Recommendations 16 Conclusion 17 References 18 Introduction Projects are regarded as one of the most critical activities to ensure the ultimate success of the modern business by way of continuous innovation and strategic advancements. However, each of these mega projects present a certain degree of risk of failure, which can occur due to the inability of the organisation to deliver the required outcomes, or technology failure or because of any uncontrollable risk element (Arditi & et. al., 1985). Project success means more than just fulfilling time and budget objectives. It involves additional dimensions such as commercial outcomes and preparation for future (Frese & Sauter, 2003). Irrespective of the success criteria, several researches have strived to find the reasons for project success and failure (Sauser & et. al., 2009). One of the most debated examples of project failures, principally due to weak technology performance, is that of Airbus A380 engine deficiencies. Failed projects can lead to wastage of resources, huge losses and even insolvency of related organisations. Hence, it is vital to understand the causes of project failure in order to minimise the risks. Background In the year 2000, Airbus initiated a project named A380, with the aim of elevating to a new degree and to dominate the airline manufacturing market. However, following manufacturing delays along with cancellation of several customers’ orders for A380 aircraft, Airbus had to face considerable challenges in relation to its brand image and customer satisfaction aspects (Naikal, 2009). Based on this particular example of project failure, the research intends to analyse the detailed cause of A380’s non-performance. In order to analyse the subject, a case study on Singapore Airlines has been selected, which was regarded as the first customer to place its order for the A380 aircraft. Singapore Airlines was severely impacted by several vital issues concerning the project failure in A380 (Shore, 2009). Hence, the objective of the research is to critically assess the project failure of Airbus A380 that led to massive losses for Singapore Airlines. By understanding the reason and type of failure, this study would help to enhance the possibility to develop strategies from a futuristic perspective in order to solve problems related with similar kinds of projects to deal with the identified risks in a more efficient manner. Moreover, the study findings will also be beneficial to develop better project management decisions. Literature Review Standard economic theory explains that the frequency of weak performance in projects is an unavoidable outcome for organisations because of their risk-taking behaviour. In any project, organisations know and accept the odds due to the reward of success. However, it is believed that project failures are best described as the outcome of incorrect rational choices (Lovallo & Kahneman, 2003). In accordance with the survey of Hughes (1986), project fails due to inappropriate basic managerial ideologies that may be identified in the form of inappropriate focus on management structure, concentration on wrong activities and poor communication of project objectives. Schultz & et. al. (1987) further classified project success aspects in two areas namely strategic and tactical. These two aspects affect project performance at different stages of its implementation. The strategic aspects comprise factors such as project mission, senior management support and project planning, where tactical aspects comprise factors of customer consultation, employees’ selection and training among others. Schultz & et. al., (1987) also found that the relative significance of success factors varies at different phases of project life cycle. Emphasising the past occurrences of project failures, Pinto & Slevin (1988) stated that most of the project success factors are theoretically based, rather than empirically verified that ignites the failure risks inherent to these initiatives. Furthermore, the perception of the strategists or project planners that most of the factors are general in nature and their ignorance towards project characteristics, nature of project team members and various external factors also causes substantial rise in project failure risks. Belassi &Tukel (1996) has grouped the factors of project success or failures into four areas accordingly (see figure 1). According to Khatak (2009), the four critical factors that contribute to project success or failure can be identified as user involvement, executive management support, clear statement of requirement and proper planning. Attarzadeh & Ow (2008) further stated that linked with these four critical factors, project fail mainly for five reasons (see figure 2). Theory of Project Failure Two theories have been used in order to evaluate the failure of A380 project in this study; namely, modern management theory and Henri Fayol’s 14 principles of management. Modern management theory: Modern management theory concentrates on two aspects of project development, employees and organisation. Modern management theory states that there are five factors, which drive individuals to achieve project objectives by utilising available resources effectively (Lussier, 2011) (see figure 3). Henry Fayol’s 14 Principles of Management: Similar to Modern management theory, Henry Fayol described that by concentrating on managerial practices, organisations can reduce misunderstandings and enhance efficiency in the workplace. The model is therefore based on fourteen important principles of management (see figure 4). These principles explain how managers should classify and cooperate with the employees keeping two important aspects in mind. Firstly, the list of principles of management must not be long but must be suggestive and secondly, the principles must be flexible for making any changes when required (Tripathi & Reddi, 2008). Methodology Qualitative and deductive approach has been used in the research. The reason for using qualitative approach is that it helped in understanding the values and perception that underlies project failure. Furthermore, qualitative approach also helped to generate ideas regarding improvement in project performance (Qualitative Research Consultants Assocation, 2013). One the other hand, since it is a deductive approach, the subject has been understood by more general to specific. The conclusion followed logically from available facts related with the project failure (Burney, 2008). Concerning the data type, only secondary data has been used such as journals, websites, professional newspapers, books and industry data (Boom, 2009). Findings, Results and Discussion Findings Airbus had high expectations regarding its most ambitious project of A380. It was a commercial aircraft, intended to guide in the new age of superjumbo airplane. It was also aimed to carry about 800 travellers and crewmembers. The problem with the project arrived during 2006 when the pre-assembled wiring, manufactured in Hamburg, Germany plant failed to be adjusted appropriately in the A380 aircraft frame (Adner, 2006). The wiring was designed by utilising old version of CATIA, an application commonly used in the aviation industry, where the body of A380 was manufactured by using upgraded version of similar application. Unfortunately, these versions were incompatible with each other and therefore, during the project lifecycle phase, the capability to share the design of aircraft between these two plants was conceded. As a consequence, considerable number of fabricated cabins developed could not be adjusted in the airplane. Hence, Airbus had no other option than halting the manufacturing work, delaying the deliveries of Aircrafts for two years and remodelling the wiring system. The expenses of the project failure exceeded about US$6 billion, positioning the program about two years behind the planned schedule (Shore, 2008). Results For any project to be successful, organisations must meet the delivery and production obligations made to its customers. However, Airbus was unable to fulfil its obligations towards the customers owing to the above stated problems causing the Airbus A380 project failure. In the year 2005, Airbus announced technical problems, which was attributed to the internal wiring, resulting in delays in product delivery. Initially the delay was estimated to be for around six months of the planned schedule (Chawla & Ray, 2006; Harvett, 2013). However, in 2006, Airbus proclaimed further postponement of seven months, causing major changes in delivery schedule. Due to the delay in delivery, existing customers started to demonstrate dissatisfaction resulting in a series of cancellation of orders with Airbus (Bloomberg L.P., 2007). Upon completion of preliminary evaluation by the Airbus research team, additional delay in delivery was proclaimed. Singapore Airlines, one of the clients of A380 Aircraft was expected to deliver the products in 2007, which was twenty months late from the original date of delivery that not only affected the interests of Airbus to gain better customer satisfaction through innovation but also inhibited the service efficiency and brand image of Singapore Airlines (San Francisco State University, 2012). The core of the project management problem in Airbus A380 can be categorised as strategic inefficiencies in the incorporation of the various segments with complex wiring system required to function the airplane with metal airframe (Fairchild, 2008). According to internal review, there were two different project design groups using different Computer Aided Design (CAD) applications in order to develop engineering diagram. The development of A380 was a cooperative activity between various manufacturing sites across different nations (Ferrari, 2008). For instance, the electrical system was designed in Germany whereas airframe elements were designed in France. Due to different origin, the organisations in diverse nations inherit different corporate cultures, management styles and technological systems as well as understandings. These differences were hard and costly to overcome owing to the limitations of continuous interaction between these manufacturing units (Gellman & et. al., 2004). Even at Airbus, considerable levels of differences were identified as extremely embedded when the project was initiated. There was an elaborate split between the control of authority, individual competitions and national pride. These aspects resulted in ignorance of the technical issues with respect to different applications. Discussion The Airbus project failure cannot be attributed to technical problem, rather it can be attributed to the senior management’s deficiencies to forecast the certain strategic challenges and plan accordingly to avoid future potential risks. Since the managers of Airbus headquarters stayed devoted to the former components, the organisation was overwhelmed with complex management structure, resulting in slow decision making procedure (Villars & Michaels, 2007). The study of Matlack (2005) also suggested that the project failure problem of Airbus was related with balkanised organisational structure. The ‘insensitive management process’, ‘constant backbiting among managers’ and ‘unresolved internal disagreements’ within the organisation were also blamed for the project failure (The Economist Newspaper Limited, 2007). Concerning the modern management theory, the key factors that resulted in the failure of A380 project are coordination, command and control. Low level of coordination have been observed among the managers of different manufacturing plans. Furthermore, the supervisors were also concerned with their individual organisational cultures and values, rather than the core objectives of the project (Amponsah, 2012). Moreover, low level of control on different operational activities of various manufacturing plants was also apparent from the case study. On the other hand, with respect to Henry Fayol’s fourteen management principles, the problem of A380 project failure is attributed to authoritative lacunas, unity of direction, subordination of individual interests and centralisation. Authority: Although the managers had the authority to carry out different operations, they lacked responsibility to deal with the technical problem of the project along with disputes within the organisation. Unity of command: In order to succeed, employees must have only one direct supervisor. However, with respect to the A380 project, the command of various supervisors were practiced, resulting in diverse objectives. Subordination of individual interests: In any project, the interests of one employee must not be permitted to become imperative than the interests of project. However, in the project of Boeing, the subordinates and managers were concerned with their individual goals and motives, resulting in unfamiliarity of key objectives. Centralisation: In order to maintain proper balance in project, employees must be close to the decision-making procedure. However, in this case, the organisational structure can be observed to have made the decision-making process prolonged, resulting in delays in solving the technical risks of the project (Stare, 2011). Impact of Classic Mistake in Such Failure The classic mistake of such failure have several internal and external effects on Singapore Airline. Internal effects Halt the production line: In several circumstances, the project related aspects can lead to halting the production line (Stanford University, n.d.). The failure of A380 project resulted in halt of production line. As a result, Boing fail to install the wiring system in the ordered products of Singapore Airline. Delivery delay: Project factors can also result in delay in delivery, which is a key cause of failure to these initiatives (Jonathan, 2007; Sambasivan & Soon, 2007). This delay in delivery can result in cost overrun, wastage of resources and rejection of project (Aibinu & Jagboo (2002). The poor project management also resulted in delivery delay to Singapore Airline. The agreement of product delivery postponed by two years of stipulated date (Kerzner, 2014). Financial problems: Poor project management also may lead to financial damages to the organisation in terms of loss of money, resources and time (King, 2013). Following the delivery delay, Airbus faced financial problems due to redevelopment of products. The expenses of delay costs about €4.8 billion for the organisation (The Economist Newspaper Limited, 2007). Slash workforces: Airbus also faced reduction of revenue by €6.3 billion due to failure of A380 project (EADS, 2012). Bad reputation: Failed projects often have negative impacts on the trust of key stakeholders on the organisation (Tsai & et. al., 2011). This low level of trustworthiness results in bad reputation for Airbus in the industry (Dietz & Gillespie, 2012). As a result, the share price of Airbus reduced by 0.4% (Karam, 2012). Figure 5: demonstrates the internal effects of classic mistake in such failure External effects The failure of project A380 also has certain external effects on Singapore airline. Initially, Singapore Airline required replacing the engines with oil traces (Paris, 2010). After competition of the project, several problems remained in the products delivered (Nadim & et. al., 2003). For instance, in the year 2012, Singapore Airlines confronted problems on its navigation system along with the autopilot mechanism in the airplane supplied. Then again, in 2013, the Airbus A380 temporarily swerved off in the runway due to certain technical problems (Wright, 2014). An emergency landing also occurred in Airbus A380 of Singapore Airlines in 2014 due to loss of cabin pressure (BBC, 2014). The project also had contagion impact on the aviation industry as Airbus failed to accomplish the expected revenue. Furthermore, to a certain extent, the mega project also imposed negative impacts on the economic stability of its home country. In the outset, the mistakes made by Airbus enhanced the employment expenses by about 7%, thus significantly reducing the profit margin. Most significantly, the trust of the clients were lost as they felt hesitated regarding the quality of products delivered by Airbus (Harrison, 2014). Recommendations The following recommendations would be helpful for Airbus A380 in order to avoid such classic mistakes, which can lead to failure of mega projects. Elimination of certain manufacturing sites: Airbus can minimise or eliminate some manufacturing sites in overseas nations, not only to maintain balance in production, but also to minimise the production expenses (Gilb, 2006). Control: Airbus can develop A380 only in one nation in order to gain better control on production operation. Redesign: Airbus require redesigning the A380 model by concentrating more on economy class seats by reducing first class seats, since major portion of revenue for Singapore Airlines arrive from economy passengers. Outsourcing: Airbus can overcome the technical problems of the project through outsourcing. Changes in pricing strategy: In order to deal with the financial problem, Airbus can change the pricing strategy of its product to an extent. For example, the selling price of A380 can be changed from US$ to Euro, which can help to reduce the risks of currency fluctuation in turn. Establishment of new organisational culture: Since diverse organisational culture was one of the key reasons for the project failure in A380, Airbus can establish a common organisational culture in its every manufacturing facility, in order to avoid miscommunication and cultural differences for the better alignment of the project facets (Oracle, 2011). Support from senior management: It is recommended that in order to be successful, the senior management of the organisation must place increased attention on the project team members, which will assist in delivering greater significance to organisational goals over individual goals (Green & Gibson, 2010). Conclusion From the research, it can be stated that the key reason for the failure of Airbus A380 project indicated towards managerial faults along with lack of proper production plans. Due to the project failure, the organisation had to face the challenges of negative publicity, financial loss and loss of key clients. It also had negative impact on Singapore Airlines’ brand imaging to the retail clients, causing financial loss not only to Airbus, but also to Singapore Airlines. Various issues, such as oil traces in engines, problem in navigation system and autopilot failure, have been observed, which attribute to management problem of the organisation. In accordance with the modern management theory, effective management is essential in order to prevent project failures. The functions of management, such as along with management principles, can therefore help to deal with project risks in a timely manner and hence, help to make projects successful. References Amponsah, R., 2012. 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