By Isha Gupta |
March 12, 2019
The plane of our dreams – the grand Airbus A380, is dead. So are the billions of dollars invested on bringing this grand vision to life. In the entire history of world aviation, this is arguably the most disastrous tale of a change in market dynamics, data interpretation and business planning.
Often, to solve business problems, visionaries and market leaders look for possible disruptive solutions but don’t do a great job of adequately testing their commercial viability. The A380 – a giant drain of precious resources, could have been avoided had Airbus asked the right questions.
The Airbus A380 was conceived as an idea to solve a looming business problem of airport congestion. Back in 2007, it was found that airport traffic doubles every 15 years. What were airlines and other stakeholders to do to solve for this? Airbus ideated that a large plane that could carry a lot more people would ease out the bottleneck and address high costs of plane landing slots. In fact, Boeing and Airbus were once in talks to jointly produce a superjumbo. Boeing backed out, arguing that it was impossible to make flights on such a large aircraft profitable. Airbus leaders, however, were convinced about their idea. They felt that a disruption in airline models was needed. They insisted that the hub and spoke model, with superjumbos connecting the major hubs, was the only way to deal with this situation. Thus, at a cost of $25 billion, the A380 was born.
Here is what we feel Airbus overlooked:
1. Historical data is not enough to predict what will happen in the future:
The aviation industry has been evolving and a lot of airports have spent billions of dollars in stepping up infrastructure. In fact, airport capacity in many cities, especially in Asia, has grown considerably. This is contrary to the above data point that said airport infrastructure will crumble globally.
2. By not asking the right questions to all the concerned stakeholders and using only some information, you see an incomplete picture:
Airbus missed key questions that needed a lot more thought. How will airports accommodate for these superjumbos? With a wingspan of about 80 meters, these planes were quite a handful! Airports needed all kinds of upgrades – wider taxiways, larger holding rooms, bigger hangars, stronger tarmacs etc. While a few airports like San Francisco International Airport did step up their facilities to allow these planes to operate, it came at a cost of over $2 billion, which was not replicable across the globe. Only 60 airports in the world have opened doors to the A380 yet.
The other difficulty that airlines faced with the A380 was selling so many tickets per flight to ensure the plane fills up and makes money. Smaller planes are easier to fill up, proving to be more sustainable in the long run. The A380’s operating costs were double those of other big planes, putting that much more pressure on revenue per flight.
3. Innovation opportunities cannot be evaluated without assessing what customers prefer and how their needs are evolving:
This in our opinion is the most important consideration when trying to innovate. You should not commit to investments of this magnitude without having accurate insights into evolving customer consumption patterns. According to Airbus – “Passenger surveys show that the more people in an airplane, the more it is preferred. The cruise ship companies found the same thing. People like bigger ships rather than small ones.”
Here is a logical argument against this – Let’s say you had a choice between flying from Point A to Point B directly, vs. Point A to Point B via Point C. Would the extra stop matter to you? In such a situation, would you rather go with the first option, because it is a lot more convenient and saves you transit time?
Airbus also planned to have infrequent flights (once daily, as against multiple flights in a day) between hubs but operate larger aircrafts to bring about economies of scale. This put aside customers’ convenience.
There has been a shift in the airline operation model – more and more airlines are flying city pairs- direct routes between cities that never had nonstop services. A new generation of efficient airlines that boast of lower fuel consumption, cleaner emissions and less noise have emerged, and are cheaper for passengers. These could be smaller of course, but they’re hugely popular – as they deliver on convenience and price.
What can we learn from this?
1. Gone are the days when we can govern how customers should make choices. Customers direct how they want to be served, by making expectations clear. Brands must consider how customers are likely to make purchase decisions and design their innovation opportunity maps armed with this intelligence
2. Responsible brands, no matter which vertical they operate in, must rise above simply churning large volumes of data. It’s not just about analyzing data using Artificial Intelligence/Machine Learning, it’s getting to data that reflects the “human mind” and how we mentally account for current and future needs
How can OSG help?
OSG’s DynamoTM uses powerful customer journey analytics to decode how your customers’ choice patterns are evolving and gives you a 360-degree view of your market. By using a combination of cognitive (historical) data and behavioral (future-looking) data, we design more accurate predictive models for you and guide you on the right innovation strategy for your business – one that guarantees profitable growth.
Our underlying proprietary ASEMAPTM methodology uses a forced trade-off mechanism to quantify what matters to your customers and by how much. ASEMAP is more accurate in individual level predictive validity and has shown 35% – 52% improvement over other statistical methods used to understand consumer choice.
Contact us to begin your journey towards customer-centric innovation.