Airbus 380

It is not very often that we can attribute a project failure directly to a culture that
management has tried to change but for political reasons finds it impossible to do so.
The project failure at Airbus is one such example.
Airbus
When Airbus was founded in 1970 two major objectives prevailed. The first was to
create a consortium of existing companies whose facilities had been scattered at
sixteen sites in four European countries including France, Germany, Britain, and Spain.
The second was to transform these existing companies into a modern and integrated
organization capable of competing more effectively with American companies that
included such giants as Boeing, McDonnell Douglas and Lockheed. Today, the only two
surviving commercial aircraft companies are Airbus and Boeing. Airbus now employs
about 57,000 people
While this strategy did bringing sixteen organizations together, these disparate
business units had trouble functioning as an integrated organization from the very
beginning. Even by 2001, it was still seen as a loosely knit organization. A Financial
Times article argued that the retention of production and engineering assets by the
separate partner companies made Airbus nothing more than a sales and marketing
company (Kevin, Survey Europe Reinvented: Airbus has come of age. Financial
Times, February 2, 2001). An article in Aviation Week and Technology contended that
while the companies collaborated on design they were unwilling to share financial data
and sought to maximize the prices for the goods they provided to other business units
in the consortium (Sparaco, Pierre, Climate Conducive for Airbus Consolidation,
Aviation Week and Space Technology, March 19, 2001). Unfortunately, there was little
evidence that the goals and objectives of the consortium had been met.

Airbus Prepares for the A380

In 2000 Airbus undertook its most ambitious project ever, the A380. It was to be an
aircraft designed to usher in a new era of superjumbo jets, capable of carrying up to
853 passengers and crew. Launch date was to be 2002.
At this time the company also announced that it had taken additional steps to
integrate the consortium and announced a new administrative structure. This
structure would physically locate top managers from each of the sixteen sites in one
location. It was a reorganization that would put an end to the conflict and crosspurposes that often occurred with the more independent, informal, and geographically
dispersed organization.
Yet, the change would prove to be inadequate.
Wiring Harness Fails to Install
Production problems began to surface in the spring of 2005. The French and German
production facilities began blaming each other publicly when deliveries were
postponed from the fall of 2005 to the spring of 2006. Then, in the fall of 2006, the
pre-assembled wiring harnesses produced in the Hamburg plant failed to fit properly
into the frame when the plane was in the assembly stage in the Toulouse plant.

Hamburg had designed the wiring harnesses using an older version of CATIA, software
commonly used in the aircraft industry. The assembly plant in Toulouse, however, used
the most up-to-date version of the software. Unfortunately, there were issues of
compatibility between both versions and one consequence was that design specs
could not flow electronically between the two plants. As a result, when it came time to
install hundreds of miles of wiring cables into the fuselage of the aircraft in Toulouse,
they failed to fit. Airbus was then left with no choice but to halt production, postpone
deliveries of the aircraft for two years, and redesign the wiring system. The cost,
expected to exceed $6 billion, would place the program over two years behind
schedule. It was not until October 15, 2007 that the first aircraft was delivered to
Singapore Airlines.

Why Did the Project Fail?

An article in the Wall Street Journal suggested that the failure could not be attributed
to a technical problem nor could it be attributed to project managers. They suggested
that the problem was much larger and placed the blame at the very top. They
concluded that because managers at headquarters remained loyal to their former
constituents, the company was plagued with a convoluted management structure
that repeatedly slowed decision making (Gauthier-Villars, D. and Michaels, D., EADS
Considers a Simple Management Structure, WSJ, July 9, 2007, p.A3).
Business Week also pointed the finger at top management. It suggested that the
problem was not with the software but with a Surprisingly balkanized organization
(Matlack, Carol, Business Week Online, Airbus: First Blame the Software, October 5,
2006).
Others blamed an unresponsive management process, continual squabbling among its
executives, and unresolved internal disputes (Head to Head in the Clouds, The
Economist, January 13, 2007, p.75.).
But the problems at Airbus were not confined to the A380. EADS announced a sixmonth delivery delay for the A400M, a military transport plane. This delay would cost
EADS another $2 billion.
Problems continued. In an additional setback, extensive design changes were
announced for the A350, a mid size jet. These changes were announced after several
major customers found the design of the aircraft failed to meet their needs and that
unless the aircraft were redesigned, interest in the plane would fall.
The delay of the A380 launched significant concern both within EADS, among
stockholders, and within the international business community. On July 2, 2006, EADS
chief Noel Forgeard and Airbus CEO Gustav Humbert announced their resignations.
Then on October 9, 2006 Christian Streiff, Humberts successor, resigned because
management at EADS would not give him the support and authority necessary to
implement a reorganization plan for Airbus.
It is always tempting to blame project failures on technical issues. Was it really the
failure to update the CATIA software? Unfortunately, in this case , the blame belongs
elsewhere. If indeed the software was critical to the integration and design of the
aircraft which it certainly was then why was it not coordinated from the top. After
all, this is what the consortium was expected to do best. Could it be that
management, although they succeeded in moving executives to a central location in

Toulouse, failed to move the culture off dead center? So the blame, as is often the
case, needs to focus on managements contribution to the project failure.
But how can this be fixed, so that the consortium becomes more successful in the
future? What have we learned from this project failure that can be applied to Airbus
and to other project environments?
The most important lesson is that organizational culture matters and without an
effective culture projects and their project managers are condemned to produce
mediocre results or fail altogether.
Lesson Learned: Organizational Culture is Critical to Success

Organizational culture is a system of shared beliefs, values and assumptions that

defines a group of individuals working in an organization. But values, beliefs and
assumptions are, by themselves, academic and rather vague. Gray and Larson
(Project Management, McGraw-Hill, 2008) attempt to be more concrete and identify
10 primary characteristics that contribute to a positive organizational culture, one
that is more likely to produce successful projects. Some cultures, of course, do better
in each of the areas than others.

1. Member Identity- The degree to which employees identify with the organization as
a whole rather than with their specific job or professional expertise.
2. Team Emphasis- The degree to which team activities are organized around groups
rather than individuals.
3. Management Focus- The degree to which management decisions take into
account the effect of outcomes on people within the organization.
4. Unit Integration- The degree to which units within the organization are
encouraged to operate in a coordinated or interdependent manner.
5. Control The degree to which rules, policies, and direct supervision are used to
oversee and control employee behavior.
6. Risk Tolerance The degree to which employees are encouraged to be
aggressive , innovative, and risk seeking.
7. Reward Criteria The degree to which rewards such as promotion and salary
increases are allocated according to employee performance rather than seniority,
favoritism, or other nonperformance factors.
8. Conflict Tolerance- The degree to which employees are encouraged to air conflicts
and criticisms openly.
9. Means Versus End Orientation- The degree to which management focuses on
outcomes than on techniques and processes used to achieve those results.
10. Open-Systems Focus- The degree to which the organization monitors and
responds to changes in the external environment.

Using these characteristics as reference points, we can reasonably conclude that

Airbus suffered from shortcomings in member identity, unit integration, and conflict
tolerance. Consider member identity. Team members apparently did not identify with
the organizational as a whole and were unwilling to set aside partisan politics to focus
on the task of designing and developing a world-class aircraft. Instead, their own self
interests dominated.

Consider also integration between units. At Airbus it was conspicuously absent and
the failure of the harness to fit into the aircraft frame confirms that these business
units failed to operate in a coordinated manner. Finally consider conflict tolerance. It
is reasonable to conclude that conflict within and among divisions was not encouraged
even at headquarters in Toulouse. Instead, mangers went along so that they could get
along. But in bureaucratic organizations public conflict is often minimized. Indeed, in
the short run it is much more comfortable for everyone to get along. It is the path of
least resistance. Unfortunately project results are measured by results not process.

Without an appropriately supportive project culture there is no silver bullet, no

methodology, and no kit of tools that can consistently minimize the risk of project
failure.