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How Airbus Lost €4.8 Billion: Part II

Friday, December 14th, 2007 by Jonathan Spira

With the release last week of our report  Airbus Hits Turbulence: How Knowledge Sharing Failures Cost Airbus €4.8 Billion,  we are presenting the report’s executive study in two parts.  Part I was presented in last week’s edition of Basex:TechWatch and here on the blog.  We now continue now with Part II.

With significant orders from some of the largest names in the airline industry, including Emirates, Virgin and Lufthansa before A380 production delays set in, Airbus seemed well on its way to establishing itself as the leader in the wide-body jet market. But Airbus’ lack of foresight in project management led to significant multi-national knowledge sharing and collaboration failures.

Far from being a unified company, Airbus’ management and production teams span many European companies. Although Airbus technically unified under the auspices of EADS, Airbus still operates as multiple semi-autonomous companies. The merger did not include significant advancements in how the production was carried out across national borders. Instead the production processes remained fragmented and split, with no significant efforts made to improve the collaboration among the factories. This is a significant problem and the company is being destroyed by a lack of corporate collaboration. Former CEO of Airbus, Christian Streiff, admitted that Airbus was a “juxtaposition of four companies.”

Faced with few alternatives, Airbus announced a massive restructuring plan designed to fix management and production problems, but also help with losses associated with other problems such as the weakness of the US dollar. Termed Power8, the plan hopes to increase profits in spite of the company’s projected losses for the year 2007 due to the costs associated with the program and the A380 disaster.

For years, Airbus was considered an innovator and technology leader. But in a short period of time the company went from darling of the industry to pariah. Airbus S.A.S. can learn from its mistakes and regain its title as a leader in the field. But significant challenges must be overcome. The company has been working on improving how its different national groups collaborate with one another. Ensuring that Airbus operates as a unified concern, where the sharing of knowledge and best practices across borders is the norm rather than the exception, however, is a battle still to be fought, and the outcome is far from certain.

Jonathan B. Spira is CEO and Chief Analyst at Basex.

How Airbus Lost €4.8 Billion: A Cautionary Tale of What Happens When Knowledge Sharing and Collaboration Strategies Fail

Friday, December 7th, 2007 by Jonathan Spira

With the release this week of our report  Airbus Hits Turbulence: How Knowledge Sharing Failures Cost Airbus €4.8 Billion,  we are presenting the report’s executive study in two parts.  It will conclude in next week’s edition of Basex:TechWatch and here in the blog.

In the coming decade, as companies move from the industrial age into the knowledge economy, more and more organizations will find that the cost of not knowing how to manage knowledge work and knowledge workers will have a significant impact on the bottom line.

What is the cost of failing to share knowledge? For years, pundits have suggested that there is a hard currency cost to organizations when there is a knowledge sharing failure, but it was virtually impossible to come up with a hard figure.

Today we have that number.

Airbus has provided us with a clear-cut example of a company’s failure to implement proper knowledge sharing and collaboration tools and techniques costing them dearly.  Moreover, this failure severely impacted the company’s bottom line, enough to threaten its very existence.

The figure: €4.8 billion or $7 billion.

In October 2006, Airbus’ former CEO, Christian Streiff, announced that the production of their highly awaited A380 would be delayed another year, pushing the jumbo jet’s production two years beyond its original schedule.  Airbus has already announced to the financial community that this delay will cost €4.8 billion in lost profit over the next four years. The consequence of ignoring the inherent friction in their knowledge sharing and collaboration processes could be fatal for Airbus, especially in conjunction with the problem of a weakening dollar.

With significant orders from some of the largest names in the airline industry, including Emirates, Virgin and Lufthansa before A380 production delays set in, Airbus seemed well on its way to establishing itself as the leader in the wide-body jet market. But Airbus’ lack of foresight in project management led to significant multinational knowledge sharing and collaboration failures.

But that impression was illusory at best.

Jonathan B. Spira is CEO and Chief Analyst at Basex.


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