Introduction
Adam Aircraft industries (AAI) is a company that was started by Rick Adam in 1998 (Hedberg and John). Rick Adam started the company out his love for aviation having been raised on Air Force bases. He always wanted to join the Air Force Academy flight program, but he was locked out because of his color-vision deficiency.
After working in several organizations including the Air Force where he ran the Real Time Computer Center at the Kennedy Space Center, in the early 1990s he learned how to fly and this set him on the path to start AAI.
As an entrepreneur, he noticed some of the challenges that were facing pilots and airplanes owners where they were using old planes and the new planes that were available were based on old designs from the 1970s and 1980s. Rick carried an analysis on the aircraft industry and noticed that there was a big opportunity that presented itself. He said:
Every time I went to a cocktail party or barbeque, all the pilots would go off into a corner and start talking pilot stuff. And since everybody was moaning about the lack of new products, I became convinced that there was a huge demand. So in the 90’s I started developing strategies for launching a new aircraft company (Hedberg and John).
His research on the industry saw him focus on issues that were affecting the industry and reasons why nobody was venturing into the business. After making his analysis and consolidating funds for the project, Rick started by employing some of the best work force in the aircraft industry and continually collaborated with the Federal Aviation Authority to create the first aircraft A500, which took its maiden flight in July 2002.
The company displayed their aircraft model to potential customers in different shows and in October 2002, the company announced plans to introduce other aircraft models. This paper will look at the problems that faced the company and the aircraft industry; solutions presented by the company and finally offer recommendations.
Discussion
Problems that faced the company and the aircraft industry
The aircraft industry was facing a lot of trouble when Rick Adams began his venture. Between 1978 and 1992, the aviation industry had experienced a 95% decline in sales and many people over 100,000 had lost their jobs. In the same period, aircraft manufacturers had spent a lot of money trying to defend them after being sued for product liability.
Many aircraft manufacturers were closing shop and they were spending as much money as they had spent to develop new aircraft in these litigation processes. This was to change in 1994, when Congress enacted the General Aviation Revitalization Act, but the damage many aircraft manufacturers had suffered made potential investors skeptical about the industry. The enactment was meant to protect aircraft manufacturers from possible litigation if the plane in question was older than eighteen years (Hedberg and John).
For the company, the greatest challenge was working with limited resources unlike their competitors who were working on huge budgets. Rick was self-funding and paying for most of the initial costs, while the Eclipse 500 project, a competitor, had over $400 million at its disposal to develop a light business jet (Hedberg and John). After listening to industry, experts Rick noted that he was going to face a lot of challenges in funding the project. He said:
I had recently heard from an industry expert that the standard budget for a new airplane project is about $250 million. Since there has been so little success in this industry to date, it would be nearly impossible to raise that kind of money for a start up airplane company like ours. That’s a long way from $250 million, but still, we knew that the only way we could make financing achievable was by cutting development costs by at least seventy five percent (Hedberg and John).
In his initial survey, John had noticed that many potential investors were weary of the aircraft manufacturing industry and would often opt to invest their money in biotechnology, telecommunications, and other industries that were regarded as safe. To compete with other established companies such as Lockheed, Cessna and Beechcraft, the company had to be innovate and this presented a challenge because some of the things they were proposing had not been done before and, therefore, ran the risk of being failures (Hedberg and John).
The company had to prove also to detractors that they could actually pull off installing all the models on essentially the same airframe. According to the detractors, the company was being too ambitious and this was just wishful thinking. Critics felt that by using the same single wing and empennage design would mean that performance by the planes made would be compromised (Hedberg and John).
The company faced a challenge in getting the Type Certification from the FAA. The FAA is mandated to make sure that the airplanes manufactured by companies met certain requirements. This meant that the company, AAI, had to spend a lot of money and time to meet these specifications and test the products to the FAA specifications (Hedberg and John).
The company had to come up with a design and an aircraft that was going to be appealing to both owner operated and professionally flown customers. This was a hard thing, because both customers had different needs and would mean sacrificing one aspect of the plane to satisfy needs of one type of customer at the expense of the other.
Solutions presented by the company
The enactment of the General Aviation Revitalization Act in 1994, revitalized the aircraft industry that was facing a lot of problems because of cases filed against them. To complete the project successfully with the limited funding, the company addressed the cost that they expected to incur during development.
This saw the company adopting new strategies including buying their own mill machine and adopting some of the latest technology available. This was meant to reduce the cost of development by over 75%. Rick hired the best work force in the industry that was knowledgeable about aircraft manufacturing and development.
To reduce the time taken to develop the aircraft, the company instituted a 24-hour scheduling program, which Rick borrowed from his background in computer (Hedberg and John). This was important if the company was going to roll out a new aircraft design before competitors and therefore, establish themselves in the market. The company would also increase its output as well as reduce the amount of time that is wasted.
The company also benefited from the introduction of personal computers, which allowed them to carry out experiments and make designs changes at very low prices. Compared to their competitors such as Lockheed who had developed multimillion dollar design tools, the computer could spend as little as $3000 and still be able to make models of their aircrafts.
The company realized that they could do virtually the same things as their competitors even though they had limited resources and all this was thanks to the advancement in technology and introduction of powerful personal computers and software.
Although adoption of the 24-7 working concept was revolutionary in the industry, the company realized that it would not be enough to give them an edge over their competitors. To make the company more efficient the company adopted yet another concept from the computer industry that came to change the face of the aviation manufacturing.
PCs personal computers are developed around a common set of rules as to how the parts interact with each other. That way, you can change the keyboard, the disc drive, the screen, whatever you want, and it won’t tear up your memory or your software; that’s called modular architecture.
There has been little progress in modular architecture in airplane-until now. We are building enormous modularity into our design so we can do things like move the wing location, modify the cabin size, change the power plants; all kind of things. What that means is that we will bring this first plane to certification status for about $50 million bucks. For another ten million, we’ll adjust the modules slightly and get a jet. For another five million we get a turbo prop (Hedberg and John).
This move was very important because it would cut the costs incurred in modeling new aircrafts. To show to detractors that this was actually possible, the company tested the airframe on their “smart tunnel.” The “smart tunnel” allowed engineers in the company to shift the location of the wing along the fuselage without compromising on the center of gravity of the aircraft.
The engineers were also able to modify the underlying airframe so that it could accommodate a wide range of engine choices and configurations. This engineering move would also allow the company to leverage their research and development spending on at least three models of aircrafts (Hedberg and John).
To meet the diverse needs of the clients, the company designed their aircrafts such that serviceability would be easy. One feature of the first aircraft they made, the A500, allowed access to the systems such that during inspections or replacement they could easily be accessed. A great deal of engineering work was done on the aircraft to reduce the amount of time that it would take to service the aircraft.
The professionally flown market segment wanted a craft that would meet the needs of their customers. To them the most important thing was comfortability and baggage space. They also required planes that were pressurized so that they could fly over weather. This was different from the needs of owner-operated segment that focused on the performance of the aircraft.
This segment looked at the handling capability of the plane and the electronic systems used in the aircraft. To meet the needs of these clients the company needed to design their aircrafts in a way performance of the planes was uncompromised and better than that of other aircraft manufacturers. When dealing with owner-operated customers John noted that, “Pilots are also hesitant to adopt something that is new. We are not Cessna, we are not Beechcraft and we are not piper.
Those guys have been around forever, and they have built tons of planes” (Hedberg and John). With this comment, the company needed to distinguish their aircrafts from the rest. According to John, the unique design modularity would play an important role in meeting the needs of both customer segments.
To avoid problems in the certification process the company worked hand in hand with the FAA. Throughout 2001, before the first A500 took its maiden flight, the company was visited by government officials and industry groups (Hedberg and John). This was important because the project would fail during the final period of certification if it did not invite government authority body to inspect its progress and the aircraft.
SWOT Analysis of the Company
Strengths
The strengths of the company lie on its capable workforce and ability to adopt new technologies and operation concepts. From the inception of the company, Rick Adam sought to employ the best work force available. This has helped the company to meet its deadlines and deliver some of the best planes. The adoption of the 24-7 working program and using new technologies has helped reduce the cost and time taken in research and development.
Weaknesses
The major weakness of the company is limited resources. The company is working with limited funds and this can result to it not finishing the project or throw it into massive debts. The company is also very ambitious and its capability to fund its other projects may be hindered by lack of funds.
Opportunities
There are various opportunities that the company can exploit to their advantage. First, the company has been able to produce a plane at a very low price compared to their competitors. This means that it can use this to sell its aircraft cheaply, and therefore establish itself in the market. Another opportunity that can be exploited by the company is its capability to remodel its aircrafts to suit the customers need. This will help it meet various needs of different customers and therefore increase its sales.
Threats
The greatest threat that the company is facing is not being able to deliver both models, A500 and A700, on time. This threat is compounded by lack of funds, which can hinder the operations of the company. Another threat the company faces is that most of their proposal about using the same airframe for different aircraft models is in the experimental stages and may fail once tried. If it fails the company stands to lose a lot of time and funds invested.
Recommendations
The company should cut down on some of the projects it is taking and focus on delivering one product at a time. The company is taking on too many projects concurrently even though it has difficulty funding its project. Plans to introduce the A700 model should be put on hold, because the company has not yet completed the A500 project. The company runs the risk of being heavily indebted if it continues fund projects before it realizes profit from previous ventures.
General Ideas
The company should look for investors to avoid finding themselves at situations where projects are stalling, because of lack of funds. The company should do an analysis of which project is more lucrative, the A500 or the A700, and concentrate on one. Companies have been known to fail because of lack of funds or not specializing on one product. Diversity is good, but it should not compromise the ability of a company to deliver primary goods or products.
From the case study, we do not see how the company plans to market their aircrafts. What we see is that they have identified potential customers and even attempted to meet their needs. The company should formulate a comprehensive strategy to see that they do not only focus on manufacturing the aircrafts, but also selling them. The company can try to work with aircraft distributors who can help in marketing and distributing the aircrafts.
Conclusion
Adam Aircraft Industries has proven that even with limited funding, a project can be successful if planned well. The company has faced a lot of competition and problems, but the dedication of the funder and the employees has made the project a success. From the case study, we see that it is important for companies to embrace new technologies and concepts if they are going to be successful.
The company has borrowed concepts from other industries that have helped it to grow and complete projects. The company also shows the need for companies to adopt a 24-7 working program so that they can meet deadlines and avoid stall ups. The development of the company shows the need of investors to do thorough research on a product and identify what the client is looking for.
Works Cited
Hedberg, Carl and John Hamilton. Adam Aircraft. Babson College: San Francisco, 2004. Print.