FLYHT: Crossing the Chasm - Case Solution

Executive summary

FLYHT is having problems with expanding market share for AFIRS 220, the company’s flagship product that is superior to current solutions, FDR & ACARS, for an airline information system.

Despite the fact that AFIRS 220 has clear advantages over ACARS in terms of cost savings, effectiveness, efficiency, and risk mitigation, the product faced a high level of market resistance and thus only captured 0.35% market share over 8 years since its introduction.

To successfully enter the mainstream market, FLYHT should consider

1. Focus its resources on targeting and penetrating one particular segment within the early majority market, using this segment as a base for reference and support to enter other segments;
2. Collect and publish result data from “the base” to ensure the value proposition of its product;
3. Provide support and help address key concerns that cause market resistance;
4. Partner with venture capital firms for stronger financial stability;
5. Raise safety issues to create leverage; and
6. Optimize product package to prepare for late majority market penetration.

Total available market (TAM) and FLYHT’s market share

Based on FLYHT’s 2004 business plan, the total available market for FLYHT’s products is estimated at 57,712 aircraft (Exhibit 1). From 2004 to 2012, FLYHT’s systems were installed and operated on a total of 200 aircraft, representing a 0.35% market share for FLYHT.

The tiny market share that FLYHT captured over 8 years proves that the company was having problems with crossing the chasm from the Early adopter market to the mainstream market (Early majority).

Comparison between AFIRS 220 and current market solutions

Currently, available means of communication and data transmissions include FDR, ACARS, and FLYHT’s AFIRS 220. Exhibit 2 shows that AFIRS 220 clearly has significant advantages over ACARS & FDR. Potentially, AFIRS can replace both systems; however, since FDR is required by World aviation authorities, it seems AFIRS 220 can only compete with ACARS:

Lower cost of installation: while the cost to install AFIRS 220 is only $50,000 per unit, it costs an airline $150,000 to install ACARS on each airplane;

Better technology with more capability: ACARS offers short messaging communication (100 – 200 characters) and needs ground-based radio towers for transmissions (line-of-sight technology). Data transferred through ACARS is mostly weather updates, air traffic delays, clearances, and flight plans. Operational data might be included but very limited due to technological constraints.

Meanwhile, AFIRS 220 utilizes satellite-based technology to offer a better two-way communication method with real-time operational data. The effective range is vast, considering satellite coverage and no need for line-of-sight requirements. In addition, AFIRS 220 has a clear advantage over ACARS in developing countries, in which ACARS is not useable due to the lack of VHR radio infrastructure.

Huge financial gains & risk mitigation:

a) Revenue increase: AFIRS 220 helps save two minutes of error on each aircraft/cycle. This means an airline with 18 aircraft and 140 cycles a day will save an extra…