Ask someone to name a great British engineering company, and they will almost certainly say Rolls-Royce. Alongside the luxury motor company it split from in the 1970s, it has a heritage of quality and innovation stretching back 135 years, perhaps best exemplified by the world-class Merlin engine that powered Allied aircraft to victory in the Second World War.
But in recent years the FTSE 100 firm has stuttered. After paying more than £600m in fines for its role in a large-scale bribery scandal, a series of profit warnings led to CEO John Rishton being replaced in 2015 by Warren East and the company is currently embroiled in a long-running and costly battle to fix a fault with its Trent 1000 engines.
East’s turnaround has focused on simplifying Rolls-Royce’s five businesses into three: defence, aerospace and mechanical systems. It’s started to show flickering signs of success: in August 2019, the company announced its half year pre-tax losses narrowed to £791m from £1.2bn in the same period last year.
Ben Story is the man tasked with working out what the next stage of Rolls-Royce’s strategy looks like and how the company will get there. When he joined as Strategic Marketing Director in 2016, he was briefed by East to "look to the future and try and make sense of it."
In less ambiguous terms, the former investment banker runs the company’s innovation lab alongside the company’s CTO Paul Stein. It’s their job to look outside the organisation, assess how it might change and then ensure that the three business units are working in that direction.
Speaking to Management Today from a Cornish holiday home, Story has locked himself away for three days to "deep dive" before planning the next stage of the FTSE 100 giant’s strategy.
Your job is to take a much longer-term view than is fashionable in the digital era. Why is that?
"If you look out 10, 20 or even 30 years then you can really clarify the direction that you’re heading in.
"For example, we could sit around the table and have a debate about the importance of electric flight in five years. I will have a load of people who are smarter than me saying in five years’ time there’s this issue, these constraints or ‘oh at the moment it never matches kerosene as a fuel’ etc.
"It’s not going to happen for ages so you can end up not having a strategy, or not seeing the threats, and kick the can down the road. So we try to be really bold in terms of where we set our north stars.
"It’s quite hard to be brave over three or five years because there’s a lot of personal risk involved, but you’re not going to look silly if you make bold statements over 20 years.
"The second stage is to produce a map of the terrain you need to cross and the system that you’re working with. Don’t do it in too much of a descriptive or constraining way, but in a way that makes it empowering."
What happens if things change? Innovation surely requires letting some things fail.
"We’re trying to avoid having huge, really detailed, pre-planned schemes that take forever to pull together and are redundant as soon as you start them. We just try and do a series of agile projects.
"If everyone’s got the same map and is heading in the same direction, those agile projects add up to more and more progress. Sometimes that north star or framework shifts a bit, but that’s fine. You can keep running these agile projects."
How do you ensure that everyone is pulling in the same direction?
"Of course if you’re building a new gas turbine, there are some really strict criteria for processes and systems, some of which are regulated.
"Some processes we still do in a traditional way. We have what you could call a product management office, which might meet once a month, every fortnight or even weekly. It’s not quite like the old days when there would have been a whole load of dashboards, progress reports and KPIs. The agile projects kind of self-regulate but you have to go to the office to get it approved so there’s control there.
"We certainly encourage people to have ideas, but we need to make sure they align properly and aren’t duplicating work elsewhere, so that different groups can work together and we can prioritise things. You get a real drum beat. So if something's failing, which is fine, then you can shut it down pretty quickly or pivot to try and salvage it. "
So what is the future for Rolls-Royce?
"When we sat down to think about what the company wanted to do and work towards that, there were two big themes that really mattered. One was electrification and the other was digitisation.
"That’s what our R2 (squared) data lab is doing. We’re trying to create a digital twin of the whole organisation. When you’ve got data you can turn that into new insights around decision excellence, new processes or even totally new business models.
"Rolls-Royce has always been talked about as a British engineering company, but we’re much more than that now, we’re a global industrial technology company.
"And we don't just want to be an industrial technology company, we want to be the world's leading industrial technology company. And ‘leading’ doesn't necessarily mean the world's biggest, or most profitable or the one with the most employees."
Has Brexit had an impact on your forecasting?
"We’re very fortunate that the industry is outside all global tariffs. Our power systems business is based in Germany and our defence business has always been heavily regulated with export controls and very close government support.
"We are a global business. There are some operational issues*, but strategically we should not be impacted by Brexit.
"Whether you think it's good or ill, Brexit has actually got people to open their eyes a bit more to think about the broader world, think about getting out and exporting and being more global. We find that genuinely thrilling."
Innovation lessons from Rolls-Royce
- Think in decades as well as years
- Set north stars that everyone can aim for
- Lots of small agile changes make for major progress
Image credit: Courtesy of Rolls-Royce PLC