Only three ways …

Oh yes – from the last post, who is this Sir John Rose?

He stood down from RR at the top of his game in a blaze of glory in March 2011 after having been with the firm from 1984 and Chief Executive from 1996.

He is one of a small group at the top of Rolls-Royce plc who, over the last couple of decades have transformed the engineering company. It has changed by expanding its product ranges, entering new markets whilst retaining a global reputation and financial strength.

Sir John Rose - Captain of Industry
Sir John Rose – Captain of Industry

The striking thing, at least to The Lad, is that he was apparently not trained as a professional engineer. The Daily Telegraph newspaper related that, born in Africa, he came to Scotland gaining an MA in psychology; it is not clear whether that was the subject of his first degree. Then he went into banking of all things. Eventually he fetched up in 1984 at RR.

On his watch, the achievements have been spectacular. Clock this! At the end of 2010 The Daily Telegraph told us that

“In 1995 – the last full year before Sir John Rose became chief executive – the company’s order book was worth £7.6bn. Today it is worth £58.3bn”

“Rolls-Royce’s figures speak for themselves. In 1995 – the last full year before Sir John became chief executive – the company’s order book was worth £7.6bn. Today it is worth £58.3bn. Revenue in 1995 was £3.6bn, today it is £10.1bn and is expected to double in the next decade. In 1995 profit was £175m compared to £915m today. Since 1996 the company’s share price has increased from 188p to 603.5p.”

Note that in mid 2013, that share price has doubled again. This is in global engineering.

His speech to the RSA offered a striking insight. He said:

“ … there are only three ways to create wealth – you can dig it up, grow it or convert something in order to add value. Anything else is just moving it about.”

That thought floodlights the churning in the modern, economic world: much of which is as useful to UK prosperity as the driven fluff. There was much more: it was a fabulous fighting speech. Read it and run with it.

The Lad found it striking but significant that in all the video footage of the speech he found on the net, the beginning has been cropped and only starts at the paragraph that has the first mention of “… politicians, economists and commentators …”. Good Grief, so many of the media only twitch or open their eyes when these people are mentioned.

There are other points about John Rose’s term as CEO of Rolls-Royce plc. On his watch the preferred principle of commerce with airlines changed and the RR business model changed with it – for the better.

Engine makers, during most of the Twentieth Century, sold their machines to the aircraft makers and, in the aircraft, on to the airlines. The airlines had their own engineers to maintain the engines, repair them as necessary and to buy new engines when they reached the end of the engine life. All this is a continuous, organisational, burden for the airlines. This approach was replaced by a new model: “Power by the Hour”. In effect the engine maker promised that he would take the full responsibility to provide the necessary power in the aircraft.

It is not clear whose idea “Power by the Hour” was originally but certainly it came to full, Roll-Royce flower under his leadership. It lead to increased engineering design emphasis on reliability and easier maintenance now that it affected the RR financial performance directly instead of being sloughed off onto the airline. The Lad is reminded of a saying that probably dates back to Henry Ford “An engineer does for 50c what any fool does for a dollar”.

It was a win-win result. The airlines were more comfortable with a cash outflow that did not vary [accountants do not like uncertainty] and, as a result, RR got more engine orders and its financial turnover grew massively.

He likes less what an accountant once told him. An engineering business [or any business for that matter] is merely a process linking buying money cheap and selling it dear. In the heat of recent financial meltdowns, that seems to be too abstract, ungrounded and risky.

All this is engineering too.

Engineering is one of the three drivers advancing the human race. This blog describes professional engineering in the real world as it is not well served by the current media. An engineer is posting: not a ‘scientist’. Its target is the career seeker and also the general public.


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