Tag Archives: Mesh Collaboration

What I like about jet engines

Rolls-Royce{{1}} (the engineering company, not the car manufacturer) is an interesting firm. From near disaster in the 70s, when the company was on the brink of failure, Rolls-Royce has spent the last 40 years reinventing itself. Where it used to sell jet engines, now the company sells hot air out the back of the engines, with clients paying only for the hours an engine is in service. Rolls-Royce is probably the one of the cleanest examples of business-technology{{2}} that I’ve come across; with the company picking out the synergies between business and technology to solve customer problems, rather than focusing on trying to align technology delivery with a previously imagined production process to push products at unsuspecting consumers. I like this for a few reasons. Firstly, because it wasn’t a green fields development (like Craig’s List{{3}} et al), and so provides hope for all companies with more than a few years under their belt. And secondly, as the transformation seems to have be the result of many incremental steps as the company felt its way into the future, rather than as the result of some grand, strategic plan.

[[1]]Rolls Royce[[1]]
[[2]]Business-Technology defined @ Forrester[[2]]
[[3]]Craig’s list[[3]]

A Rolls-Royce jet engine

I’ve been digging around for a while (years, not months), looking for good business-technology case studies. Examples of organisations which leverage the synergies between business and technology to create new business models which weren’t possible before, rather than simply deploying applications to accelerate some pre-imagined human process. What I’m after is a story that I can use in presentations and the like, and which shows not just what business-technology is, but also contrasts business-technology with the old business and technology alignment game while providing some practical insight into how the new model was created.

For a while I’ve been mulling over the obvious companies in this space, such as Craig’s List or Zappos{{4}}. While interesting, their stories don’t have the impact that they could as they were green fields developments. What I wanted was a company with some heritage, a history, to provide the longitudinal view this needs.

[[4]]Zappos[[4]]

The company I keep coming back to is Rolls-Royce. (The engineering firm, not the car manufacturer). I bumped into a story in The Economist{{5}}, Britain’s lone high-flier{{6}}, which talks about the challenge of manufacturing in Britain. (Which is, unfortunately, behind the pay wall now.) As The Economist pointed out:

A resurgent Rolls-Royce has become the most powerful symbol of British manufacturing. Its success may be hard to replicate, especially in difficult times.

[[5]]The Economist[[5]]
[[6]]Britain’s lone high-flier @ The Economist[[6]]

With its high costs and (relatively) inflexible workforce, running an manufacturing business out of Britain can be something of a challenge, especially with China breathing down your neck. Rolls-Royce’s solution was not to sell engines, but to sell engine hours.

This simple thought (which is strikingly similar to the tail of the story in Mesh Collaboration{{7}}) has huge ramifications, pushing the company into new areas of the aviation business. It also created a company heavily dependent on technology, from running realtime telemetry around the globe through to knowledge management. The business model — selling hot air out the back of an engine — doesn’t just use technology to achieve scale, but has technology woven into its very fabric. And, most interestingly, it is the result of tinkering, small incremental changes rather than being driven by some brilliant transformative idea.

[[7]]Mash-Up Corporations[[7]]

As with all these long term case studies, the Rolls-Royce story does suffer from applying new ideas to something that occurred yesterday. I’m sure that no one in Rolls-Royce was thinking “business-technology” when the company started the journey. Nor would they have even thought of the term until recently. However, the story still works for me as, for all it’s faults, I think there’s still a lot we can learn from it.

The burning platform was in the late 60s, early 70s. Rolls-Royce was in trouble. The company had 10% market share, rising labour costs, and was facing fierce competition from companies in the U.S. Even worse, these competitors did not have to worry about patents (a hangover from the second world war), they also had a large domestic market and a pipeline of military contracts which put them in a much stronger financial position. Rolls-Royce had to do something radical, or facing being worn down by aggressive competitors who had more resources behind them.

Interestingly, Roll-Royce chose to try and be smarter than the competition. Rather than focus on incremental development, the company decided to designed a completely new engine. Using carbon composite blades and a radical new engine architecture (three shafts rather than two, for those aeronautical engineers out there) their engine was going to be a lot more complex to design, build and maintain. It would also be a lot more fuel efficient and suffer less wear and tear. And it would be more scalable to different aircraft sizes. This approach allows Rolls-Royce to step out of the race for incremental improvements in existing designs (designing a slightly better fan blade) and create a significant advantage, one which would take the company’s competitors more than the usual development cycle or two to erase.

Most of the margin for jet engines, however, is in maintenance. Some pundits even estimate that engines are sold at a loss (though the manufactures claim to make modest margins on all the engines they sell), while maintenance can enjoy a healthy 35%. It’s another case of give them the razor but sell them the razor blades. But if you give away the razors, there’s always the danger that someone else may make blades to fit your razor. Fat margins and commoditized technology resulted in a thriving service market, with the major engine makers chasing each other’s business, along with a horde of independent servicing firms.

Rolls-Royce’s interesting solution was to integrate the expertise from the two businesses: engine development and servicing. Rather than run them as separate businesses, the company convinced customers to pay a fee for every hour an engine was operational. Rather than selling engines, the company sells hot air out the back of an engine. This provides a better deal for the customers (pay for what you use, rather than face a major capital expense), while providing Rolls-Royce with a stronger hold on its customer base.

Integrating the two business also enabled Rolls-Royce to become better at both. Maintenance data helps the company identify and fix design flaws, driving incremental improvements in fuel efficiency while extending the operating life (and time between major services) tenfold over the last thirty years. It also helps the company predict engine failures, allowing maintenance to be scheduled at the most opportune time for Rolls-Royce, and their customers.

Rolls-Royce leveraged this advantage to become the only one of the three main engine-makers with designs to fit the three newest airliners in the market: the Boeing 787 Dreamliner, the Airbus A380 and the new wide-bodied version of the Airbus A350. Of the world’s 50 leading airlines, 45 use its engines.

Today, an operations centre in Derby assess, in real time, the performance of 3,500 jet engines enabling to Rolls-Royce to spot issues before they become problems and schedule just-in-time maintenance. This means less maintenance and more operating hours, fewer breakdowns (and, I expect, happier customers), and the operational data generated is fed back into the design process to help optimise the next generation of engines.

This photograph is reproduced with the permission of Rolls-Royce plc, copyright © Rolls-Royce plc 2010
Rolls-Royce civil aviation operations in Derby

This service-based model creates a significant barrier to competitors for anyone who wants to steal Rolls-Royce’s business. Even if you could clone Rolls-Royce’s technology infrastructure (hard, but not impossible), you would still need to recreate all the tacit operational knowledge the company has captured over the years. The only real option is to recreate the knowledge yourself, which will take you a similar amount of time as it did Rolls-Royce, while Rolls-Royce continues to forge ahead. Even poaching key personnel from Rolls-Royce would only provide a modest boost to your efforts. As I’ve mentioned before{{8}}, this approach has the potential to create a sustainable competitive advantage.

[[8]]One of the only two sources of sustainable competitive advantage available to us today @ PEG[[8]]

While other companies have adopted some aspects of Rolls-Royce’s model (including the Joint Strike Fighter{{9}}, which is being procured under a similar model), Rolls-Royce continues to lead the pack. More than half of its existing engines in service are covered by such contracts, as are roughly 80% of those it is now selling.

[[9]]The Joint Strike Fighter[[9]]

I think that this makes Rolls-Royce a brilliant example of business-technology in action. Rolls-Royce found, by trial and error, a new model that wove technology and business together in a way that created an “outside in” business model, focused on what customers what to buy, rather than on a more traditional “inside out” model based on pushing products out into the market that the company wants to sell. You could even say that it’s an “in the market” model rather than a “go to market” model. And they did this with a significant legacy, rather than as a green fields effort.

In some industries and companies this type of “outside in” approach was possible before advent of the latest generation of web technology, particularly if it was high value and the company already had a network in place (such as Rolls-Royce success). For most companies it is only now becoming possible with business-technology along with some of the current trends, such as cloud computing, which erase many of the technology barriers.

The challenge is to figure out the “in the market” model you need, and then shift management attitude. Given constant change in the market, this means an evolutionary approach, rather than a revolutionary (transformative) one.

The revolution will not be televised

Or the importance of being both good and original.

While I’m not a big fan of musicians reworking past hits, I’m beginning to wonder if we should ask Gil Scott-Heron to run up a new version of The Revolution Will Not Be Televised. He made a good point then: that real change comes from the people dealing with the day-to-day challenges, not the people talking about them. His point still holds today. Web 2.0 might be where the buzz is, but the real revolution will emerge from the child care workers, farmers, folk working in Starbucks, and all the other people who live outside the limelight.

There appears to be a disconnect between the technology community—the world of a-list bloggers, venture capital, analysts, (non-)conferences, etc.—and the people who doing real things. The world we technologists live in is not the real world. The real world is people going out and solving problems and trying to keep their head above water, rather than worrying about their blog, twitter, venture funding, or the new-new thing. This is the world that invented micro-credit, where fishermen off the african coast use a mobile phones to find the market price of their cash, and where farmers in Australia are using Web 2.0 (not that they care what it is) to improve their farm management. These people don’t spend their time blogging since they’re too busy trying to improve the world around them. Technology will not change the world on its own; however real people solving real problems will.

We’re all too caught up in the new-new thing. A wise friend of mine often makes the point that we have more technology than we can productively use; perhaps it’s time to take a breather from trying to create the new-new-new thing, look around the world, and see what problems we can solve with the current clutch of technologies we have. The most impressive folk I’ve met in recent years don’t blog, vlog, twitter or spend their time changing their Facebook profile. They’re focused on solving their problems using whatever tools are available.

Mesh Collaboration
Mesh Collaboration

Which I suppose brings me to my point. In a world where we’re all communicating with each other all of the time—the world of mesh collaboration—it’s all to easy to mistake the medium for the message. We get caught up in the sea of snippets floating around us, looking for that idea that will solve our problem and give us a leg up on the competition. What we forget is that our peers and competitors are all swimming in the same sea of information, so the ideas we’re seeing represent best practice at best. The mesh is a great leveler, spreading information evenly like peanut butter over the globe, but don’t expect it to provide you with that insight that will help you stand out from the
crowd.

Another wise friend makes the equally good point that in the mesh it’s not enough to be good: you need to both good and original. The mesh doesn’t help you with original. Original is something that bubbles up when our people in the field struggle with real problems and we give them the time, space, and tools to explore new ways of working.

A great example is the rise in sharity blogs. The technical solution to sharing music files is to create peer-to-peer (P2P) applications—applications, which a minority of internet users use to consume the majority of the available bandwidth. However, P2P is too complicated for many people (involving downloading and installing software, finding a torrent seeds, and learning a new language including terms like torrent seed) and disconnected from the music communities. Most of the music sharing action has moved onto sharity blogs. Using free blogging and file sharing services (such as Blogger and RapidShare, respectively) communities are building archives of music that you can easily download, archives which you can find via a search engines and which are integrated (via links) into the communities and discussions around them. The ease of plugging together a few links lets collectors focus on being original; putting their own spin on the collection they are building, be it out of print albums, obscure artists or genres, or simply whatever they can get their hands on.

What can we learn from this? When we develop our new technology and/or Web 2.0 strategy, we need to remember that what we’re trying to do is provide our team with a new tool to help them do a better job. Deploying Web 2.0 as a new suite of information silos, disconnected from the current work environment, will create yet another touch point for our team members to navigate as they work toward their goals. This detracts from their work, which is what they’re really interested in, resulting in them ignoring the new application as it seems more trouble than it is worth. The mesh is a tool to be used and not an end in itself, and needs to be integrated into and support the existing work environment in a way that makes work easer. This creates the time and space for our employees to explore new ideas and new ways of working, helping them to become both good and original.

Update: Swapped the image of Gil Scott-Heron’s Pieces of Man for an embedded video of The revolution will not be televised, at the excellent suggestion of Judith Ellis.