A nurturing environment is vital in supporting technology innovation according to Warren East, Chief Executive of Rolls-Royce. He says that time, a clear technology strategy and a supportive ecosystem are key to successful innovation.

Warren East became CE of Rolls-Royce in July 2015. Prior to this, he worked for ARM Holdings plc, a multinational semiconductor and software design company. Warren was CEO of ARM from 2001-2013 through a period of exponential international growth, during which time an ARM chip has been used in almost every mobile phone in the world.

He was made CBE in the 2014 New Year Honours list for services to Engineering and Technology and is a Non-Executive Director of Dyson Limited.

Warren was a keynote speaker at the RADMA R&D Management Conference, held in Cambridge in July 2016, and the following article is based on his presentation.

Why do we innovate?

Innovation attracts attention. A recent example of this might be the Dyson hairdryer, which has a mind-numbing retail price of £300. I can go to a supermarket and buy a hairdryer for probably less than £10, so why pay £300?

The answer is that it is iconic and considered a better class of product. This is a good example of the incremental value that can be achieved by creating world-class products.

At Rolls-Royce we consider innovation to be the lifeblood of a successful company. It is also hugely satisfying; it creates enthusiasm, as success makes people innovate more and creates a kind of cooperative virtuous circle.

Where does innovation come from?

The good news is that ideas come from all over. Management needs to recognise that they don’t have all the solutions – the answers will come from people in their teams. As managers our role is to develop a creative environment to enable the answers to come through.

Successful businesses are those that are very clear about the importance of innovation and will have a technology strategy that has commitment from senior management.

You have to go the extra mile with innovation, because by the very nature of R&D quite a lot of what we produce doesn’t work and there are blind alleys. As a company you have to value and encourage R&D and that is when innovation really thrives and you can bring winning products to market.

Not just new product development

Innovation is not just about products. ARM was successful because it had a disruptive business model.

ARM was all about designing things that could be incorporated into third party products and licensing that technology. Once those products were made and sold it would then earn more money on royalties, thus creating downstream revenue.

At Rolls-Royce we operate a similar business model based on ‘power by the hour’. What often goes unnoticed is that companies operating this business model, like ARM and Rolls-Royce, invest a huge amount of resource in creating a nurturing environment for their employees and technologies in order for their products to be successful.

Innovation takes time

Recently here in Cambridge we produced a book celebrating 50 years of the Cambridge Phenomenon. In fact high tech and biotech have been going on in Cambridge for over 100 years. This sort of thing doesn’t happen overnight – it requires time.

The Rolls-Royce facility in Bristol has been making aero engines and planes for many decades. For example, at the Farnborough Air Show we demonstrated the F35 plane, which has vertical take-off and landing. This is in fact a derivative of technology developed about 60 years ago, known affectionately as the ‘flying bedstead’ and one of the first Rolls-Royce escapades in vertical take-off.

I must admit that some of our engine designs are better second time around because you learn from being connected to customers. Customers need to experiment with the first product in order to clarify their requirements and feed this back to the design engineers. This iterative process improves the product.

Drivers for innovation

Over the years Rolls-Royce has driven innovation in jet engines through a focus on energy efficiency, which is a theme that runs through our whole technology strategy.

Engines use hydrocarbons, which is not good for the environment, so if we can produce the same amount of useful power with fewer hydrocarbons that is a win for both the business and the environment.

We have an overarching ambition for what we’re trying to do, which we’ve broken down into bite-size chunks, and we need to look for innovation to achieve these smaller objectives.

To use less fuel, the first thing you can do is to make the engine lighter, so it uses less energy to power itself. This is obvious but it’s still an example of innovation.

A rather less obvious thing to do is to look at how engines work and see how efficiencies can be made here. Using different alloys for a turbine blade enables you to run the engine hotter. Coating the turbine with ceramics to protect the metal inside from high temperatures enables it to be run a little hotter still.

Then creating a better airflow by using little holes to enable a layer of slightly cooler air to surround the ceramic enables it to go hotter still.

The engine operates in a harsh environment so it mustn’t fall apart. Casting metal is a process that’s been around for over 6,000 years, and we are still improving it.

Each one of those things is an innovation in itself, and together form an example of successive stages of innovation which has been successful.

Engines made today are about 25 per cent better in terms of carbon dioxide emissions than their predecessors 40 years ago. They are also 40 per cent better in terms of nitrogen oxide emissions and over 20 decibels quieter as well.

Creating an ecosystem for nurturing technology

At Rolls-Royce we use a number of nurturing mechanisms that are quite important, so let’s look at a couple of them:

Seed generation of ideas – we provide an environment for people to exchange ideas. This can be on an intranet, through an innovation portal, supporting forums where people get together, creation of innovation ambassadors, or encouraging people to go out of their areas into other parts of the business and work with other engineering teams. We also provide time and resources for incubation and create a special space for this. Actively fostering innovation is essential to make sure that it happens.

External experts – we don’t do it all in-house at Rolls-Royce. I’m a firm believer that two heads are better than one, and that multiple heads are even better; different perspectives bring a better solution.

We work with a network of over 30 university technology centres worldwide that have been established for about 25 years now. That means that we have access to a whole range of external researchers with a slightly different perspective on the problem.

This is a continuous process. We have people doing doctorates, which provides us with a pool of potential employees that have already been working on some of our big challenges, and also provides a source of intellectual property generation.

It is not just about the design – we also utilise external resources to try different perspectives and to leverage the investments and brainpower of others to do this.

The main thing is that external experts augment in-house activity. It drives some rigour into what we’re doing.

Managing innovation

It’s all very well to ask your team of engineers to be more innovative, but people have a day job to do as well, which is never-ending as we all try to get the next product out of the door. Therefore we try to optimise that balance for innovation.

There are different stages in a project and the beginning and end offer the greatest scope for innovation (see diagram, right).

At the start there is considerable scope for innovation but limited resources available. As you get towards the end, the project runs into challenges such as real-world implementation problems. This is when people have their backs against the wall and they need to get creative to solve those problems.

This means you get intensive innovation at the beginning and the end of a project, but the scope for utilising innovation at the end of the project is significantly less than at the start.

What we aim to do is create a repository for good ideas and check the quality of those ideas with a peer-to-peer review. It might be that an idea generated on one project might be useful on another.

To maximise the benefit of innovation we need active management that allows time between projects to review the good ideas and to allow individuals to rotate projects into R&D.

The release of this time requires a management team that believes in innovation.

In conclusion

• Innovation can be incremental – I talked about how a turbine blade makes the whole engine better. We don’t have to innovate across the whole piece, just innovate in certain areas that make the whole product better.
• Business model innovation – a good example of this is Apple, where the products and the business model are inseparable and work together.
• Successful businesses operate in a wider ecosystem – if you can work the ecosystem and create pull then you can drag other customers along at the same time.
• Creating an ecosystem also nurtures innovation – companies can move up the value chain by specialising in an area where they provide greatest value.
• There is no magic in this – it is applied common sense.
• The best answers are often the simplest answers – but don’t look to management to come up with those answers.