Digital Transformation and Servitization at Rolls-Royce

• About Rolls-Royce: digital transformation and jet engines
• Rolls-Royce digital platform for field service and servitization
• Rolls-Royce: "IFS is a fantastic company"
• Servitization at Rolls-Royce relies on data
• Impact of digital transformation on customer experience at Rolls-Royce
• Servitization advice from Rolls-Royce

This transcript was lightly edited.

About Rolls-Royce: digital transformation and jet engines

Michael Krigsman: We're discussing digital transformation and servitization in the jet engine industry with Russell Masters, Vice President of Digital Services at Rolls-Royce.

Russell Masters: Hi, Michael. It's fantastic to be here. Thank you for inviting me and thank you for including me. I'm so glad that we can connect. It's just brilliant to be involved.

Michael Krigsman: Well, I must say, of course, Rolls-Royce is an iconic British brand. Tell us about Rolls-Royce and tell us about the work that you do.

Russell Masters: Yeah, thank you for that. I mean you're right. We are a British institution, but we're part of an amazing industry. I'm sure most of your audience will know that whilst we started in the automotive industry, actually now we're designers and manufacturers of gas turbines and power solutions for a whole range of applications.

I work for our civil aerospace business. I spend all of my life thinking about aircraft, powering flights. But also, importantly, we provide services and so we're here to provide power systems and services that support all of our airline customers around the world. It's brilliant fun to be part of this amazing company and to be involved in digital services.

Michael Krigsman: Certainly, people who watch CXOTalk are frequent travelers and we all care about the part of an airplane that makes it move safely through the air. Tell us about jet engines and give us an overview of Rolls-Royce's work with jet engines.

Russell Masters: Historically, we think about that as an industrial and manufacturing activity. But as the aviation industry has grown and as customers demand and rely on air travel more and more, it's become an increasingly digital organization in a digital industry. I'm really happy every day to be part of leading the digital organization that supports Rolls-Royce aircraft in service.

We've got two things that we do in my part of the company. Firstly, we manage all of the analytics and the applications that we use to deliver information and insight, both to our teams and to our customers, as they operate their fleet safely around the world.

The other part of the job is to deliver digital services that all of our customers use as part of managing their fleets. That ranges from tracking assets in real-time to understand their health and how they're operating to tracking the life that they've used and when they'll need maintenance, and forward forecasting all of the activity that we need to keep every single one of those assets flying around the world safely, efficiently, and as reliably as possible.

It's a huge privilege to be part of this organization and to lead an incredible team that do some amazing stuff every day.

Rolls-Royce digital platform for field service and servitization

Michael Krigsman: Give us a sense of the kind of complexity that's involved with the manufacturing, the maintenance, and the digital analytics around jet engines.

Russell Masters: It's huge. Just to get one of these really complicated pieces of turbine machinery designed and developed requires huge amounts of data. It requires huge amounts of testing and collaboration across a supply chain and a manufacturing base that produces tens of thousands of parts at different places around the world.

In the very early stages of a jet engine's life, we're using digital technology to test, to simulate, to measure, and manage how that design is going to come together and how we think it's going to perform in the real world. Then, of course, that's just the beginning of the journey because a new aircraft, a new engine enters into service, that asset is going to be with our customers for anywhere up to 25 or 30 years. All the way through that really long period of time, it's going to need to perform flawlessly.

Most of our assets will be on wing for five to six years at any one time. It might accumulate 20,000 or 30,000 hours of flying before we do any kind of heavy maintenance. Yet, every day, it's taking off, moving hundreds of people and thousands of tons of cargo around the world.

Tracking those assets, understanding how each and every one of those thousands of parts are working together, understanding the health of the asset, and then being able to plan, predict, and take action to keep it flying as long and as efficiently as possible is really, really important.

Michael Krigsman: In fact, then Rolls-Royce is actually involved on an ongoing basis with the operation of these engines.

Russell Masters: Yeah, absolutely, and we've moved more from a manufacturer of equipment to being a provider of long-term services. Now, it's very much the case that every single one of our customers has the option to not only buy Rolls-Royce powered aircraft but also take a whole range of supporting services, which will help them manage those assets throughout the life both in terms of how well they perform, the maintenance that they undertake, making sure that they're covered should anything untoward or any unforeseen events happen, and also helping them to manage them in the most efficient and sustainable way.

Michael Krigsman: All right. Let's talk about the technology components that make this happen. Give us an overview of your platform and the data components.

Russell Masters: We have a raft of products that we use to do that. We created what we call our Blue Data Thread service. Through that, we're able to connect to the aircraft performance and engineering data we need to drive our care services.

We do that through a number of methods, some of which is direct with us and some with service providers. All that data comes into our analytical platform, so our intelligent engine platform, which is cloud-capable and upon which we run a number of Rolls-Royce specific applications that we use to both model aspects of performance and asset behavior and service, but also to forward forecast maintenance and other actions that we need.

Then, from that, we create actionable insight. Those insights are consumed by a whole raft of service delivery teams across our organization, each of those using a variety of digital tools and capabilities to do their bit of the job really efficiently and really well.

Then, of course, all of that needs to be shared directly with our customers. It manifests itself in our customer portal and in the more consumer digital experience that our customers use to access our products and services.

Rolls-Royce: "IFS is a fantastic company"

Michael Krigsman: It sounds like data sharing in both directions is a fundamental aspect making this all possible.

Russell Masters: Absolutely. Data sharing in an industrial setting is a really important enabler to adding value and it's almost critical now. It's the lifeblood of industrial businesses is being able to get at and exchange data. It's been a particular area that we've worked on incredibly hard over the last few years.

Fundamentally, a lot of this data belongs to the customer. It's their asset. How they use it, how they operate it, is fundamental to them.

Our whole journey in data sharing, data service, and data exchange has been about creating these trusted, neutral, very privacy-centric, two-way connections with our customers. Their feedback is that they really like it and that it helps them to do a better job and it helps us to do a better job for them.

Michael Krigsman: I'm very grateful to IFS because they're making our conversation possible. I know that you work closely with IFS. Tell us about that relationship.

Russell Masters: IFS is a fantastic company we've been working with for quite some time now. As we talked about in the earlier part of this discussion, exchanging data is really important. What we want to be able to do is do it in a completely secure and trustworthy way.

One of the ways to demonstrate that is to use proven partners who have got a really good track record of data creation and data management. And so, we partner with people like IFS because that's very much in the spirit of creating this trusted data exchange with our customers.

Partnering with IFS has been a fantastic experience. We've been able to accelerate our journey along the data exchange, data sharing, and development, and we really enjoy making use of IFS and others to help us build out this trusted data exchange.

Michael Krigsman: IFS is a key part of your servitization journey.

Russell Masters: Yes and, as a provider of services, you have to challenge yourself to think about where can you consume services and where can people do some of these jobs better than you can. Given the choice between working with a credible ecosystem of providers like IFS and others or building this all yourself, it's very compelling to be able to work with a group of partners who can help accelerate your time to market, can help you achieve a better overall outcome, and do it in a way that's better for our end customers.

Servitization at Rolls-Royce relies on data

Michael Krigsman: What kind of data are you collecting on these engines? As you're doing the monitoring and you're this partner to the airlines, what are you looking at?

Russell Masters: Every day, in every real-world situation, we're collecting data about how each flight has performed. We're streaming that in real-time. We're analyzing sometimes quite small packets of information using our current experience, engineering knowledge, and our analytics capability to create lots of insight for actually relatively, in some cases, small amounts of data.

Every time an aircraft takes off, we collect snapshot data around how its pressures, temperatures, speeds at the various rotating components within the engine, more information about its control system and how it's performance, and all of that data is brought back to us here. We process that and we can understand that both in real-time and on a more periodic basis to understand how the engine is performing relative to how we'd expect. From that, we can use that to detect situations and issues before they might happen.

Michael Krigsman: How does all of this feed into the Rolls-Royce business model?

Russell Masters: From the late '90s, we've been providing customers with long-term service agreements where, instead of paying every time they have need of support, they pay an ongoing fee for every time they fly. From that, we transfer a lot of the risk of managing the products, managing the maintenance to ourselves and we take all that responsibility on behalf of the customer.

That's been transformational for us because what that's allowed us to do is to align our goals, our objectives, and our incentives to that of the customer. The one thing that we always want to do is we want the customer to fly on time whenever they need to. All of our service provision is built around doing that.

Michael Krigsman: Russell, how is this servitization approach different from the traditional, historical relationship between a jet engine manufacturer and the airlines?

Russell Masters: Rolls-Royce took this whole servitization of products into the aviation industry, and so total care was one of the first long-term service agreements that you could use to manage your fleet of aircraft. It is a transformational process going from being incentivized to provide a customer with parts when they need them to thinking about how you could help that customer operate as efficiently as possible to fly as often as they need to and make the asset completely available, it changes the mindset that you have and it changes your thinking.

It moves you to a mode of thinking about the assets throughout its whole life instead of how it is now. It incentivizes you to improve the product over time so it can be more reliable and it can perform in a more efficient way.

Product with service and enabled by digital technology is really the foundation of our vision in this area. It's the vision that we like to refer to as the intelligent engine.

Impact of digital transformation on customer experience at Rolls-Royce

Michael Krigsman: Russell, as I talk with experts on digital transformation, very often they say to me, "Jet engines are an example of how transformation can change that relationship with the customer." Just drill down even further. How do the different relationships that you've established with your customer change your incentives to look at that customer more holistically and become a partner in their operating outcomes as opposed to, "Well, we supply you the parts"?

Russell Masters: If you're just selling someone a product or part, that's quite a transactional relationship. It happens fairly quickly. It might happen a lot in a given year, but it's a kind of one-off thing.

In creating a long-term service and support agreement with a customer and providing a long-term outcome-based service, you're committing to that customer for a long period of time. Some of our relationships, much like our assets that can last 25 years in service, some of our relationships are 25 years-plus.

When you commit to a customer in that way, it requires you to act in a different way. Every single one of my team and the colleagues that I work with are tremendously committed to our customers. We know that we're an intrinsic part of our customer's operation and we know they rely on us. That both makes the job enjoyable, it makes it rewarding, but it also gives it a really important purpose.

That's why having a wealth of service offering and service experience and having the digital capabilities and the analytical capability that we do gives us so many more tools and so many more ways to support our customers. It's a massive enabler to helping live up to our commitments and our promise that you only deliver when you create some sort of long-term service agreement.

Michael Krigsman: A lot of what you've been describing involves change and transformation of one kind or another. To what extent is culture change and managing this transformation a key part of what you're doing?

Russell Masters: It's a huge part. Effectively, what we've got is we're a highly regulated, safety-conscious industry. Safety always comes first for us and it's the most important thing.

To a certain extent, having stability, always doing things in a repeatable way is a massive enabler to creating really safe, really reliable products. Alongside that, though, we want to create new things and that means finding ways to innovate and iterate quickly and then translate those back into a more production environment where there's a production service or production application or as part of our engineering or other processes.

You have to learn to operate in these two different modes, so it presents a huge amount of challenges. That's why pretty much all of us within Rolls-Royce now are going through some sort of transformation, either organizational or personal level, because we're learning what it takes to do these really fast, iterative projects, these more digitally enabled propositions while still delivering the reliable service that our customers need.

Servitization advice from Rolls-Royce

Michael Krigsman: How do you manage the tension between the need for safety, stability, processes that don't change, on the one hand, against the need to innovate on the other hand?

Russell Masters: One of the brilliant things about operating in a highly related environment, it gives you a framework in which to operate. It gives you some really good, clear guidance on what you need to be worthy. Ultimately, a lot of the time when we're developing new services, it's adding value in and around the operation of the product, so that gives you some latitude in some areas to work in.

I think it's also fair to say what we've tried to do is create pockets of disruption within our organization. Groups who don't have to worry about maybe setting stuff up in a production way, don't have to worry about doing things the way we've always done it.

Within our organization, we have our R² Data Labs team. They provide a disruptive force within the wider group. They're given the license and the remit and the freedom to try new things, use new technologies, be less respectful of the norms. It requires you to operate with two halves of your mind and it's certainly something that we think we do really well but we're always learning how to do better.

Michael Krigsman: Russell, Rolls-Royce has traversed this servitization journey. Can you share with us some lessons that you've learned that others might find helpful as they go through this process?

Russell Masters: I've been in the company a while, but not necessarily for the full extent of that journey, but I've learned a lot even during my time. We should all face up to the fact that we are needing to be more digital and more digitally aware. If you are in a team and you've got a day job, your responsibility, you really need to think about how could this be more digital and how could I learn about what the digital possibilities might be here?

As leaders, it's no longer the case that we can let the IT or the digital guy handle that and then just come and talk to them when it's done. We have to educate ourselves more. We have to become more conversant in the language. We don't have to be fully qualified enterprise architects or UX consultants, but we certainly owe it to the rest of the organization and our teams to learn more about how these technologies can affect and improve their lives and how we can exploit the opportunities.

I think it's remembering that customer, remembering where you're trying to get them to, and becoming more conversant in the opportunities, the tools, and the technology that are available to us. That's a great place to start. If you could do those two things, you're on to a winner.

Michael Krigsman: Okay. Russell Masters, Vice President of Digital Services at Rolls-Royce, thank you for taking time to speak with us today.

Russell Masters: Thanks for including me. I've really enjoyed it and thank you for everybody watching.