Technology leadership coupled with a sector changing Total Care business model makes this company the preferred partner for many.
Rolls-Royce is one of the most high-tech organizations on the planet. It makes products that require years of development, pushing the boundaries of material science and engine performance and yet it now derives the majority of its revenues and most of its profits from a ‘power by the hour’ service business: Engines used to be sold to customers at competitive prices and margins were made 10 years later in the spare parts business. The Total Care business model shifted the relationship with customers from product and spare parts to a long term, multi-decade contract to keep their planes flying. The vast majority of airlines now buy thrust through this and similar models where a flat cost per hour gives them the engine, all servicing, monitoring and spare parts with a guarantee for on-time performance. Rolls-Royce manages the risk just as much as the revenue opportunity and this approach has changed the sector.
What keeps the company at the forefront is however other long term partnerships – especially in the R&D arena. In 2011, Rolls-Royce invested over £460m on research, mostly on projects focused on improving environmental performance and reducing emissions. While a good proportion of this is spent internally, an increasing and majority share goes to a global network of University Technology Centres as part of the company’s de-centralized research and technology approach. Rolls-Royce thinks long-term and partnerships in all its activities from customer sales to technology development. As such and with nearly £60bn in forward orders, its continued growth prospects are very good indeed. With orders for 137,000 new engines forecast in commercial aviation alone, the total spend on aerospace engines is expected to be approaching $1 trillion over the next decade and Rolls-Royce is well positioned to take a good share of this.