Rolls-Royce CEO Tufan Erginbilgic: Transforming an Iconic Brand, Pioneering Energy Transition, and Leading Strategic Initiatives
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Hi everybody, i'm a nuclear tian, and today i'm a good company with two fun, the CEO of rolls voice. And in the fun, we own two point three percent of the company, totally more than one billion dollars. So big. Welcome to fun.

Now um when you took the job at words, uh, you call IT a burning platform, why were you so dramatic in kind of your .

opening statement? So first, all IT was an internal meeting, I would say. So this is my third transformation, right? We may talk about what are the right pillars. I learned what pillars you want to have in place sort of in transformations.

One of the pillars is very important that actually you put the mirror up because most of the organizations which requires turnaround, they don't nature of a whole employee base is not any more communicated where the companies I think that town hold what I did when I first came in, obviously, I did lots of assessment of the business before I showed up. Then I got together with leadership because I want to get them on board. Then we had the big tunnel to engage everybody else, right? IT in that tunnel, IT was one. And how far what I was doing early on, put the mirror up and then talk about the vision and how we are gonna get there.

how people react.

actually, internally, people react IT. Was they found that very energizing, of course, externally. You found the first fifty men is of the on the on the news, which was saying burning platform. Normally, when I walked to the sort of work, I put my head phone and I listen to music or podcast, something like that, I was actually like that in king's gross station. I was sort of walking with my head phone on a lady approach me, and so are, do you too fun next day this is, I said I took to get one of, I said yes. He said that town hall was so energize .

when I ready, I thought, you know what, he he's either going to turn around around who he's going to be out of there in the air, but you still here. So that's all good. How do you prepare for the job? You say you made assessments before, how how do does one do that before my taste job?

So I do external assessment and internal assessment. So early september I actually launch an exceptional benchmarking um and which took couple of months, a division by division and I created the steering committee. I wasn't in the job.

I invite to all the division leaders to be in this year and community because if they have disagreements, while we are progressing the external benchmarking, they should be in the mix, right? So obviously C F as well. So that was the sterling community. So between early september to novembers, we did external bench marking. While this was happening, I was meeting with the teams to do my internal assessment.

How many meetings did you have?

Many, Frank, many. So I, I do not. I don't come.

why? Why is that important to meet so many people before you start?

One of the things I actually did beyond internally as when I talk to topping masters. So I actually met with them. And IT was very clear that there was huge frustration out there.

So IT was very clear to me we needed to go into action. This wasn't gonna be a honeyman. So therefore, that was my view that actually we needed to go into action quickly.

So therefore, there is an ideal sequence of my pillar. But I hardly end up with the ideal sequence in transformations because in this case, I need to get go into action very quickly. So circumstances ort of you need to tailor.

So then you come in here. Jan one.

what you do? Jan one, when I came here, I came with very clear ideas then, because we as N E, T, I already met, and we agreed, actually, late novembers is an executive leadership we did until late november. Remember, they were part of the stern committee.

We did lots of work, so we knew what the gender. Us, okay, we came in. E T was obviously team change. Executive ly, team change quite a bit.

but at that time you had said the team before.

you know actually that was the old team, the old am. I brought one or two new people by that time, two people actually, but mostly, uh, the previous team, uh, but we were aligned then we actually top on the meeting we ahead, we got a line with that. Then went to the old organization and that was the kicker of of transformation program.

You had some priorities, which you said pretty early. One was to, uh, refine the contracts and we're on pricing.

How do you do that? We've done lots of things. Everybody sort of focuses on contract negotiations because IT is interesting for many people, Frankly.

Um we came up with six levers as part of that. The investments we make and the risks we take, we don't remember ate them, suffer iena in our Price. Second thing is what is called L T S A contracts.

This long term contracts with airlines and song. Our pricing, therefore, was not good there. And we had lots of big contracts with losses, if you like.

So early on, sort of we needed to deal with IT for two reasons for performance and improvement reason because I actually, again, we are not talking about the pillars, but Normally I lead with strategy than everything comes. But I was very clear that strategy was gonna take six to nine months because the way I run the tech is very inclusive. I don't run IT with couple of people in a dark room.

And how do we go about IT your question, elect? I really believe we are not a supplier. We are a partners, and that's how I step into these conversations. And most of them had Operational issues withdraw.

So these are with the engines that you supply to the airlines. And just, uh, for the listen here, you supply half the engines to the world's wide body plans that .

that's correct. That's incredible .

market position.

Yes, I think our deal is fifty percent. Yeah, there are only two players, as you know, in that market. So what you do I mean every meeting is slightly different in some sense, very identical in other sense, because they all hit Operational issues.

And I said at the end, I acknowledge IT, i'm gonna make sure i'm on IT and we can talk about IT. But I also said weak grow service can only give you that I am investing one billion pound in time on wing program that's improving products. Our customers will benefit a lot, right? We're gonna improve whole portfolio by forty percent.

That means a lotless disruption for our customers. I said we grow shows could do only this. Stronger rose shows can be a Better part.

But you are not negotiating with companies which print money, right? You are negotiating with airlines, which are generally not doing well. So why would they want to a give a way a lot more money to you?

I've been actually on both sides of the equation in my career. Sustainable partnerships only work and only become sustainable if they are mutual benefit, otherwise they are not. I was in a very rich contract.

So one day, after three years, four years, I don't remember, they came and said, sorry, enough is enough. If you want us, if you want to take us to the court, take us to the court, we are not hungering this contract animals. I didn't do that, by the way.

So my whole point was actually, let's rebaLance this and we did some early work and we can also find win win solution. I didn't actually fight the issue. I said we need to rebaLance IT, but we can, if we bring the teams together, find win, win solutions. So now that we made great progress, I look back in every case we found win win solutions.

And now you approve all prising or you look at all contracts is right?

That's correa.

You said that, uh, IT was impossible to change things that people didn't think was possible to change. What are some of the other things that you have changed?

I mean, in this company, we change everything. We renegotiated all equal tracts as well. The big change in this and IT IT plays a significant role in in my pillars having a very grander strategy, which I do not .

have what you mean. So it's detailed in terms of what you want to chief IT.

IT is detailed in terms of part station and competitive strategy. I where you are gonna participate and you make lots of choices, and how we are gonna compete. That is so very important because IT becomes element to, because IT aligns the all ordinances ation. So i'm so I am a .

huge believer in what you are say here and we are doing the in the end right? This of broad anchor means that when you have decided something to move but this is uh a quite scanner navy and way of doing IT, right? Where did where did you take IT from? I learned .

by doing, i'm not contain avian, so I didn't get IT from there. But my view, I use IT aligned engagement and performance management too. So I learned that this is one of the key pillars in my transformations.

How are you doing IT? I do for all right. I obviously tailor IT, but one is put the mirror with a clear vision.

People are very important. Leadership is more important. I have fundamental belief. Good people make difference, and leadership has a big role in transformation because they need to deliver the goods, at the same time, lead the change rather than only delivery. I create the right leadership.

So that, man, we made lots of changes on the executive team. And then top pond, we call IT. See all minus two. We change fifty percent, either new people or they change their positions.

Who do you promote? what? What's the leadership skills you are looking for?

I look at obviously, they need to be they need to be capable in leading the business. I don't look at see sort of loyal sector. I don't look at that.

I actually look at individual characteristics s and that stand my jo B2Create a t ea m out of IT. I actually, I put together a, see what I expect from them. I gave everybody first week even. People need to believe in extraordinary.

In my previous life, I was an enlist uncovered world choice, and I met a the person who ran IT, then warne's. Uh, he talked about per frost as being the middle vel of the company. Really, really, really difficult to change. Why are you managing to change IT? It's a md sexy.

right? IT is more than mindset. okay? Because I totally disagree.

If somebody y's saying i'm gonna do team exercises, cultural change exercises and culture will change. That's not my model. You need to put the right things in place.

So grand most of the organizations stand when they have IT. They put IT on the shelf. When I am building grounds strategy, I am already to me about strategy implementation.

We have seventeen studies initiatives which will transform this company. Seventeen, your performance managed that IT is embarked in the organization because of if you only want to run things with communication, that's where the things stumble. But if you actually get, I call IT sweet spot a lion door organization, everybody knows they are roles.

My seventeen program, because strategy is that granular implementation is granted. Think about, I said, aligned engagement performance management to let me time or wink, improvement is one of them. So let's say nuclear, you're the time on the leader.

Just explain time on wing.

IT is effectively improving our products so that durability of the products we have, reliability of our engines are very good. We are making this one billion dollar improvement and IT once actually, that's one program, one of the seventeen. I'm just giving an example, right?

So now you are the leader of IT. IT is my program. Now I told you the following.

You matter, nicola, in our transformation, you and your team matter. IT is very engaging. Those people tend to be made measures because mid low, I gave you something.

You matter. And going engage this with your team. When you go to your team, you are saying, guys, here's what we can actually contribute in this transformation. That is sw satisfying in big organizations. If I am doing something in line with the culture, I let IT go, because culture will take care of IT. If I am doing something against the culture and what I want to change, the culture I performance manage very consistently done over time, that changes the culture.

What part of the culture did you need to change one of the most important cultural change?

I might see your judgment based on year on year improvement on that because I want people to think strategic progress and our accelerated delivery has a lot to do with this. We can talk about the, but strategic progress is one. Then we came up with four behaviors that we are actually rolling out as we speak, right?

Let me know safety first. We can talk about IT up doing the right things. And then making a difference, i'm gonna remember, keep IT simple.

What we see often in companies, and you will resort that in B, B, A, do right when you work in a company where parts of the organza needs to be so super safe, it's spill into the rest of the organization. So even places where you don't have to have to be super.

you be like super safe procedures. That's where I obviously, I manage businesses with very high rist profiles in a way goes .

without saying that these indians need to tick over and not stop me there, right? So it's it's embarrassing for everything you do.

Absolutely.

when you have been implementing this, how easy to work with the labor force and the unions and so on.

I I talk to you about five hundred people were already included IT in strategy development. Therefore, I never had an issue. Oh, I have a start.

I need to engage the organization. We were already aligned, not to mention the five hundred people's brains and experience, actually improve the storage sort of quality of strategy. But actually you are all the day day line.

Everybody knows we made lots of tough decisions. So an union and engagement so that what what would we do here is pretty inclusive, moderated, rather sort of less do the things in dark room and and then less go engage people. Not not like that.

It's incredible how fast this is gone, right? You are now one year and nine months into into your period here. Um how far are you on on the transformation you .

think from the sort of results? You are absolutely right. Accelerate daily. I think we front end loader to delivery one day this year, I was reflecting on IT because results delivery how much of IT, how much of the performance improvement we thought we were gonna deliver was identical to two other transformations I did that made me sort of thing. Hold on a minute.

Very different business is very different starting points, different people like how come here is my conclusion after that reflection? You change the mindset to strategic progress. You have very clear programs I talk him about IT on by the people, and then you go with pace and intense.

What who did you learn in from? Did you learn at A B B?

My learning process sort of is a little bit sort of different because i'm still learning. By the way, before I joined mobile in the us, after the school, I was actually when I was doing P H D, I was teaching in east state university and doing resort on micro microeconomics. So I I had this learning part of me, and when I got my career, so I I always whatever position I took to cut IT short, either that at least three books about, and then you you synthesize IT. Those are textbooks, obviously, you synthetic IT, you implemented, you learn more.

Who are the best leaders you have learned from.

I don't think there was one leader that I can actually say but a little bit of so to me completely the puzzle for myself if you like rather than copying one person I say what I think um and and that authentic bit is not about copying IT is me creating， but learning from every occasion for ank. I'm still learning. I actually tell the team I learnt a lot.

I I mean authenticity, I think is key if you we see the people who burn out all the people who are not authentic, the people who try to be somebody else. Very important. How important is the board? And this .

process of very important coming in and making an impact on a company like this is very special. That's why i'm here in that board is a big role because turnaround don't happen by incremental actions. When you are making non incremental actions, not everybody y's happy internally are exactly by the way you talk about burning platform.

Make board should be prepared to support you in the turnaround because you are gonna be doing some of the things which will bring big change. And that mean not everybody would like IT at the beginning. I actually believe this is a transformation which will benefit all the stakeholders.

But it's not about me how we lands with them early on. Maybe very different. Is IT lonely .

to be the C. E. O?

Yeah but I mean this part of the job, right? I mean, that's why IT do you think being .

the seo is tough for now? And IT was five years ago generally across companies?

Yeah.

probably because what is making a tougher to be the C O these days.

all the stakeholders understanding, Frankly, and the awareness improved over years. So you need not only about sort of employees and masters when you are running a company, you need to think about all the stakeholders and not in this sense of like zeros. You need to embrace IT in a way.

Therefore, I said IT early on. Transformation is holistic. This is not restructuring, by the way, this is transformation.

I define both of them very differently, but and IT will benefit all the stakeholders. World is actually rapidly changing. I'm not sure IT was that rapidly changing in the past. If I say two big trends I see in the world, energy transition and digital transformation, neither of them were at the level that they are right, not ten years ago, but the speed of change is different. And the impact not only impact on your business, but how much opportunity create also how you are is one and stakeholders awareness improved on the other hand.

So uh, the energy transition and the genitalia ation, how does that impact your uh logis division, the civilization .

space next twenty years on energy transition in commercial planes, I should say, would be about really more efficiency. I feel efficiency, one hundred percent S F compatible.

That's just the anal aviation feel, right?

That sustainable aviation field, we are the only company actually can say all of our engines compatible with hundred percent sustainable aviation feel. You can, I know regulations don't do that, don't require right now, but they are ready. World needs to incentivize S A F, especially what I called synthetic fuels.

why? Because today S F, most of the people are talking about is BIOS ase. But there isn't enough of IT to the carbon ze, the whole aviation industry. Therefore, we need to incentivize synthetic fuels. I ve from Green hydrogen en you go to with the commerce technology, you go to effectively as A F.

How fast does this transition going?

Not very fast right now, because IT needs to be incentivize. I mean, reality is these technologies, by definition, especially early on, more expensive. Even bike fields is more expensive, as you know, many airlines, therefore, unless IT is Mandates, they don't use IT because IT creates competitive disadvantage for the right and synthetic fields is even a little bit more expensive. Oh, but the benefit of IT you can scale up. 嗯， so i'm not sure without policies support, they will actually scale up significantly hands my point about policy support.

Talking about a lot of change here. What what are your plans .

for the narrow body market? First of all.

that market is an interesting .

market of this is IT is big, growing White, but is also growing. Here are two things in strategy presentation last year in we called the C M D. Effectively, I could talk about, we want to participate with with our partnership.

Why do we believe? What are we bringing to the table? So think about first of next generation engine will be more field efficient and S A F compatible, as I said, altera, and is exactly that.

which is your technology.

which this is our technology that we are working on, uh, IT is IT is ten percent more efficient than the most efficient engine is out there. And we believe with that and what you can do in the whole area, aircraft, new aircraft, you can take that ten percent to fifteen percent, which is significant. And IT is hundred person S A F compatible.

So that's wanting. Second thing is R I P S on IT. This is a gear structure and wanting nuclei. I don't think there is any controversy around that in the industry.

Next generation will be gear danger because of this efficiency required, if you like, and r ips. And how long day are positions as really well? And undertaking is we really have some capability in this space that respected by others. So those three things we I believe we bring us to the table talking about .

the table. So we are now seeing boying struggling with quality. We are seeing airbus, uh, kind of struggling with producing enough volumes. When will we have a third credible .

play a here IT may take a while um but who .

is going to be you think?

I mean.

comic is working on IT as you know, that's a chinese company.

Yes, chinese company. Um what do you .

think theyll have a good plan?

I mean they already they have narrow, but as you know, they have our plane and narrow body uh, today with G, E engine. So that is already out there scaling up. So in a way, they're already in the market, uh, in that sense.

Um you are one of the leading companies in small modulate reactors, yes, which is kind of a new way to harvest the nuclear yeah power. And what what .

do you think this could be if world is genuinely sincere about net zero, especially europe? Because U. S, S.

Here are the options that doesn't work without nuclear. That's simple. This is not about my opinion versus another expert.

If you believe in mathematics, you have to believe that. okay? So therefore europe needs to embrace nuclear. Then you have two choices, big, small, big or small up.

We know all the advantages, and these advantages of the big, because world has good, good, bad and ugly experience. With that, what is the advantage here? First of all, this cost and the duration risk.

IT is small, you dilute, but it's not old. This is eighty five percent of its manufacturing process. So IT is not a big epc project. Big nuclear plants. Every time you from zero here.

you want to mass produce them.

this eight, five percent martially you produce and you learn, like manufacturing learning process.

So why is IT so, uh, financially risky? Why are people so uncertain about the costs of making this?

I mean, IT financially, they are much less risky than the big plans. But new technology, IT is not new technology in the sense that we have been doing this technology sixty years in U. K. Of marines. But commercializing new technology earlier, early plans are always risky.

So when will you have your first plan? Top and running. You think .

when we have the hopefully orders from uh G B N and few other countries, we are working with IT. Um i'm hoping next year if orders come, then Frankly you need to build the supply and eta to twenty one around that. Where are you .

technology wise compared to, let's say, the the venture, which is backed by a bill gates.

So I think ours is most advents, especially in europe. This is not me talk. There is a regulatory process, but which says three face process, right, which actually assesses your technology and then you get the sort of approval I E, you have viable technology and safe to deploy. And we are the only company actually a effectively face to so in .

in your mind, is this like a no brain type of technology to take in use.

eat for supply security and net ero for europe, yes, especially for europe, right right? Because europe doesn't have many choices yes.

Um defense we are not going to talk about geopolitics. But how is the world changing the way you run your defense business?

We are not in weapons, no production. So people have misunderstanding that they now our performance is good. People think I is using me more, and song IT has nothing to do.

No, you're in the ukraine. More did an impact at all. Uh, are defense business right? We so therefore, there is a misunderstanding. Our defense business improvement so far is all underlying performance improvement.

If you look at what we call me term I to end seven targets, it's gonna be mostly about underlying performs improvement in the business. After that, we have big program like b fifty to a Flora program in the us, an J K A program and and obviously submarine I agus, great, here they are all coming. We have significant growth coming because of the winds we had so far. But he has nothing to do with ukraine. I more and.

What's driving you?

It's lots of things I talk you about coming here and creating a legacy, I mean, last transformation status, all obviously you want to achieve. And so so for .

what's your what's your driving force? What makes you wake up all in the morning? What makes you work late night?

I'm about making a difference. When I took a job I seen that is I I wasn't obviously see you to stop the career, whatever job. I always thought the following.

They pick me. I need to make a difference that nobody else can. So how how does that show up? right? So because otherwise they could, I put somebody else, if if I as good as the next guy.

So how much? How much do you work? Actually, I am love smartish. I should say me how much I used to work. I probably was too much, but I actually manage Better, right?

How do you do that?

I is prioritize. I dynamically prioritize and encourage my team. Dynamically prioritize.

How do you relax?

I go to gym every morning. I need to play competitive tennis every weekend. So I I do that uh, sort of saturday, sunday and sometimes nights so of, but not every time.

What do you read? Uh, I read history books these days. I read A I and history books because I want to improve myself .

and part of the the book .

if if you want sort of history of the world by an under a mr. I actually like this, started the history of modern britain by him again.

Is is art and culture important .

in your life? Culture is definitely very important. I'm not that arc sort of guy, but obviously given how many countries I live in um that make me think about cultures because when you leave my first eleven years, I change eight countries. IT wasn't by design. Talking about Young age.

What is your advice to Young people?

Three things, if I can say a one thing is learning. Actually IT is learning to improve your own value. If that makes sense, your value is an individual, then money and career progression will come.

I actually rejected this is true story, big promotion, accepted a horizontal move because my view was actually, that is gonna make me more effective later on. So one thing is learning. They need to think about how they learn.

People learn differently. Whatever works for them. I'm not saying there is one way, but they should focus on themselves and making a higher value. Individual number two, power of belief.

I I tell people, did you achieve anything difficult that you didn't believe in? But people that I talk about, you need to believe in extraordinary. I believe in an extraordinary. But IT doesn't happen without the deep belief. IT is possible.

But is this as this got to do with optimism and delusional optimism?

I'm not an optimist, by the way, right? It's character. I would go to what's not working rather than what is working first, which which gives me some recognition chAllenges. So sometimes with the organization that I work on OK.

But the time .

was the third point. IT is passion, whatever they are intending to do. They should go in with two feet in sometimes people hedge themselves ah um this is high risk. Go with your passion, go with two feet, then then you can make things happen to some.

Uh, you clearly have gone with both your feet into this time around situation. Uh, you're still standing IT looks, uh, really good. And also having heard how you, uh, privatize, we are really pleased that you have dynamically prioritized cast big. Thank you.

Thank you. good.