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From an Engine Manufacturer to a Sustainable Solution Provider

The COO of a company with a 100+ year history making combustion engines shares a perspective on the gap between now and the carbon-neutral future and moving from a traditional engine manufacturer to a sustainable solution provider.

Last Monday, the MBA class had the pleasure to have Otto Preiss as a guest speaker. Otto is a former colleague of mine who graciously accepted the invitation to share his experience and ideas. These days, Otto is the Chief Operating Officer of Rolls-Royce Power Systems, a wholly-owned subsidiary of Rolls-Royce Holdings. Not exactly a household name – unless someone recalls the luxury car brand – but a prominent player in the area of aerospace, power systems including propulsion engines, and defense.

We are learning a lot about sustainability in the Business & Society course taught by Professor Knut Haanaes. We’ve also had the Innovation Week, focused on United Nations Sustainable Development Goals, led by Professor Mark Greeven. Both of these were augmented by guest speakers ranging from thought leaders to hands-on practitioners.

When Otto and I discussed the event, he proposed a speech about sustainability challenges from the COO perspective. Given that this topic is a red thread throughout Module 2, I could not think of a better one for his presentation. This was a unique opportunity to learn from a COO and a member of the executive board of a low-volume, high-mix technology-intensive company in charge of operations worldwide, R&D, technology, engineering, and everything related to that.

The company is not only technology-intensive, but it also has a history of manufacturing combustion engines for over a century. How does one transform this to minimize and neutralize the impact, reduce pollution and take it towards a sustainable future with renewable energy? How does one address the demand for new solutions and business models?

It starts with the energy stack of 3Ds: decarbonization, decentralization (and electrification), and digitalization: alternative fuels, distributed peer-to-peer power generation and storage systems consuming renewables, and, of course, digital technology. These are the main drivers addressed by the three strategic pillars:

  • Reshaping the core with an inevitable decrease in diesel and gasoline engines and moving towards hybrid solutions and alternative fuels made of CO2-neutral liquids and gases
  • Becoming a sustainable solution provider by expanding the portfolio towards large-scale power backup solutions and microgrids complemented with digital products and services
  • Adopting business models leveraging the entire product lifecycle by offering upgrades, modernization, and overhauls giving customers peace of mind for years after the initial sale

What does this mean for a COO? First of all, the company needs an appropriate organizational design and supply chain, as well as production planning methods to run the future business—today’s setup won’t work. Then act on the 3Ds: carbon-free/neutral/reduced product portfolio, operations, and supply chains driven by digital technologies, new skill sets, and partnerships. Finally, improve the gross margin, transform the portfolio roadmap and deliver both with superior customer experience. The race for a net-zero economy is on, and there is no alternative. Welcome to TINA.

Beyond that, we had the chance to learn about the Greenhouse Gas Protocol and how Rolls-Royce Power Systems is transforming its portfolio to tackle the protocol scopes. Their ambition is to marry the business growth with GHG reduction and leverage ecosystems and partnerships to provide end-to-end sustainable solutions.

Otto’s final insight was the importance of organization-wide standardized data structures and being humble.

Otto Preiss at IMD MBA