Reinventing Rolls-Royce: A conversation with CEO Tufan Erginbilgiç

Investment Rating - The report does not explicitly provide an investment rating for Rolls-Royce or the industry [1][2][3] Core Viewpoints - Rolls-Royce has undergone a significant transformation under CEO Tufan Erginbilgiç, with profits more than doubling and the share price surging [1] - The transformation focuses on creating a high-performing, competitive, resilient, and growing business, moving beyond mere restructuring to a more ambitious transformation [2][3] - The CEO emphasizes the importance of culture, strategy, performance management, and execution intensity as key pillars for successful transformation [3][4][6] - Rolls-Royce has implemented 17 strategic initiatives, with a focus on granularity, alignment, and engagement across the organization [7][8] - The company has improved its resilience, with the ratio of total cash cost to gross margin reduced from 0.9 in 2019 to less than 0.5, aiming for 0.4 [11][12] Strategy and Execution - The CEO advocates for a chaotic and inclusive strategy development process, involving 500 key people to ensure alignment and ownership [6] - Strategy is translated into clear initiatives and cascaded down the organization, making it relevant and actionable for employees [7] - Execution is relentless, with a focus on intensity, pace, and rigor, while maintaining clarity and alignment [4][8] Leadership and Culture - The CEO prioritizes assembling a leadership team of individuals who are good business and people leaders, willing to learn, and passionate about success [10] - Culture change is driven by consistent expectations, reinforcement, and performance management, with a focus on purpose and behaviors [13][14][15] - The company's new purpose statement emphasizes powering, protecting, and connecting people everywhere, with behaviors centered on safety, simplicity, and making a difference [15][16] Future Outlook - Rolls-Royce is focused on becoming an execution machine, with further work needed to embed the performance culture and achieve full alignment [19] - The company sees growth opportunities in small modular reactors (SMRs) and microreactors, while continuing to strengthen its competitive position in safety, operational effectiveness, and customer service [19] - The CEO views Rolls-Royce's history and iconic brand as assets for talent attraction and believes the transformation effort is worthwhile [20]