Rolls Royce Innovation Performance and Capabilities: Report

This report provides a comprehensive analysis of Rolls Royce's innovation strategies and performance. It begins with an executive summary and introduction, followed by an overview of the company and its innovation history, highlighting its focus on pioneering technology and sustainable solutions, including electrification and the development of efficient engines and mining equipment. The report then delves into Rolls Royce's innovation capabilities, evaluated through internal (VRIO) and external (Porter's Five Forces) analyses, assessing its strengths, weaknesses, and competitive advantages in the market. The VRIO analysis reveals core competencies such as product mix diversity, rapid innovation systems, and artificial intelligence capabilities, while the Porter's Five Forces analysis examines the competitive landscape and potential threats. The report also discusses industry trends in 2016, particularly focusing on environmental concerns and the automotive industry's shift towards innovative waste management practices. The conclusion summarizes the key findings and emphasizes the importance of managed innovation for competitive advantage. The report highlights Rolls Royce's ability to adapt to the changing needs of the market and maintain its position as a leader in the energy and automotive industries.

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MANAGING INNOVATION IN BUSINESS
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Executive Summary
This report examines innovation trends in the Rolls Royce holding. The report analyses
the company and reviews its history with innovation. The report goes further to analyses the
capabilities of the firm as far as innovation is concerned. This capacity is evaluated by subjecting
the company to an external analysis model (Porter % forces) and an Internal Model VRIO. The
report then examines the trend experienced in the industry in the year 2016 and mentions some
of the changes related directly to Rolls Royce. The automotive industry is one of the industries
that has been causing a lot of environmental pollution. The manufacturing process of automotive
yields a lot of wastes in terms of solid wastes and also gaseous wastes. Solid waste includes
scrap metal and metal oxides while gaseous wastes include carbon and its oxides plus Sulphur
gases. With the rising concerns in environmental issues and global warming, manufacturers are
compelled by environment regulatory authorities to reduce their carbon emissions and wastes in
a bid to safe the world’s climate. Manufacturers have therefore been forced to employ innovative
waste management practices to eliminate the release of carbon into the atmosphere and to reduce
the carbon content in the exhaust fumes produced by automobiles. This has been made possible
through the adoption of widespread innovative ideas and practices for both production and
operation of the final product.
Additionally, with increase cost of living, manufacturers have been forced to find new
ways of manufacturing to reduce the cost of their final products in order to remain relevant to the
world’s population in terms of costs. This struggle has forced innovation and creativity in areas
such as material science and solid mechanics which have developed new principles and
materials including composites and polymers for use in manufacturing of cheap products. These

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innovations are promoted by the application of science in conjunction with engineering. Product
developers work towards the realization of even cheaper products every day. Innovation is only
advantageous if it is managed properly. To manage innovation and to accommodate it, producers
have shifted to the creation of more flexible production lines with provisions for improvement
and systems that can accommodate expansion and addition of innovative processes and
equipment into the production process. Innovation is being used as tool to gain competitive
advantage. This truth is examined by subjecting Rolls- Royce to a detailed analysis in this report.

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Table of Contents
Executive Summary.............................................................................................................2
Introduction..........................................................................................................................5
Organization and Industry Overview...................................................................................5
Rolls Royce Holdings and Its Innovation History...........................................................5
Rolls Royce Innovation Performance and Capabilities...................................................7
Internal analysis – VRIO.............................................................................................7
External Analysis- PORTER 5 FORCES..................................................................10
The Industry In 2016......................................................................................................12
Conclusion.........................................................................................................................14
References..........................................................................................................................15

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MANAGING INNOVATION IN BUSINESS
Introduction
This report analyses the innovation strategy at Rolls Royce. Rolls Royce Holdings is an
incorporated engineering company operating in the United Kingdom. The company specializes
in design and manufacture of engines and vehicles. The company is known majorly for its luxury
vehicles and brand Rolls Royce. This report revisits the innovation strategy of the organization
by evaluating its innovation history and the current state of innovative performance at the
company. The report further explains how the company and the industry within which it operates
fared in the year 2016 as far as innovation is concerned.
Organization and Industry Overview
Rolls Royce is involved in the energy business. The energy business is concerned with
powering machines and systems for the world. The sector designs and fabricates engines,
machinery, and other power equipment for both domestic and industrial uses (Rolls-Royce,
2020).
Rolls Royce Holdings and Its Innovation History
Rolls Royce prides itself on pioneering cutting-edge technology that provides clean, safe,
and competitive solutions for energy needs. The company spearheads impact by maintaining
freedom of innovation and exploration of brilliant ideas. The company is among the leading
companies in Civil Aerospace engines, defense aircraft, and power tools.
The company discovered the idea of electrification for vehicles and propulsion. In this
concept, rolls Royce discovered the alarming rates at which the environment was degrading and

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designed a concept through which cars can be powered through alternative fuels and mainly
electricity. The use of electricity for propulsion is pollution-free and is more efficient in
generating thrusts. The use of such electrification concepts allows aircrafts to be re-designed
with new high-performance systems. Electrification of aircrafts brings the promise of efficient,
quiet sustainable flights that eliminate the cost of conventional fuels and hence significantly
lower the cost of air travel (ROlls-ROyce, 2019).
In the recent past, Rolls Royce has applied modern technology to increase the power
density of its engines. The company has also developed battery cells that are capable of storing
energy for extended periods of time. For example, in their recent model, the 2020 rolls Royce
Dawn features a fuel-economical light wight engine with a 48month power train. The company
is manufacturing small size engines with more power than ever before.
Rolls Royce has in the recent past built mining equipment for mining companies in
Brazil. The mining contract U& M received a supply of improved MTU series 4000 engines to
increase its mining capacity. The series features a hybrid drive solution that significantly
improves performance while increasing profitability and reducing logistics burden. This
innovative design enables mining companies to operate comfortably in most remote places (Rolls
ROyce, 2020).
Rolls Royce began making experimental cars in 2004. These models began with the
100EX, of which a limited number of models were delivered to specific customers all over the
world to solicit feedback. Eventually, this model became the Phantom Drophead coupe in the
year 2007 (Rolls Royce Motor Cars, n.d.). The culture has gone on from then and has been very
succe3sful in introducing new designs to the product line. The company’s product development

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team designs new models and manufactures a few of them to distribute to the world for feedback
and input from potential consumers and dealers (Chiaroni, Chiesa and Frattini, 2011).
Other innovations in the same industry include the solar-powered car, the turboshaft
engines, and modern cars with very low CO2 emissions coefficients (Schiederig, Tietze and
Herstatt, 2012). These are environment-friendly innovations meant to drive change in the
contemporary world by providing solutions that are friendly to both the environment and the
people. Rolls Royce has also manufacture domestic equipment like ventilators with zero
emissions and high-power efficiency. The same ventilator concept ins used in air conditioning
some of their car models, and this drives the meeting of the world's power needs.
Rolls Royce Innovation Performance and Capabilities
Rolls Royce Holding bears the potential to grow its innovation in the market. It has the
capacity to become the number one leader in innovative energy solutions.
Internal analysis – VRIO
The VRIO framework evaluates the value, rarity, imitability, and organization of an
enterprise. The aim of this model is to analyses and quantify the key competencies and
competitive advantage possessed by a company. The model effectively evaluates the position of
the company with respect to the market.
VRIO Analysis Table – Rolls Royce
The following table represents an approximate analysis of the resources and capabilities
of Rolls-Royce Holdings. The factors are an approximate approximation based on the
background information available on the company’s website. V stands for value, R means Rarity,
I stands for Imitability, and O means organization.

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Rolls Royce resources and capabilities V R I O
Business process automation ✔
–Competitive employee compensation packages ✔
–Human resource capabilities for innovation ✔
– Product mix diversity ✔ ✔ ✔ ✔
Sustained (Long-Term) Competitive Advantage(s):
– Globally popular premium brand ✔ ✔ ✔
– Systems set up for rapid innovation ✔ ✔ ✔ ✔
– Ecosystem of complementary products ✔ ✔ ✔ ✔
– Access to user information ✔ ✔ ✔
– Artificial intelligence capabilities ✔ ✔ ✔ ✔
– Global distribution and sales network ✔ ✔ ✔
Source: (Newton, 2019)
The company has four core competencies that satisfy all the four variables of the VRIO
model. These are product mix diversity ( the company produces limousines, engines, agricultural
equipment, heavy-duty systems and mining equipment not forgetting logistics equipment like
trucks), systems set up for rapid innovation ( the company has a well-equipped product
development team and a flexible production process that can easily adapt to new ideas), an
ecosystem of complementary products and artificial intelligence capabilities. The company
produces some competencies required for its final products and does not have to outsource them,
some of the components used in equipment have been modified and produced in different
versions for use in other varying conditions and tools. The ventilator, for example, is used in
homes for air conditioning, and the same is modified for use in the cars.

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With these core competencies,' the enterprise has the capacity to expand more into the
energy industry, the automotive industry, and aviation. The three frons offer enough grounds for
innovation (Nambisan, Lyytinen, and Song, 2017). Additionally, the company has a global
reputation for rolls, Royce, a brand vehicle.
Rolls Royce uses very attractive rewarding systems for all the employees; this creates the
morale and motivation necessary for innovative operations. The company provides more than
enough resources to the product development team. This arrangement creates the capacity
necessary for innovation and creativity. Rolls Royce production lines have the provisions
necessary for automation and artificial intelligence; some of the operations are already
automated. This mode of preparation puts the company in a strategic position of industry 4.0 in
which efficiency will be maximum, while production costs will be a fraction of what they are at
p[resent (Newton, 2019).
Besides the core competencies, Rolls Royce has several other competencies that are also
crucial in the market. For a business to remain relevant, access to user information is necessary,
and it is very valuable as it points to the producers in the right production sequence. Human
resource capacity for innovation and a global distribution network hold the company in a
strategic arrangement for innovative production. With this core and Non -core competencies,
there is extensive room for innovation at Rolls Royce (Motiwalla and Thompson, 2012).
External Analysis- PORTER 5 FORCES
The company faces stiff competition from competitors in the industry. It must, therefore,
engage in continuous development and improvement to staying business. Porter's Five forces is a
useful tool in analyzing the level of competition that a company is facing.

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The company is operating in an industry that has a lot of players. Tesla, for example, has
already built a purely electric car while Rolls Royce is still researching its electrification agenda.
Companies like BMW have already manufactured Co2 free vehicles, and they are supplying the
market with very cheap cars. Lockheed is building jets for very low prices, although they get
some of the engines from Rolls Royce’s. All these are competitors against Rolls Royce for the
same market. They are all known companies with outstanding quality agendas. To staying the
market, the company must actively seek to establish a competitive advantage in a way that
ensures it retains its clientele (Porter’s Five Forces, 2016).

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As time goes by and the industry evolves, more companies will venture into the power
industry and try to establish a shareholding in the market. This scenario directly threatens Rolls
Royce sales. Rolls Royce is, however, very safe from such a threat, given that it has established a
loyal clientele comprised of the upper class. The company specializes in heavy equipment and
luxury cars. Its clients are bound by a lifetime of loyal series and quality delivery.
Rivalry AMong
Existing
Competitors
Tesla/BMW/
Morgan
Motors/Lockheed
Threats of New
Entrants
Bargaining
Power of
Buyers
Threat of
SUbsitute
Products
Bargaining
Power Of
Suppliers

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Some of the products, like cars and machinery, have substitutes. However, the levels of
quality upheld by Rolls Royce have so far proved to be unmatched. For any client to substitute
with other similar products, they will be sacrificing the top-class quality offered by Rolls Royce,
and none probably is willing to do so. The design components, such as engines and power trains,
cannot be substituted with anything.
Both the buyers and suppliers of the company have very limited bargaining power.
Mainly because the company produces unique, powerful products and they are very limited
options for substitutes, and the company gives very reasonable price offers, given the production
cost and quality. The company is well placed in the market for the sole reason that it is offering
unique products at unique prices; the design concepts are very original and impressive.
The Industry In 2016
The energy industry in 2016 experienced some very drastic changes. The year saw
several matters relating to energy and the environment come on board the global energy agenda.
The year 2016 saw the world realized the destructive effects automotive were creating on the
global climate and the atmosphere at large (Ruff, 2015). It is the year that manufacturers turned
their attention to renewable and eco-friendly energy and fuels. The concepts of electrically
driven vehicles and carbon-free machinery were developed all across the world.
Google came up with the idea of the Google electric autonomous car, which was meant to
be the leader in clean and efficient transportation. The market began calling for silent cars with
zero emissions, the market also demanded fuel-efficient vehicle and brought up the need for
innovation to increase the mileage per unit mass of fuel (Pinkse, Bohnsack and Kolk, 2014).

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The energy industry was faced with the challenge of powering, even bigger machines and
systems using minimal energy and created the need for small but powerful machines (Neuhaus
and Schertler, 2016). As the year drew to a close, the automotive industry was faced with the
challenge of creating self-driving vehicles and reducing manufacturing expenses, a more
profitable manufacturing enterprise. The industry took a drastic turn towards industry 4.0 ( an
industry of 100% automation and artificial intelligence in an application for faster and more
efficient manufacturing) as big companies, including Mercedes, Toyota, BMW, and tata
implemented the automation of production processes (Klimenko and Zhavoronkov, 2016).
The increase in the world population created a greater demand for energy-producing
resources and engines for both logistics services, industrial applications, and domestic
applications as well. This means that there was a heightened demand for energy, vehicles,
industrial machinery, and more innovation. (TREndS, MARKET, 2011)
In 2016, vehicle manufacturers were competing to establish brand identities in third
world countries. The focus was on the manufacturing of high-quality vehicles at very low costs.
However, Rolls Royce continued rolling out its custom luxury models at the same prices. Rolls
Royce does not compete to sell to everyone, and it competes to sell to the business class. The
year 2016 was a year of rampant economic growth. The demand for energy for domestic
purposes went high, cross country business increased and this saw increases air travel. This
meant that there was more business for Rolls Royce as airline companies purchased more and
bigger aircrafts. Rolls Royce had to increase the speed of production of aero-engines and
vehicles to counter this surge in demand.
The year 2016 also the adoption of polymeric materials for vehicle bodybuilding. Car
manufacturers stopped using metallic structures to build vehicle frameworks but adopted the use

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of polymeric fibers and matrix materials for manufacturing. This adoption allows the
beneficiaries to lower the prices of their vehicle products even further and to establish a rapport
with the market.
Conclusion
So far, rolls Royce has played a very key role in promoting innovation in energy
equipment at both domestic and industrial levels. The benefit of innovation is the use of
technology to perform complex tasks and to cater to human needs at all levels of consumption.
The company has effectively provided innovative power equipment and machinery and it is
strategically placed to continue being on the front line for innovation. However, the company
needs to shift attention to costs of its products to make them affordable to both the middle class
and the lower class.

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References
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dynamically implement the emerging innovation management paradigm,' Technovation, vol. 31,
no. 1, pp. 34-43.
Klimenko, V. and Zhavoronkov, V.A. (2016) 'INTERNATIONAL SCIENTIFIC
CONFERENCE INDUSTRY 4.0', SCIENTIFIC-TECHNICAL UNION OF MECHANICAL
ENGINEERING BULGARIA “INDUSTRY 4.0”.
Motiwalla, L.F., and Thompson, J. (2012) Enterprise systems for management, Boston, MA:
Pearson.
Nambisan, S., Lyytinen, K.M.A. and Song, M. (2017) 'Digital Innovation Management:
Reinventing innovation management research in a digital world,' Mis Quarterly, vol. 41, no. 1.
Neuhaus, K. and Schertler, M. (2016) 'How Industrial Machinery Makers Are Capturing the
Digital Opportunity,' Bain Insights.
Newton, V. (2019) Apple Inc. VRIO Analysis – Core Competencies & Competitive Advantages,
10 January, [Online], Available: "https://www.rancord.org/apple-inc-vrio-analysis-core-
competencies-competitive-advantages" https://www.rancord.org/apple-inc-vrio-analysis-core-
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disruptive innovation: The automotive industry and the emergence of low-emission vehicles,'
Journal of Product Innovation Management, vol. 31, no. 1.

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you.com/porters-five-forces/" https://www.business-to-you.com/porters-five-forces/ [05 April
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TREndS, MARKET (2011) 'Industrial Machinery and Manufacturing Equipment that Support
Hitachi's Social Innovation Business,' Hitachi Review, vol. 60, no. 5.