ATTENTION – QUESTION!
The Rolls-Royce Company makes aircraft engines, but does not sell them. Nevertheless, quite a lot of aircraft are equipped with them.
Where do aircraft designers get them from – do they steal them, or what?
The answer is a little later.
CHARLES AND HENRY’S CHILD
Usually at the words Rolls-Royce everyone remembers one thing – a luxurious car on which the super-rich drive around. Their prices are not for the faint of heart – today a brand new Rolls-Royce in Ukraine will cost a chic lover near 17 million UAH.
Rolls-Royce is not onomatopoeia: the names of its two creators were really consonant, as were their designs. Charles Rolls was a wealthy man, one of the earliest motorists and pilots. And Henry Royce, a talented engineer, created one of the best engines of his time.
When they met, they found that they were dreaming of the same thing – an ultra-reliable and super-luxurious car – and began to work together. Since 1907, the production of the famous first Rolls-Royce model – Silver Ghost began.
It was not about the famous figurine on the hood – it was called “The Spirit of Ecstasy”, and it was ordered by a friend of Rolls and Royce, Baron Montagu, in honor of his beloved woman, Eleanor Thornton. The sculptor Charles Sykes made a figurine that embodied “reasonable speed, grace and beauty”, and in 1911 Montagu put it on the radiator of his car, and only then it decorated all cars of this brand.
The comfort of this car is well explained by the famous Rolls-Royce slogan: “At 60 miles an hour the loudest noise in this new Rolls-Royce comes from the electric clock”. No less famous is the reaction to this slogan of the driver of such a car: “I have always said that something needs to be done with this watch”.
ROLLS-ROYCE IN THE AIR
But the interests of Rolls and Royce were not limited to cars alone. Charles Rolls was not only the third motorist in the history of Wales, but also a co-founder of the British Royal Aero Club. Unfortunately, in 1910 he died in a plane crash – crashed in his Wright biplane.
Royce adopted his companion’s love of aviation and during the First World War developed a series of aircraft engines named Eagle, Hawk, Falcon and Condor. More than half of the Entente aircraft flew on its engines.
The last invention of Royce, who died in 1933, was the great Merlin aircraft engine. On all the main British aircraft of the Second World War: the Hurricane and Spitfire fighters, the Mosquito and Lancaster bombers, and even on the American Mustang number one fighter, this engine was installed – the Packard company produced it in the USA under license …
Nobody is immune to the difficulties – in 1971 Rolls-Royce went bankrupt. But Rolls-Royce Motors, which separated from it, is still producing legendary cars, and Rolls-Royce plc is privatized again and deals with engines.
But if a company makes so many engines and doesn’t sell a single one, where does it put them? Do they tar the engines and put near the wall? Then the list of major troubles of the company would clearly not be limited to one bankruptcy in 1971 … For what do they need it?
For the plane to be profitable for the airline, it must belong to it – shouldn’t it? The plane is its property, and the concept of ownership is one of the main concepts in business. Moreover, it is one of the most ancient: in the Paleolithic there was no property yet, but in the Neolithic it already existed.
The Universal Declaration of Human Rights stipulates that each individual has the right to own property, either alone or in association with others, and no one should be arbitrarily deprived of it. Thus, the right to property is attributed to one of the basic human rights.
If this right is limited, it turns out badly in the end. Residents of the USSR, where private ownership of the means of production was abolished so that no one, God forbid, earned a little money and began to live better than their bosses, still remember perfectly well what came of it and how it ended.
WHY DO YOU NEED AN ENGINE?
How do airlines install Rolls-Royce engines on their planes if they don’t sell them? Is Rolls-Royce giving them away for free – as a charity or as an advertisement for their luxury cars? Hard to believe…
Maybe planes don’t need engines at all, and in fact they need something else? The famous creator of the scandalous science of freakonomics Theodore Levitt once said that drills with a diameter of three quarters of an inch are not needed by anyone, but they are sold well, because so many people need holes with a diameter of three quarters of an inch …
Strictly speaking, aviators don’t need engines – they need planes to fly. But without engines, it just doesn’t work. So you have to buy these same engines, not really knowing how long they will work. It’s up to the aviators to load their planes with work.
Now, due to covid, the intensity of engine use has sharply decreased. This is not only an aviation problem. We calculated how much each purchased drill works on average. It turned out to be 13 minutes! For the sake of these 13 minutes, we buy it, and the rest of the time it lies useless.
So the question arose. If they stop buying engines from Rolls-Royce, they will simply shut down. And if they buy, the question of the intensity of their use will become a problem for those who bought them. Even in the quality of the engines, Rolls-Royce will be interested only indirectly. What to do?
Dolphin trainer Karen Pryor has already told us about a typical mistake of her colleagues – to encourage a treat not what they want from an animal. If you want the dolphin to jump over the barrier, do not give it fish when the dolphin just swam to the barrier – otherwise it will swim in the direction of the barrier, and not jump over it, but it will require fish. It’s the same with engines.
CAUTION – CORRECT ANSWER!
Aviators do not need engines, especially those that are idle a lot – they need the flying hours of the aircraft on which the engines are installed. For the time that the engines spend in repair, they even more do not have to pay.
So let them pay for what they want – for the flight hours! And the engine remains the property of Rolls-Royce, they both repair and service it. If the price is right, everyone is satisfied.
SELL WHAT YOU NEED
This is how Rolls-Royce introduced the innovative Power by the hour model “Pay per flight hour”. The company does not sell the engines, it simply allows them to be installed, receiving an agreed amount for this for each hour of flight. It does all the repairs and maintenance itself.
This is in line with the progressive “Performance-Based Contracts” business model, in which the price of a product is calculated based on the services rendered rather than face value. This amount includes all related costs – operations, maintenance and repair costs – so that customers can easily control their costs.
This template allows you to monetize existing knowledge and services, including process knowledge, maintenance know-how, and other related services. It is popular with clients who want to avoid upfront costs and those who plan to increase transparency and stability in the cost of final goods and services.
Do the company’s clients want this? Usually they want, and quite strongly. When Rolls-Royce began to use this method in the early 80’s, it immediately became clear that such a program liked the buyers of its engines. It was thanks to it that Rolls-Royce began to receive up to 70% of the profits.
If Rolls-Royce took money from aviators not for the flight hour, but simply for the astronomical time of installing the engine on the plane, it would be a similar, but slightly different business model – “Rent instead of buy”. It has been known since antiquity.
Rent is a special case – a thing very familiar to us. In the USSR in the 50s and 60s, rental was considered a very correct business, and there were a lot of rental shops everywhere – I remember that. The hero of the story Monday begins on Saturday, also arrived in Solovki in a rental car …
This business quickly faded away – the rental equipment was used at random, sold and drunk, and such an ineffective owner as the state could not do anything about it. Car rental quickly ceased altogether – a critical mass of trouble was reached.
And now they don’t remember how they lived without renting a car – not only in the rich West, but it also works for us. You get off the plane and there at the airport you get your car keys, sit down and go wherever you want. If you fly away, you just return it there, and also in a matter of minutes.
The world famous Xerox (then Haloid Photographic Company) just brilliantly took advantage of the “Rent instead of buy” model. Through the correct use of this method, it was able to promote a completely new and unfamiliar technique.
The Xerox 914, released in 1959, was the world’s first copier to use dry photocopying techniques. The device seemed like a miracle to many – it made it possible to copy several thousand pages a day instead of 15–20, as before.
However, the device came out quite expensive and the majority of potential buyers could not afford it. And then the company made a brilliant decision – to simply lease the Xerox 914 to everyone for $ 95 a month. The results exceeded all imaginable expectations!
There was a real boom in demand for such devices, and the company even felt certain difficulties – the demand soared that for some time the company could not cope with the production volumes! However, there are different difficulties – such are even very pleasant …
TAKE GOOD NOTE
It is good to buy something at a reasonable price that will help us solve our problems. But it is even better to acquire something that solves our problems, without spending anything else on it.
Restrain natural thriftiness – not eveverything that we need, we need forever, and not for a while. Buying an expensive and difficult drill to use for only 13 minutes is not very economical.
It’s good to be flexible and use innovative business templates where it can be beneficial. In northern countries, more than half of the population lives not in their own, but in rented apartments, and the locals are by no means poor!
Leasing is a little more difficult than selling – you need to prescribe in contracts what can prevent any of the parties from behaving in good faith. But if this is not done, it will be the same as with Soviet rental offices …
Do not be afraid of new forms of business relationships – they can quickly get ahead, as Xerox has been able to. Just think carefully if you need it now, and make no mistake!