Rolls-Royce Marine president Mikael Makinen thought he had seen it all in a 33-year career in marine engineering — but the persistence of the shipping industry’s “unprecedented” downturn caught him by surprise.

Three years ago, having just joined the company, he was sitting at his desk at headquarters in London, waiting for the customary cyclical upturn to arrive. Then it dawned on him that this time was different and he had to do something about it.

“The world economy was doing okay. So in the beginning I said: ‘It’s a downturn, I’ve seen it before. It will come up’. But it continued to go down, and then I realised I had to do a big restructuring.”

Makinen is no stranger to turning engineering companies round, having been involved in two previous major restructurings at Wartsila and Caterpillar.

But this time it would involve more than cutting costs and jobs and would change the working life of everyone in the company. He also wanted to redirect Rolls-Royce Marine towards a very different future, and that involved moving away from traditional pure engineering and manufacturing, and committing to the world of advanced services, automation and digitalisation.

“We asked: what is the future of marine? And I think the winner will be someone who understands the digital world,” he tells TW+.

Makinen encouraged managers to adopt a two-pronged approach, to make the company more cost-competitive while at the same time working towards the long-term vision.

That, he believes, takes rare talent. “Some managers are good at cutting business and some are good at growing it — not many can do both.”

Holding on to the positive picture of a dynamic future for the company also helped him go through the painful process of cutting one-third of the Rolls-Royce Marine workforce.

“When you lay people off and go home at night, you have to think of the jobs you save. That is what keeps me sane,” he says.

Like many shipping executives, Makinen’s working life involves a lot of stress, travel and long hours.

When in London, where the Finnish executive has set up home, the working day starts between 8am and 8.30am. “I try to get home by 6.30pm to at least have a few hours with my wife,” he says.

But there is no such thing as a typical working day: he spends only around 150 days a year at his London office; the rest of the time he is on the road visiting offices, factories and service centres around the globe.

Roll-Royce’s digital vision includes land-based centres like this that will be able to remotely monitor and control the unmanned ships of the future, using interactive smart screens, voice recognition systems, holograms and surveillance drones to monitor fleets across the globe. Photo: Rolls-Royce

He has a few tips for keeping stress levels down. Reading is essential, he says, to make a heavy travelling schedule tolerable. “If you travel a lot, you have to escape. I’m usually reading three books at once — one in English, one in Swedish and one in Finnish.”

History is a favourite subject and the stories of English and Swedish kings are two he currently has on the go.

Oddly, for someone who has so much faith in a digital future, he prefers a traditional book to an e-reader.

But Makinen, who enjoys cross-country skiing and mountain biking in his native Scandinavia, knew he needed to change the mindset within Rolls-Royce Marine as part of a digitalisation strategy.

Offshore accounts for nearly half of Rolls-Royce Marine’s $1.1bn annual revenues. In the days when the price of oil was more than $100 a barrel, the oil industry was awash with money but no one was investing in cost efficiency.

“The customer did not care about price and I thought, ‘There is something wrong here’,” he remembers.

That affected Rolls-Royce too. “I have seen times when people were arrogant, thinking: ‘We are Rolls-Royce’. But history does not help you. It is today’s world in which we are living.”

Now the cuts have been made, the company is cost-competitive. Rather than living off its brand name, it has realigned to the new price realities of the market. Makinen believes a recovery in investment in the oil industry can happen even without an increase in the oil price because companies are restructuring their business.

Shipbuilding is changing too, he senses. In the past, newbuilding owners chose equipment sourced from a variety of manufacturers. Now he sees that process becoming increasingly commoditised and he thinks equipment will eventually be sold as one package from one supplier.

But in the long run, as a high-end engineering company working in technically advanced areas, the manufacture of commoditised products is not a business Rolls-Royce Marine wants to be involved in. Since 2012, its manufacturing footprint has been reduced by 40%.

There is still a role for making sophisticated technical products at Rolls-Royce, but it is being co-ordinated with the growth in digitalisation.

“We are coming from a product world and even if I talk about digital or autonomous ships for the next five years, we still need products and we still need to connect the digital world to these products,” Makinen points out.

Environmental regulation is another factor that should help Rolls-Royce Marine. It is investing $300m in R&D in automation and digitalisation. By 2025, Makinen sees the company being involved in autonomous ship systems, big-data analytics, energy management, advanced materials, robotics, intelligent ships, human augmentation and human-computer interaction.

But what if his vision of shipping’s digital future is never realised? His critics would say it is a pipe dream that is not going to happen. Makinen is confident he can prove them wrong. “My biggest surprise over the last year-and-a-half is that people are changing so fast. Classification societies and leading owners are all thinking about it [digitalisation and automation].

“What we are talking about now will happen faster in marine than in the air industry, I believe. And even if there is never an autonomous ship, everything we have learned can still be used.”

PLUS POINT: Man at the wheel

Mikael Makinen joined Rolls-Royce in April 2014 as president of the marine business, which has more than 4,000 employees in 35 countries.

After attending the Helsinki University of Technology, where he received a Master of Science in 1980, he held several senior positions at Wartsila from 1984-2006, including group vice-president and deputy to the chief executive responsible for the marine business and Asian strategy, as well as managing director, Wartsila Group Singapore.

From 2006-12, Makinen was president and chief executive of Cargotec in Helsinki, and from 2012 until joining Rolls-Royce, he was president of McGregor. He is also a director of Stora in Finland.