‘If you're not successful, you can't make a difference’: Dave Shemmans, Ricardo
Image credit: Nick Smith
Ricardo CEO Dave Shemmans says that in order to adapt to the challenges facing industry in a post-covid landscape we need to get back to addressing fundamental megatrends such as climate change, pollution and resource scarcity.
Everyone these days is having meetings over digital platforms such as Zoom and Teams. It’s becoming part of the much-trumpeted new reality. Yet for Dave Shemmans, holding meetings this way isn’t just a makeshift response to not being able to meet in person. For the CEO of global engineering and environmental consultancy Ricardo, it’s something that we should be embracing. It’s a way of taking fewer flights; spending less time in the car; reducing the environmental impact of doing business. If you can save time, money and the planet by plugging into this simple measure, it becomes a ‘no-brainer’ rather than an inconvenience brought about by government-mandated working from home.
The fact we are sitting 200 miles apart has barely any impact on the interview process. Neither does it affect our ability to produce the accompanying portrait photography. To maintain Covid-19 compliance, I sent a style-matching and technical brief to a photographer located in Shoreham, close to Ricardo’s headquarters, figured out the social-distancing requirements, directed the shoot remotely and we’ve all ‘just got on with it’. While Shemmans and I agree we’ve shown a certain amount of ingenuity in pressing ahead as normal, we shouldn’t be too complacent.
This is because, as Shemmans says, living with a Covid-19-dominated news-cycle, it’s easy to be misled into thinking climate change and Brexit, along with many other previous hot-ticket issues, have simply disappeared. “But they haven’t,” he says. “In fact, one of the dangers of Covid-19 is that everyone sees environmental pollution as falling and believes the problem no longer exists. Yet as soon as industry gets back online, it will become evident we will be in the same position that we were in just a few months ago, when the pollution levels around the world were horrendous. So that hasn’t gone away at all. People forget too that Brexit is still there. The target is still for the end of the year. The questions of how we trade with Europe and the rest of the world are still uncertain. All these problems are just sitting there on the shelf and they will come back once Covid-19 reduces to a level when it is no longer headline news.”
One big challenge confronting Shemmans is how to make sense of the new reality, to keep all the plates spinning while creating a strategy. “We’ve got lots of mantras at Ricardo, because over time you realise the way to get people galvanised behind an agenda is simple messaging. While the government is today using simple messages about protecting the NHS, we use simple messages too. One of ours is ‘agility, adaptability and ambition’, and we have that very much at the heart of the culture of our business. However, we also have a good idea of what the megatrends are going forward: climate change, pollution, the protection of scarce resources and urbanisation.
“By 2050, 80 per cent of the world’s population will live in cities and that’s going to create all sorts of problems. Transport, pollution, getting water in, getting waste out. How do you power a city in a sustainable way? When you talk about climate change, one of the big impacts is that you find you either have too much water, or too little, which leads you to thinking about how to protect resources. There are a lot of changing dynamics. Gone are the days when it was a simple world.”
He pauses. “Maybe the world was never simple,” he continues, “but it certainly isn’t simple today, because all these factors are interconnected: you solve one problem over here and create another problem over there. I think the ability to be adaptable – accepting that life is going to change – and then having the agility to be able to move quickly is vital, along with the ambition to be successful. If you’re not successful, you can’t make a difference and if you’re not ambitious, you won’t be around for very long, quite frankly.”
‘If you’re not successful you can’t make a difference’.
Shemmans has been with Ricardo for 20 years and has overseen the organisation’s transformation from something that “everyone thought was just about cars” to “creating a world where everyone can live sustainably”. This idea is based on the five pillars of clean air, access to clean water, availability of clean energy, safe and sustainable transport, and conservation of natural resources. It’s an ambitious plan, consistent with Shemmans’ positive outlook on a sustainable future. Yet he’s not convinced that everyone agrees with him.
“It seems to be a quite populist pastime these days to criticise business,” he says. “Yet businesses provide oxygen that fuels government and social support. At the moment, we are quite rightly celebrating the care workers of the NHS. These guys and girls are superheroes. But at the end of the day somebody has to fund all of that.” Ultimately, he continues, it is “tax that pays for it. The lifeblood is profit, because that’s where the tax comes from. That’s why you need healthy ambitious businesses that grow, generate profit, pay tax and fuel society. Sometimes people miss that. We should celebrate successful businesses and we should celebrate successful people, providing, that is, they pay their taxes.”
Before joining Ricardo, Shemmans remembers at the end of the 20th century being involved with the early days of vehicle electrification and boring his children with cautionary tales about how the world would need to become more sustainable. “At that time, we were constantly going to war over oil, and that just didn’t feel right to me. You could see the impact industry was having. Even before we started talking about carbon dioxide, whenever there was a picture of factories and industry you could see that these emissions weren’t doing the world any good. And so there’s always been that thing where I’ve wanted to make a difference.”
Shemmans pitched up on Ricardo’s doorstep in 1999 at the dawn of the early 2000s economic recession. “At the time we were heavily automotive-focused, dominated by eight car-company clients, and the best way to describe the business was that we were pretty much ‘UK-based, jump on a plane’. Now that’s a great model when the sun is shining because it’s very efficient. Yet when the recession hit, we found that model was fragile because our customers were large, and when the car industry had a really hard time in 2002, they dropped us like a stone. The company suffered and the CEO at that point asked me to step in as managing director and my Day One job – literally two weeks before Christmas – was to implement a 25 per cent headcount reduction to take the company from a loss to a profit.”
All this time later, Shemmans still sounds disturbed by the experience: “When you go through that you reflect on how it happened. The answer is that the business hadn’t been set up to navigate storms at all well. Which is why we decided to put in a strategy for growth and risk mitigation” that had as its guiding principle the removal of dependence on any particular sector, geography or client.
Consequently, geographical expansion was his first focus when he became CEO in 2005. “We put a footprint into China, Japan, India and Korea. Once we got the geographical diversity plate spinning, around 2007-8 we started pushing into different sectors. Up until this time in Ricardo’s history, we were predominantly automotive: cars, motorcycles (that’s just a two-wheel car), trucks, buses, military vehicles. They’re all the same. They all have the same components. It’s just the skin of the vehicle is different. At this point, they were all driven by emissions legislation. What this meant was that if you could develop the technology to solve emissions legislation for, say, the passenger car, you could then apply that to all sectors. We navigated the 2008 recession pretty well, mainly because the truck industry was looking at legislation for 2010 and so that sector had to develop, and that carried us through.”
Knowing he had to diversify, Shemmans glanced sideways and saw the emerging preoccupation with carbon dioxide in the energy sector, which prompted him to do some wildcard research into wind turbines. “I reasoned that a wind turbine is just a gearbox on a stick, and in that sector, the issues they were having were maintenance, up-time, bearings and so on.” Realising Ricardo had ‘fundamental expertise’ in the physics that goes behind designing bearings, the company diversified again, a process “that carried us through. What’s interesting is that industries which are legislatively driven tend to perform better in recessions than consumer-retail-funded industries. Automotive is always going to struggle in a recession, but government-backed industries tend to perform well. That’s what really led me into thinking about diversification and a balanced portfolio.”
Having emerged from the recession intact, Shemmans decided he needed a new strategy. Rather than start from the position of being a gearbox and engine expert hunting down markets, he decided “to look at problems society was going to face in future: climate change, pollution, scarcity of resources. We felt we really needed a new partner to help us understand where these drivers were going to take us and give us a seat at the top table with government.” This, in turn, led to the acquisition of AEA Technology, a 400-person environmental consultancy that “had supported the government for many years. That was fascinating because we learned so much from them, especially what governments were trying to tackle long-term.” Clearly, he says, electrification of vehicles was going to be a big issue, while the possibility of completely removing vehicles from city centres was no longer science fiction. “And we are starting to see the initial steps towards that today.”
Realising people would still need to get about, “we acquired a business – Ricardo Rail – which gave us insight into, and exposure to, inner-city and inter-city mobility. So really, we went from purely automotive to adding environmental aspects and adding rail, which all overlap. We’ve always done defence in the background.” Yet there was still the requirement to get longevity, to be able to project a decade forwards, “which is where our niche production business such as motor sport comes into the picture”.
Shemmans then tells a parable of ‘agility, adaptability and ambition’ for our times about how the legendary Ron Dennis phoned him up and asked if Ricardo could build some engines for McLaren. “Now that was one of those calls where you could say, ‘look Ron, the last time we built engines was during the First World War when we made them for tanks’. Or you could say: ‘let me go away and think about it,’ and run the risk of missing out. Or you could say: ‘yes we can.’ I did that and went away to work out how to do it. We’ve now done 25,000 engines for them.”
His key to remaining sustainable as a business is, “to bring in a new activity every three years or so”. Shemmans describes this as “continually pushing forward but in the context of a common theme”. That common theme might once have been for Ricardo the manufacture of car components, but today it is about creating a world “fit for the future”, which keeps coming back to the headline concern of climate change. “That’s the big one,” says Shemmans. “We’ll still be working out how to deal with that long after we’ve forgotten about coronavirus.”
Yet for the moment Ricardo is showing how adaptable an engineering company can be by developing face-shields to assist frontline workers at local care homes – “in fact, I’m delivering some this afternoon to a medical centre” – as well as assisting in the design of patient-monitoring systems.
“Then I thought, could this be the beginning of Ricardo Medical? That seems to line up with creating a world fit for the future.” Yet for Shemmans the strategist, his mantra of ‘agility, adaptability and ambition’ must always be tempered by ‘no dependence on geography, sector or client’.
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