The president and CEO of SKF, a Swedish industrial group gone global, is a Brit who takes a holistic view of business and believes in opportunities not plans. Exec talks to Tom Johnstone
Written by John O’ Hanlon
Tom Johnstone is a bit unusual, a Scot at the helm of an international group that declares its turnover in Swedish Kronor, over 53 billion of them in 2006. That’s around £4 billion or, at today’s rates, more than US$8 billion. When I first went to Timken, it was more closely comparable with SKF because both of them made steel. Since SKF divested those activities in 2005 they are less head-to-head, but however you look at it, SKF is the biggest bearing group in the world, not counting its other four major divisions, seals, mechatronic systems, advanced lubrication systems and services. Tom Johnstone wields a bigger bat than his Timkken opposite number, Jim Griffith. In fact, although Timken is a major and respected player SKF is probably more aware of the €8 billion Schaeffler Group and the Japanese companies NSK and NTN as direct competitors.
Though Johnstone speaks Swedish, all the corporate business of SKF, even at its headquarters, is conducted in English, so he doesn’t need the vernacular other than socially. His gentle Ayrshire tones have directed a period of major change throughout the business. As well as getting out of steel and restructuring around five customer areas SKF has rolled out Six Sigma throughout the organisation. It was for his leadership in this that Johnstone was awarded the Six Sigma Premier Leader Award by the ISSSP in 1996 for his work in committing the company to continuous improvement. He was the first European corporate leader to receive the prestigious award, sharing the honour with well-known CEO’s such as Jack Welch and Chad Holliday.
Tom Johnstone is no corporate big shot parachuted in to restructure the company. He has worked his way up from making the tea – well almost. “I joined SKF in 1977 as a trainee salesman,” he recalls. “I had a van and delivered bearings and components to customers in the North of England from our sales office in Irvine in Ayrshire.” After 10 years in the UK with SKF he went to Sweden for the first time in 1987, worked there for three years, ran a business area in Italy for a year, then came back to Sweden where he has been ever since. “I worked in different areas, primarily in sales and marketing until the last 12 or 13 years when I moved into general management.” And no, he didn’t set out to be an industrial magnate. “When you start in the West of Scotland you never think you are going to end up in Gothenburg! But now I have spent two-thirds my career in Sweden so I suppose I must be comfortable with how it has turned out!”
He didn’t plan this
His contemporary at Timken, Jim Griffith, is a Stanford MBA and like many American corporate leaders seems to have been on the fast track from earliest college days. The contrast is fascinating, Johnstone always seems to have been more mystified by the planned life than the serendipitous.
Johnstone commented: “I talk to a lot of young people today and they always seem to talk about career planning. I must say I never really planned mine. I just took advantage of opportunities that came along in the SKF Group. For example the opportunity came to come to Sweden happened because a few months previously I had been on my first overseas training course with the company. As part of which I filled out a form that asked ‘would you be willing to work abroad?” I ticked the box: six months later I was given the chance to work over here. At the time I thought I was coming over for three years then I’d move back to the UK, but I have never been back since!”
That is one of the advantages about a company like SKF, Johnstone says, which has always been a bit different. “We have been a global company, with English as our mother tongue within the Group, since the 1960s. And we are into so many markets that you feel as if you have been in different businesses altogether, just under the common umbrella of an international group.”
Innovate or die
Professionally, Tom Johnstone sees his role as keeping his eye on the end goals and not getting bogged down in detail. Six Sigma and technical innovation are just important means to this end. “Innovation is critical to any company. If you aren’t innovating you are harvesting, and you will die. Innovation comes not only in the products you make but also in how you do business. We focus heavily on innovation at SKF. All the main innovations in bearings technology in recent years have come from the SKF Group, and so have the innovations in methodology, all-life programmes and environmental performance.”
“I think there are two dimensions to innovation that are important. Firstly ensuring that your innovation is very much driven from customers’ needs today and tomorrow.” And you don’t always find that out by asking the customer – if you really want to know what he is going to need next year, you had better go to the end user, he believes.
“The other side is technological innovation,” he continues. “This is where you see new materials coming through or new designs that we can develop and bring to the market. Again you are solving customers’ problems, but problems they may not know they had, using technology they might not understand yet!
“I think to keep long term leadership you need to focus on innovation and one of the things we have done is to double our spending on R&D over the next five years to advance our leadership not just in bearings but in all five areas we are in.”
Better than nothing
Part of Tom Johnstone’s big picture is environmental responsibility, which he sees as a huge opportunity as well as an ethical imperative. SKF launched its Beyond Zero programme in 2006 with the aim of reducing carbon emissions. “We have a target of five percent a year CO2 reduction regardless of what happens to production. Last year we increased production by twelve percent but reduced our carbon emission by 2.2 percent.”
Saving CO2 emissions for customers is another key part of Beyond Zero. Projects he cites include supplying ‘a major European transmissions manufacturer’ in Europe with a new hybrid pinion bearing unit to help them reduce energy loss due to the bearings by 30 percent. “That means five grammes less per kilometre driven.”Another is a ‘throttle by wire’ system to control the engines on business jets. “Two business jet manufacturers are using them now and that reduces their fuel consumption by five percent, which means roughly a million litres of fuel saved over the life of one of these aircraft!” He may not deep dive, but he certainly knows his detail.
A high profile project is at the European Parliament building for which SKF developed new actuators to control the temperature in the glass fronted building. “That can save them up to half their energy consumption for heating and ventilation. We are going to document all the saving we have made for our customers in energy saving and carbon emission, and the savings we get from these should be greater than the negative impact across our business. That’s what Beyond Zero means – that we are making an overall positive contribution to global sustainability.”
Everyone wants to tell a good environmental story these days, but when Tom Johnstone talks about it you begin to realise what gets him out of bed in the morning and why this quiet Scot came to head up one of Sweden’s proudest industrial groups.
Source: Exec Digital UK
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