♪ francine: a titan of british industry, his five decade-long career has seen him work as chairman of companies as diverse cadbury wherend , he oversaw the 11.5 billion takeover by croft. now he holds the same position at bae, one of the biggest defense and aerospace companies in the world. today on "leaders with lacqua," we meet sir roger carr. what will be the most transformational agent of change for your industry in the next five years?

sir roger: i think the most significant change is going to be driven by artificial intelligence. i think it is the application of that in the development of capability in particularly aircraft, but not only aircraft, land, sea, and air will also benefit. so the advancement of ai drives change in the capability of the industry. francine: this is artificial intelligence, not augmented reality? or is it both? sir roger: i think it is a combination of all of those things. i think we are taking technology further and further into the capability of all types of aircraft, particularly in both their stealth capability, their ability to detect, to sense difficulty, and to use attacking capability through the use of intelligence. francine: how quickly will that change? it has already gone very fast with leaps and bounds. will it double that? sir roger: i think the maths are

difficult to say. this is a constant process of change and the evolution is driven by the capability of people and the learnings of people, but we have seen in the last five years advancement at levels we would never have thought possible. and i think we will see that as a continuing theme. francine: what does it mean for you, innovation and having the right people to drive that? sir roger: innovation, mission-critical people, absolutely vital. education systems that produce first-class people who have a real sense of commitment to the engineering area, but math, science, all of the stem leading in school, through training programs, which as you know we do. we train 800 apprentices a year, 300 graduates. all of these things are making sure we have our own stock of excellent people and it is those people that will help drive change and not just in our company of course, but the industry. francine: will it also change the way we travel? sir roger: i think if you take

the extreme, there is the potential through the use of new engine capability over a period to be in australia in four hours. it is an objective, but the beginnings of the work to make that happen are in train today. francine: what needs to happen for me to travel to australia in four hours? sir roger: we need to go forward in time a little. we need to see the capability of engines, the technology of engine capability move on in itself. it needs to be developed and harnessed and grown so it becomes a commercial capability, rather than just a scientific ability. francine: is this national pride? is it a race between the u.s., others., china, and about who can get this technology first? sir roger: i'm going to put china in a different compartment, but i think with the u.s. and the u.k., there is also cooperation. this is something that is going to help the world move on and sharing knowledge and sharing technology between all of our

allies and friends is the way we can make the greater progress. francine: how will your industry become bigger or change? is it a change or will it also become bigger in size? sir roger: i don't think it is actually about size. there is critical mass already. the major players in the defense industry are substantial in scale they have considerable , capability and deep roots in their various area of specialization. it is not a question of size. it is an investment of people in the capability and the leverage of the existing scale to meet the requirements of the customer and the customer is getting more demanding, looking for a more competitive product, looking for people who are focused on customer service rather than simply the provision of technology. it is a combination of all of those things that the customer

needs and that we have to respond to. leading inp next, turbulent times. we talk about how bae is dealing with geopolitical uncertainties and what roger carr sees that the biggest global risk. ♪

♪ francine: u.s. president donald trump's big push on nato states to lift military spending is providing a welcome benefit for bae, but the defense giant is headquartered in london and is also contending with the uncertainties surrounding brexit.

how is the business preparing for these geopolitical uncertainties? roger carr is still with us. well governments in general -- will governments in general spend more money on defense given the geopolitical uncertainties? sir roger: we are certainly witnessing that now. i think on a wide scale, where -- the recognition that we are in an unstable environments and where risks are increasing, are driving governments to recognize that investments in defense is something they have to do. their first job is to protect their people and that is what we help do. i think we will see a continuing trend at least for the foreseeable future of what we have seen in particularly the united states, but also in australia, where australia is -- australia's decision to invest materially in their own defense capability, to have a sovereign capability is

something we have benefited from. we have just secured a $20 billion order to build ships in australia. it is also a recognition by australia that to have homegrown skills, domestic capability, is -- in a provision of a defense capability that they need in an uncertain world that is now , evident in their budget and their belief that this is going to continue. clearly north america is exactly the same. francine: what is your biggest concern? is there a risk out there that you struggle to try to keep on top of? sir roger: well, like everything, there are lots of risks. i would say a risk that is not just about our industry, but it is very important to our industry is the risk of cyberattack. that is state led cyberattack. what we are developing is vital to the nation and the security of the nation. it is also probably some of the most advanced capability in the world, and therefore of

significant interest to people who do not have our best interest at heart. we have to make sure we are cyber protected and have layers of capability in the business to make sure that penetration is at least difficult, if not impossible. and we work for the impossible all the time. francine: how much do you spend on protecting yourself against cyber attacks compared to innovation? sir roger: they are in separate compartments. cyberattack has to be part of our committed expenditure. this is non-optional and we continue to invest in it. it is both people and system development and it is working with government. we spend at the moment probably collectively about 11% in r&d of our revenues. when you shrink that to a percentage of product rather than service, it is more than that. we make a strong commitment to r&d. some of it is with government support. they put money into the program alongside our own money. so, we have unity of purpose.

we have a joint commitment financially. and an out-turn that is a benefit to the company and the nation that is the way we try to , develop it. francine: you said you put china in a different compartment. why? sir roger: well, they are not an ally as a starting point and they have their own ambitions from the military point of view, which may not actually always sit alongside our own. we have to respect that china are an important part of the world economy and that trading with china is important, but we also have to respect the fact that from a military point of view, they are not part of nato and therefore we work with partners who are part of nato rather than others. francine: we used to talk about the arms race with china. what is the next frontier? space race? sir roger: i think space is part of everybody's frontier. there is no question that it is there today, whether it is through satellites, gps. how do we live our lives today? we live a lot of it through the

capability in the skies. that is an area where it is important we have a degree of control and we have certainty, so there is a space element to this, but all aspects, land, sea, and air are under constant evolution and constant development, and we have to both respect that and help lead that process. francine: you have a number of positions for a different number of companies. which is the one that you have liked the most? sir roger: that is like asking which children do you love the most? [laughter] sir roger: i have enjoyed really all of the roles. i have been very fortunate. i have had some really interesting roles and they have been very different. that is why it is not possible to pick one. the bank of england was a particular experience. i was the deputy chairman in the period of the world financial crisis and i saw very able people working under incredible pressure to deliver a result where there was no blueprint. fascinating.

the bbc, another fascinating period of my life. and in the industrial area, i would say whether it has been in the chocolate business or the energy business, both of which i have been, both have had the -- both have had their challenges. both have had their interest. for me, i have to say that i have been fortunate probably to take my last chairmanship in a company that has all my interests. it has engineering, military, geopolitics, involvement with government. all of those things come together in the current job, which i am very privileged to have. i'm enjoying today, but i value the past. francine: how much of your current job is actually being a lobbyist, being a politician, speaking to government, and how much of it is actually business? sir roger: all of those things are the same. we are in partnership with government, whether it is here, america, australia. we are a partner. we are on the same train with

the same destination which is the provision of the highest form of security we can offer. there are times when we are in different carriages and we may have not quite the same ambition on price and cost, but fundamentally, if we do not have a partnership mentality, then we are not working in the nation's interest and that is why this , job is interesting. you are working for your shareholders and everybody respects that, but what you do for your shareholders has to provide a product for your customer that is competitive, that does the job, and is a product of working together rather than working apart. francine: does the america first policy mean that we are testing globalization? is it on hold? sir roger: i think in the defense industry and for our company in particular, we have a very large part of our business, maybe 40%, is in the united states. we have a very special trading arrangement in the u.s., where

we are seen as a u.s. company. we have a very privileged position and we are very pleased to have that. i think in the world at large, there has been a period where the public have been concerned about what has happened as a result of globalization. it has needed business to try to address that by really demonstrating in their behavior, in what they do, the way they pay themselves, the way they work for the customer, that globalization is ultimately a force for everybody's good, rather than a damaging move. now, politics of course then come to play and we see a very different attitude where protectionism is starting to be visible. it is a dangerous course to take. i think it is potentially one of a stepping process toward rebalancing economies, but ultimately, the world is a better place for open markets

and free trade, because that is where everybody ultimately benefits. francine: what do citizens worry, what are they afraid of? does it go back to the financial crisis, that people will feel left out? maybe it is not necessarily globalization, but technology? sir roger: it is all of those things. we have had a very difficult period where the financial difficulties were an accelerator of something that was already happening. globalization was part of the change that everybody is feeling. if you add financial challenge to a time of job challenge, you magnify the problem. for those that are not in the not,area but in the have this has magnified their problem and it has fractured the relationships between business and society. behavior of business, not only in the way it conducts itself, but in the way it pays itself, but in the training it gives to people who need to have new

skills developed, these are the responsibilities of business in order to heal that fracture that occurred. it is something that i think many businesses are now clear that it is their responsibility and that they have to do. i think that is the right attitude. francine: is it the same fracture that led to the brexit vote? sir roger: i think it is a matter of judgment, isn't it? there is no doubt that was part of it. if you were in fact left out, if you felt your future prospects were extremely limited, and unless there was a major change nothing is going to get better, than potentially you voted for major change. i think, sadly, that may have been on a false premise, and the change that may occur may be, at least for a time, more challenging rather than less. but i think that may have been a motivator for behavior at the time and one can understand that if you feel you are a have not and you compare yourself with

those that appear to be ever richer, it will provoke behavior for requiring change for you to have a fairer place in society, so a fairer place in society is what we should all be looking towards. francine: does protectionism or anti-globalization change the way you look at your supply chain? sir roger: i think protectionism, i'm never a supporter of. i think that ultimately leads to bad conclusions. anybodyon never helped and a competitive edge is , something we must all strive for and free markets drive a competitive edge. that is the way forward in the fundamental. francine: do you worry about your supply chain because of the things that are going on? it is quite difficult to see where business ends and geopolitics starts in certain cases. sir roger: i think the supply chain in our particular industry, in this business, the supply chain is well-known for us, it is well-defined. the brexit element has little

impact on that. what is important in our own supply chain is important in the nation. it is productivity, it is skills, it is being competitive, so that the whole chain from the smallest supplier to the end product manufacturer is more competitive in a world where whatever the outcome of any political move, competitive edge is something we are all going to need and more of. francine: coming up, roger carr was one of the founding members of the 30% club. he tells us it was one of the easiest decisions he ever made. we talk diversity next. ♪

♪ carr started roger

his career at a computer programmer before rising through the ranks to oversee some of the most iconic companies in the u.k. it is not just business, he is a prominent champion of women in the workplace. he was one of the first executives to sign up to the 30% club, which aims to boost to the presence of women in board rooms. roger carr is still with me. why did you decide to be one of the founding members of the 30% club? sir roger: that was probably the least difficult decision i've ever had to make. we want the best talent in business and to exclude 50% of the talent of this country and the world, in fact my wife and daughter would argue that it is probably more than 50%, why would you exclude women from that? it makes no business sense. i've always believed that, i'll -- i had always felt that a mix of men and women produces, particularly in a board room, but really any working environment, better dynamics,

better atmospherics, better outcomes. when the 30% club was formed and dame helen morsi was the initiator of that, she wanted people who believed in the principle to argue for business rather than for women. she chose people to do that who were, i would say, seasoned, rather than old, but seasoned, typically gray-haired, who could be advocates for something that was all about business, not about women. i think that was the key to making this resonate with the business community. francine: has it resonated? sir roger: i think it has. if you look at the board population today and we have an ambition of 30%, if you look at the ftse 100, you will see large scales of achievement of that across the piece. i think when we are looking in

the future, what we've got to do is to make sure that seeing the board visibility is not the end of the story. we have to keep working on the pipeline. we have to ensure that young people coming into the business, young women feel that there is a career path that is practical, deliverable, where they can have a balanced life, but where they can look forward to senior positions based on their merit, rather than simply their gender. the 30% club above all has said merit first, gender is a plus, and if we keep doing that, building the supply chain of people as we look to the future in the operational areas of the company, then we will see a broader population in the business in total. francine: why do we need quotas in 2018? sir roger: i don't think we ever wanted quotas. i think 30% was an aspirational

total. it was no more than that. i have been very much against quotas because i think they are demeaning, they make it appear that you have to fill it with women, whether they are good enough. that is not what business wants, it is not what women want. everybody wants to get their job, male or female, on merit first of all and when they've got that, the mix of gender i think typically provides a better outcome. and diversity does not stop at gender, it is a much broader issue, which i think we are all seeking to address but gender , was the most visible target and the most obvious one. that is why i got involved. francine: what kind of leader are you? do you micromanage? do you step back? are you very involved? sir roger: like all leaders, i think you adjust behavior to circumstance. if you take what is the role of the chairman, there is the absolute textbook position of chairman, looks after the board, and the chief executive looks

after the company. in the operations of the company. that is the great place to start. i think behind that, it is about the chemistry and the way the two people function together, and that really is about recognizing first of all who does what, so clarity of purpose. i think secondly, an understanding that you are working as a team, so you have to leverage the skills of each and make sure you apply them collectively to the benefit of the company and the shareholders. and finally, to respect the fact that neither of you wants surprises and neither of you want trip wires. if you have those at the heart of your relationship, then i think you will find it to be productive and helpful. francine: was there a day that you realized that you were indeed a leader? a tough day or an easy day were somebody said something that made you think, i can do this? sir roger: i think if you start

to believe you are a leader, you are in a dangerous place because this is an evolution and it never stops. i think what you have to believe at the outset is you want responsibility. and you will take responsibility and if you have that as a general belief, then if you apply the basics of being authentic, being visible, having integrity, trying to do a good job for its own sake, and doing it every day, if you try to do those things, then you will find leadership is given to you, and then you must take the opportunity. francine: what is the best piece of advice you've ever been given? sir roger: i think as a young man, really certainly to have an ambition for the future, but to respect the fact that you will only ever achieve that if you deliver day by day. and it is the combination of focus on the daily product, but ambition for the long-term horizon that i think is a

helpful piece of advice. francine: sir roger carr, thank you. sir roger: thank you so much. thank you. ♪

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