TOP 100: The new Raytheon Technologies sees its workforce as the strongest link

Conversations over the megamerger to create what is now Raytheon Technologies began with one CEO of a legacy company reaching out to the other to bring up the idea of a business combination and gauge interest.

But why did Raytheon’s Tom Kennedy (now RTC’s executive chairman) make the first phone call to UTC’s then-chief Greg Hayes (now RTC’s CEO) about that idea even with a lot going on at the latter company?

“For years, we knew about Moore’s Law and that technology was changing on a linear fashion. But in reality, we were actually on an exponential curve the first part of it, and we’re starting to see significant increases in technology growth in multiple areas that affect our business,” Kennedy said during a call with investors to announce the deal on June 10, 2019.

A second exponential curve sees Raytheon Technologies at No. 4 on our Top 100 rankings this year with $6 billion in unclassified prime contracts.

Like the deal to create L3Harris Technologies, the transaction that launched Raytheon Technologies in April means more scale and hence resources to bear for technology development. RTC touted having 60,000 engineers and at least $8 billion in its own research-and-development spending.

When I spoke with RTC Chief Technology Officer and Raytheon’s former CTO Mark Russell, he also pointed to that combined workforce and especially those engineers as an advantage to the aerospace-and-defense systems provider.

“A lot of things we were working on, the software side, communications systems, inertial measurement units -- it’s the kind of work (UTC) could use from us,” Russell said.

“We’re able to take and use engineering from different parts of UTC for some of our defense work because the actual design of the hardware, electronics and circuits is the same.”

Some of the technology areas Russell mentioned as of mutual interest to both legacy businesses include artificial intelligence and machine learning for items like predictive maintenance, software sustainment and cyber resiliency.

One of the larger ideas behind RTC’s creation was to give the market a larger A&D system and subsystem provider that is platform agnostic. Think radars, signal processing tools, sensors and other components that go onto the bigger-ticket items.

Russell said RTC has 11 broad technology road maps that define where it will focus R&D resources, but the “science is the same” across many of those domains.

Legacy Raytheon and particularly its former intelligence, information and services business in recent years touted software as equal a capability to hardware.

Russell characterized the mix at Raytheon as having completely flipped from 75-25 percent in favor of hardware to the reverse, given that systems now have “millions of lines of code.”

Such complexity in the initial writing phase also translates to what comes next in the software lifecycle, as Russell pointed out. This is where the Raytheon side brings in the commercial practices it incorporated in the few years pre-merger.

“Writing software is one thing, but over time making sure you can sustain it, that it remains resilient, making sure it can be platform-hardware agnostic… these are really important parts for going forward and having a successful product,” Russell said.

Legacy UTC brought a sizeable book of U.S. and international defense business to the combination with a majority of revenue being in commercial aerospace through its Pratt & Whitney and Collins Aerospace businesses.

A second larger idea to drive RTC’s creation was that a larger company with diversified business across defense and commercial markets is a good hedge against differing cycles, which is especially pronounced today.

What has happened to the commercial aerospace market during the coronavirus pandemic is well-documented -- air traffic has slumped and that has wreaked havoc on plane makers and others in that supply chain. RTC is supporting its supply chain partners with accelerated payments.

The defense and overall government market has been a completely different story. Production and other work has kept going and companies like RTC are hiring to meet that customer demand.

Russell said RTC is actively hiring to fill thousands of engineering positions in its defense businesses and also shed light on how the company is leaning on those in the commercial aerospace side of the house as many new hires await their security clearances.

As CTO, one of Russell’s primary responsibilities is to balance capacity and human resources across the different demand cycles.

“We’re using engineers that are freeing up from Pratt and from Collins who are experienced and can also help us right away,” Russell said. “Those engineers can be given a set of work that has earned value milestones and key performance parameters.

“The program manager in legacy Raytheon can say ‘Okay I’ve got an integrated product team that’s led by person Y and we have these 10 things we need to do,’” Russell added.

Same concept holds true for the manufacturing piece of RTC’s work and that includes the expansion of electronic assembly capabilities to places where there is capacity today.

“Collins is in some of the same exact technology areas from circuit cards, microprocessors, microwave RF technology and at this point, the engineers are just seamless,” Russell said.

“I think it’s also something the engineers like. If you’re sitting right now in the commercial side and there’s clearly headwinds there, we have the problem of delivering to our defense customers technology at the speed of relevance.”

That focus on human capital also comes into play in how the company is thinking about the future of work, though perhaps some of that future is now during the COVID-19 pandemic. At least half of RTC’s around 195,000 employees are working remotely.

Russell cautioned that as an engineer he “reserves the right to get smarter” about what exactly to take away from the current landscape. But Russell did highlight connectivity and possible latency as something companies will have to consider along with cybersecurity if remote workers stay that way.

How could companies consider everything they have learned during the crisis?

“The future of work will be a strong look at where we have offices, why do we have people coming into work, and how much travel do we do?,” Russell said. “At some point in the future of work, we want people to get back to traveling, but you’ve also got to figure out who’s going where and why.

“There’s more to be learned, but I think it’s going pretty well for us.”