How Thales Group is Chasing Growth with New Xplor Initiative

By Stephen Ellison |  January 25, 2016

Pete Roney says that the rationale for launching a new innovation effort at Thales USA, the American arm of the French aerospace and defense giant Thales Group, was pretty clear.

Roney joined Thales USA via a 2012 acquisition, and quickly learned that Thales Group’s then-CEO felt that “we weren’t growing top-line compared to our peer group, and [Thales] wasn’t thinking creatively or entrepreneurially enough.” So CEO Jean-Bernard Levy “set in motion a plan to think differently,” Roney says, which included changes to internal R&D, “as well as the way we work with the startup ecosystem.”

The company decided that the U.S. was the right place to plant such an initiative, and put Roney in charge; he’s now Vice President of Innovation and Managing Director of the new initiative, dubbed xPlor.

xPlor exists outside of the company’s R&D organization, explains Alan Pellegrini, CEO of Thales USA. It may take technologies already developed by the company and find new applications or business models, or it may build new businesses around technologies that a new partner is developing. But, Pellegrini says, “Everything we do out of xPlor should have an end result that is driving company growth — sometimes through the businesses, and sometimes on their own.”

Thales Group has more than 65,000 employees around the world, who serve markets including transportation, aerospace, defense, and security. Defense represents about half the company’s $17 billion in revenue. Here’s how the company aims to drive growth with the xPlor strategy, which officially launched in July 2015, and is run out of an office in Cambridge, Mass.

A Three-Pronged Approach

The xPlor initiative has three components, according to Roney: leveraging internal competencies, working with startups, and forging ties with the academic community.

Leveraging Internal Competencies. Since Thales already has talented people leading its aerospace, defense, security, and transportation businesses, the xPlor team for the most part acts as a consultant in this capacity. Like all other Thales divisions, xPlor is involved with both the strategic business planning process and the technical and innovation planning process, Roney says. “We feed on the outputs of those processes, so we understand where we can help these businesses fill gaps or extend themselves in ways they haven’t thought of before,” he says. “Our development should help them to implement their strategies, not to create new strategies.” There are also a number of Thales business leaders who will participate in the “xPlorers-in-residence” program, a rotational position that lets them work with the xPlor team over the course of a year.

Working With Startups. The startup communities, in both Boston and Silicon Valley, are crucial to xPlor’s mission to engage with creative minds and problem-solvers, Roney says. “We need to partner with them early and benefit from the technology as much as anyone else,” he says.  One way the company makes itself accessible to startups is simply by having a presence in the Cambridge Innovation Center, a shared office environment a few blocks from the Massachusetts Institute of Technology campus, where many startups have their own offices. Thales has also sponsored a hackathon, and holds occasional networking events at the CIC.

Forging Ties With Academic Institutions. Becoming a member of the MIT Media Lab in 2015 was a giant leap for Thales, Roney says. “Being part of that allows us to see where the world’s brightest think state of the art [innovation] will be, not necessarily next year but the next 10 years,” he says. “That helps us to guide our own investigations.” Indeed, the lab membership gives the xPlor team access to some of the world’s most forward-thinking researchers, whose work has led to the Amazon Kindle and other e-readers; the popular Guitar Hero video game; and Lego’s Mindstorms robotics kit.

As the company explores disruptive technologies, new services and business models, and prospective academic or private sector partners, Roney says it will look to “marry those with Thales capabilities and businesses in our core markets,” or as a way to help Thales bring its capabilities into new markets.

How the Group is Funded

xPlor gets its funding from Thales USA corporate and the company’s five business units, “so if we were a venture capital firm, we’d have six limited partners. They fund equally the overhead and admin side of what we do,” Roney explains. That “allows us to be business-unit agnostic, and tie together multiple initiatives into one cohesive project.”

Pellegrini elaborates: “Each business in the US has its own R&D expenditures, and those businesses are each moving in alignment with their own strategy and roadmap. xPlor is looking for ideas or technologies that may energize some of those business plans or initiatives, or be the platform by which we can take new ideas into adjacent markets.” It may also create its own independent new revenue streams.

Bringing a First Product to Market

Roney says xPlor has been off to a good start in its first year, with one major launch and another in the works. The first product is an augmented reality device for neurosurgeons called DragonFly. It allows them to see important information, without taking their eyes off the patient. DragonFly is based largely on work done at Visionix, the company Roney had worked for previously, which Thales acquired. “We developed that product over about a one-year time frame,” he says, “and now we’re marching down the path of getting that out as its own company.” It is derived from the technology Visionix had developed for helicopter pilot’s helmets. (See the video below.)

The DragonFly information display may also have applications in warehouses or factory environments, Roney says, especially as xPlor works to bring the price down.

The xPlor platform hopes to source and develop more products like DragonFly, Roney says. “Our team will ideate, prototype quickly with customers, and develop new solutions that can turn into businesses in a short amount of time. Oftentimes, the development cycle can be in the years or decades for a defense and aerospace company.”

Growing the Group

Roney, who reports to Pellegrini, says he’s been careful about the talent he brings into xPlor, and thus hiring has been slower than initially anticipated. He has full managerial responsibility over the xPlor program, including its budget and investments. He also makes final decisions on investment themes and project hypotheses, and directs those projects from beginning to end, he says. Each theme or project is like its own little business, he says, involving strategists, technologists, and operators.

“We’re trying to design a model [for innovation] that is scalable, so what I’d like to see first is that we execute our strategy well in the U.S.,” Roney says. “That means we do things well in Boston, and then we probably open up something on the West Coast, and then ideally in the other hot spots around the world like Tel Aviv or Hong Kong.”

Below is a graphic that Thales has been using to promote its partnership strategy.

Measuring Progress and Attracting the Best and Brightest

Roney says xPlor’s success is being gauged in a number of ways. Some tangible measurements include returns in the form of cash flow from a new business, from a spinoff, or if a new technology becomes an additional offering in one of Thales’ existing units.

There’s also value in positioning the Thales brand, which in the U.S. is not very widely recognized outside of aerospace and the defense community, Roney says. “If you were to go out to Palo Alto or large parts of Boston in the tech community and mention Thales, most of those people are not going to know who you’re talking about,” he says. “So, as we execute our mission within xPlor, we need to be evangelists of the brand and show that we have something to offer this next generation of entrepreneurs and technologists. That will help us recruit the next best and brightest talent.” Roney talks about xPlor being a “brand enhancer” overall for Thales.

Looking Ahead 10 Years

While his role overseeing xPlor is still evolving, Roney continues in his executive capacity to seek best practices in innovation and spread those practices across all Thales businesses in the U.S. He manages a community of chief technology officers within Thales Group, hosting gatherings and liaising with his peers so that they, as a group, are aligned in their thinking and scaling their investments appropriately.

As for the future of innovation at Thales, Roney has a clear vision.

“If someone were to ask me what would you want to look like in 10 years, I’d want the world to recognize Thales as one of the leaders in the innovation business, not because we have several million dollars to throw at it each year, but because we do it in a smart way that brings our customers into the game as early as possible, optimizes our resources, and creates value for everybody involved,” he says. “That includes our partners, our end users, our internal stakeholders – and the employees, because they have fun doing what they do – and then I’d call that success.”

Below is a graphic Thales produced to highlight R&D investments, academic partnerships, and patents.