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Interview

with Jeffrey Lavers, Vice President and General Manager, 3M Norge AS

28.03.2013 / Energyboardroom

As the former VP of Marketing and Sales for 3M globally, how have you found the transition from marketing to the high street to marketing to the oil industry?

It has been a fascinating transition. For me, the most interesting element has been the willingness of the oil and gas industry to embrace and understand technology and the ways that it can enhance operations. It is very refreshing for a company like 3M which is present in across a broad variety of industries to work in oil and gas, precisely because of this market’s affinity for technology.

Personally, I have worked in the industrial sector, healthcare, transportation, consumer goods and one thing that I see clearly is the “can-do attitude” of oil and gas industry workers. These individuals are ready to take on some of the world’s key challenges with a very positive spirit and in a highly collaborative fashion. This collaborative nature means that the oil and gas industry is very relationship-driven and this is something we have to pay attention to as a solutions provider.

The GFC is still leaving its mark and emerging markets, China and India, have slowed recently. However the oil price remains consistently high. How does this shape the interest of 3M in oil and gas?

These macroeconomic trends have served to emphasize the importance of the oil and gas industry within our portfolio. It is clear that the global demand for oil and gas is not going to subside anytime soon. Not that long ago, there were theories that new forms of energy from wind or solar would somehow eclipse the demand for oil and gas. Today, the industry recognizes that hydrocarbons remain significantly more efficient than these other energy sources.

As developing markets in Asia continue to grow and Africa begins on this development path as well, oil and gas will have a pivotal role in shaping global development for years to come. This outlook is very important for 3M. As we look at how our business should continue to grow, we choose markets where we can identify a clear and sustainable growth curve and in this analysis, oil and gas is at the top.

What would you say is the main issue you seek to address in your offering to the oil and gas industry?

In the industry today, I would say that the most influential cost-factor for oil and gas companies is labor. In some of the oil and gas markets that we have addressed, labor costs have recently risen more than 250 percent. 3M is therefore looking at its technologies and asking the question: how can we improve labor efficiency and thereby increase the efficiency of production? We are looking at technologies which make labor more productive or reduce the need for labor, making the whole process more efficient.

And oil and gas production has to become more efficient. The price of oil will probably be sustained at around USD 100 per barrel, so the question that we have to ask now is what to do about the continuing rise in overall oil production costs, which have been rising over the last 5-10 years. The rising prices can eventually start to cause problems for the industry. 3M is therefore seeking to build services and products which will counteract this upward trend in production costs.

On the supply side of the equation, high oil prices will raise the production costs of many of your own products. What impact has this had on your business model?

3M as a company does consume a lot of oil and gas both on an operational basis and as the feedstock for a lot of our products. This makes our search for efficiencies a circular initiative. We are often looking to benefit as a company from the same efficiency-driven products that we provide for the oil and gas industry.

On the other side of the circle, if you look at the recent trends in US gas prices, which has dropped dramatically simply because the industry has managed to become more efficient in extracting gas, this has delivered huge savings to American industry. As a major industrial consumer, 3M has gained a lot from this as our variable costs have gone down and we have been able to use these savings to fund more R&D investment and commercial opportunities.

3M has an expansive offering to the oil & gas industry from abrasives to personal safety equipment. How much brand equity does 3M carry into the oil & gas business?

There is a strong recognition of the 3M brand within the oil and gas community but not specifically as a provider for the oil and gas industry. Many people know us through our consumer products and brands and this generates curiosity. I think that this baseline recognition is one of the assets that we can build on when we expand our presence in the oil and gas industry.

Globally 3M is known for innovation and there are many people in the oil and gas industry who are curious about our upcoming innovations. Our challenge now is to penetrate deeper into the oil and gas industry and demonstrate how our products can really help.

With such a diverse portfolio, how challenging is it to generate recognition of what 3M represents for the oil & gas industry?

An interesting characteristic of the oil and gas industry is that it takes decades to establish your credibility in certain areas. The oil and gas industry, to its credit, needs to be risk-averse. As such, we have to appreciate this characteristic as suppliers and we need to have patience as a corporation when building our brand equity in this market. Nonetheless, 3M has some very dynamic technologies which are already starting to generate some traction and build our recognition. Our focus is on providing solutions to our customers in the oil & gas space to help protect their people and the environment, to extend the life of critical assets and to drive productivity and recovery.

3M’s strategy is to target the early adapters to see how products can benefit our markets and then try to replicate this success with the other companies in the industry to build a broad base of acceptance.. Risk is a critical component for the oil & gas industry and to be successful, 3M needs to know how best to help companies understand and have confidence in our solutions.

Norway is characterized as an early-adapter market. How do you view the Norwegian market within your global portfolio?

Norway is a primary market for 3M globally, for the very fact that it is a key site of innovation in the oil and gas industry. Norwegians value technology and are adept at building new technologies and this is extremely valuable for a technology-driven company like 3M.
Booz Allen has recently recognized 3M as a highly innovative company, not only because of our investments in R&D but because we can translate invention into true innovation. In order to achieve this translation, you need to have companies which are willing to apply your technologies in their operations.

In Norway you have new discoveries in often challenging locations such as the Arctic, where there is a recognized role for technology in overcoming environmental factors and in protecting the environment. Sustainability is a core value of 3M and we want to play our part in delivering technological solutions for these new frontiers.. However, we also see great opportunities in the mature areas. Norway has been producing oil since the late 1960s and in order to keep producing you need innovative technological approaches. 3M therefore sees its presence across both ends of the development timeline.

Innovation is the magical blend of invention with practical application and to be truly innovative, you need to have that mix. By continuing to work in the Norwegian market in an industry like oil and gas our ability to innovate on a global level is much higher than it would otherwise be.

How would you compare the dynamics of the Norwegian market with that of the UK, on the other side of the North Sea basin?

There is an interesting dynamic between the two markets. As close as the two markets are in geography, they are very different in their approach. It is important for us to be in both camps and we serve the market differently. Our presence is strong across both sides of the North Sea. I would say that in Norway, we place a special emphasis on technology development.

For any company focused on innovation there is a balance to be made between making more innovations or focusing on marketing the existing product base. Too much innovation risks cannibalizing the existing base and confusing the market with many distinct products. As a company set on innovation, how do you handle this balance?

3M is a publicly traded company therefore quarterly performance is obviously important for us, as that is where investors focus. There is always a balancing act between pleasing the investors on a quarterly basis, and investing in the long term. 3M is no different from many other companies in that regard. Where we try to differ is in establishing a business culture built around long-term planning and investment. We cultivate an understanding of how technology can really make a difference and this is especially manifest in the oil & gas industry. Therefore when considering the balance between the existing portfolio and further innovation, we are less guided by short-term investor interest than long-term value creation.

Our close dialogue with the main players in the industry is crucial in allowing us to understand the fundamental issues and how we can balance the existing portfolio for addressing these challenges with future innovations aimed at targeting these same challenges. These two approaches have to work in parallel.

Our existing portfolio, which is not that well known in the industry, has significant near term potential to address the industry’s productivity and profitability issues. We are also looking to make minor modifications to the existing portfolio to address the needs of the oil & gas industry with these products. At the same time we have a longer term strategy looking at how we can add the greatest value through innovation. You cannot follow one strategy or the other, it is typically a combination and by remaining in close contact with the industry we are able to guide and shape our strategy.

Given this picture of your innovation, would you say products define your markets or markets define your products?

One of the main issues that 3M is facing as a company right now is that we have traditionally used the former approach with products defining the market. However, the market dynamic is playing an ever more important role in steering the company and we are now starting to see within 3M a shift towards allowing markets to increasingly inform our innovative processes. 3M has a rich technology base, which is fantastic in and of itself, however without guidance from the markets, this base cannot be truly effective. We are therefore placing a greater emphasis on the interface between the markets and this technology base.

3M has many R&D bases around the world. Why are there none in Norway?

There are 46 technology platforms within 3M and our products are driven by a collaborative identification of how these platforms can best work together. Very rarely do we have our products driven from a single technology platform; the vast majority of our products have three technology platforms as a minimum. We have an increasing tendency to centralize this technology development because it allows for better collaboration.

Moving from invention to innovation all depends on this collaboration; the physical location of technology development is not nearly as important as the dialogue that we open with key industry partners who inform the process of taking invention through to innovation. We therefore extend an open invitation to companies to meet with us in any location and discuss their challenges.

Where have you seen the Norwegian market really inform 3M’s global product offering?

Jeff Lavers (JL): There are a number of technologies which we are working on at the moment which we believe will become game-changers for 3M in oil and gas and they are driven directly from this market. The challenges of the oil and gas industry in the North Sea require innovative approaches; whether we are dealing with depleted wells or insulation in frontier areas or communication, the technologies required by the Norwegian market are cutting-edge.

Boerre Noekleby, Industrial Channel Manager Nordic, Industrial & Transportation Business / Safety, Security and Protection Business (BN): Our subsidiary in the Nordic region is trying to balance the global strategy for 3M with the market needs here. There are two principal growth drivers for 3M in the Norwegian market, the first of which is the dynamic subsea industry market. One of the largest cost-drivers for the industry in this subsea environment is corrosion and 3M therefore contributes through many different applications tackling corrosion. The second driver in this market is the HSE factor and particularly personal protection. 3M has been leading the market in active hearing protection as one of the most prominent projects in the industry at the moment is preventing hearing loss for workers operating in noisy work environments. 3M has therefore been working on technology to protect hearing, yet at the same time allowing for communication and efficiency.

JL: Active hearing protection is a leading technology for 3M in the oil and gas industry and it is a field where the Norwegian market is a way ahead of the rest of the world. We are continuously looking at what is driving this market and how we can leverage these factors in other markets. Every oil and gas industry in the world faces similar issues, but Norway is really leading the way in addressing them.

BN: In the case of active hearing protection, protection is not actually the only issue to be addressed in product development. Comfort is a major factor and we want people to like using this equipment. As you can imagine, product development is a very dynamic process and requires an active dialogue with many bodies across the value chain from the end users to the management and the HSE director to the procurement staff.

JL: One of the great joys of working for a company like 3M is the sheer diversity of technologies that we can bring to the table, from active hearing protection to personal safety. We are industry leaders in these fields and we apply a variety of technologies to develop these products, because it is more than simply a matter of protection; it is a matter of making the equipment a part of the working process. Ask any offshore worker and they would prefer to not have to use cumbersome safety equipment, but it is a necessity. 3M therefore sees its role in making this equipment integrate as seamlessly and comfortably as possible into the everyday processes of the industry.

And whilst we are bringing this industry leading safety technology to the topside, we are also providing additives and chemicals designed for use downhole for increasing the productivity of a well. The diversity of ways that we can contribute is one of the most exciting elements of working for 3M and it all comes from within the same company.

With Norway being so far ahead of other markets in regulation, how do you ensure that the types of innovation based on this market are not viewed as overkill elsewhere?

JL: We have spent a long time trying to understand what the regulatory issues are and how they are trending. We also pay attention to where the main active fronts in regulation are situated. We have identified some regulatory developments as “one-offs”, where they arise out of a particular local dynamic, but they will not be replicated in other parts of the world while in other cases they may be closely followed by other centers. As a company, we have to understand these developments and adjust for them.

The interesting thing about the various regulatory and technology fronts in the Norwegian market, is that they are actually replicated in other markets. This trend is clearly observable throughout the history of oil and gas regulation, from personal protection to environmental protection. Norway has a leadership role in the industry and, as a consequence, we pay a lot of attention to this market. Our view is that if you can be successful in Norway then this success will carry over into other markets.

Deba Sen, Business Diretor Oil & Gas: In my experience of meeting clients, most of the time the Norwegian regulations are not viewed as overkill, but as regulations to aspire to for others. In almost every country we travel to we begin our conversation with a discussion of Norway to align on what is possible. We are even having conversations with the principal regulators of in other markets about what Norway is doing so that they can better understand how to improve their own regulations.

How would you define success for your organization over the coming years in Norway?

We define success when people in the industry are faced with a challenge that they do not know how to solve and we are their first call in finding a solution. 3M brings enormous experience from many different industries from healthcare to transportation, whereas many oil and gas industry workers have only worked in this industry. This is one of 3M’s core differentiators; we offer a fresh and informed perspective on many challenges facing the oil and gas industry. 3M is excited by the opportunity to work in this industry and we want companies to know that we are not just in this industry, but committed to this industry. 3M ultimately aims to be seen as the main solution provider for the industry, driven by our technologies.

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