with Kjell O. Johannessen, Managing Director, NCE NODE
As the head of one of Norway’s key innovation clusters, what do you see as the key strength of the Norwegian innovation model, and why has it been able to achieve the success it has?
One of the reasons for Norway’s leadership in oil and gas technology is the physical nature of Norway’s production environment. In my opinion the NCS has served as the most important laboratory in the world for testing new technologies partly thanks of the uniquely high pressure or hydrocarbon reserves which have often been found at water depths of over 300m. This was the stepping stone to all the deepwater projects now taking place worldwide, including in Brazil where we are now seeing drilling depths of 3-4,000m.
The other significant factor in our success stems from Norwegian culture itself. I believe that Norwegians on the whole think systematically and are naturally adept in engineering. Norway also has a small population, and the people and the government work closely together, which means that decisions can be made very quickly. The model is highly communicative, and an idea can be created and passed on to an executive manager or government official extremely quickly, whereas in more hierarchical R&D environments it can take up to a year or in some cases never happens at all.
If I examine my own cluster, we are now in the process of building a specialization in mechatronic construction. This field combine We have a lot of engineers from electronics to construction to mechanics and hydraulics. In our cluster we are blessed with engineers from a plethora of backgrounds, which allows us to bring together this knowledge in designing increasingly innovative systems. The cluster also benefits from its members’ international connections with more than 30 countries around the world, who bring international ideas to a focus in Norway.
How has the cluster mentality cultivated?
Before establishing the cluster in 2006, there were two principal companies positioned in the region: National Oilwell Varco and Aker Solutions, and the competition between them was and still is very tough. For a long time it did not make sense for them to collaborate. Therefore when setting up the cluster we started by talking about what we should not discuss when the companies were together and made some strategic choices: we would discuss technology, not products and we would discuss the market, not customers. From these basic rules we found that we could build relationships with government, journalists, universities and then work together on projects.
The most important element to build in a cluster is trust. You have to make sure everyone who is working together trusts one another. You build this trust by bringing individuals together in conferences and technical foras and by eliminating elements of competition. I would often tell them that the door is closed and I will not open it again until a meeting has been set up. The NODE foras have been extremely successful so far and this dynamic has filtered through to the everyday innovation activities of these subcontractors. Compared to seven years ago the subcontractors are communicating much more on projects.
The NODE cluster is constantly winning new contracts, building the number of employees, constructing buildings and everyone asks each other questions in an open environment. The environment is friendly and open but ultimately this is business, not pleasure and it has created an extremely competitive group of companies.
What are the advantages you see for an international company wanting to set up in South Norway?
The evidence is largely in the testimonials of the large companies who have established in the region. They have concluded that in the short term it has been good for them, it has generated healthy and productive competition and it has benefited the region. This reflects well on the Norwegian innovative system, firmly establishing its international reputation.
Cameron has recently entered the cluster with an NOK 1.5 billion acquisition not for machinery or facilities but to acquire the knowledge generated in the cluster. This knowledge is the main attraction for international companies to establish themselves in the region.
However, Norway is not particularly attractive in terms of production costs and taxation. Is expense a problem for potential investors?
Norway’s oil and gas industry is established in what is essentially one of the richest countries in the world. Taxation is high but very stable. For production, the companies in NODE generally employ subcontractors in more than 30 countries to overcome the high production costs in Norway. However, I would say that in real terms the cost of employing engineers in Norway is not that expensive compared to the UK, Singapore or France.
Norway faces increasing R&D competition and Asia is outspending the West in R&D almost two fold. How do you stay ahead of the game in the international arena?
The cluster has devised a 2020 plan stating that in ten years time we will need to have world-leading knowledge and world-leading technology. Otherwise there is no point to being in this business in Norway. The members are training each other to think in this mind-set and we are working hard to maintain our leadership. The collaborative environment and cluster dynamics of NODE are unique and this alone should ensure our ongoing leadership in technology.
Partners in Asia still look to the Norwegian clusters for new technologies. In fact, Norwegian companies are now collaborating closely with the Korean yards. Samsung says that if they did not do business with Norway, they would not have been able to participate in deep water projects. I see the advancement of other companies globally as a win-win situation creating more partnerships. All the large Asian yards and engineering companies look to Norwegian companies as business and research partners rather than competitors.
Would you outline a couple of the main points within the 2020 strategy?
We have two programs in Norway for cluster development, one of which is three years old and is called ARENA and there are 12 projects in the Norwegian Center of Excellence (NCE) program which NODE was nominated for in 2010. At that time, I began asking the big corporations what they would want to use a company like NODE for in 10 years time. We then decided to make a strategy for the next ten years.
The NODE companies organized more than 40 people, together with the universities and the regional authorities. We spent nine months arranging a continual set of meetings, several of these were for two days. We made a plan. I think this process was very important for why they should be included in the cluster. They unanimously agreed that the strategy would rely on building knowledge in mechantronics, robotics, the supply chain management and international leadership. This defined the four areas of focus.
They wanted to build knowledge with the best universities in the world. We created project boards for these four areas. So far the mechantronics board has established links with 11 universities around the world who want to do business with NODE. In November we are going to institutions like Rice University in Houston, the University of Singapore, and the University of Aalborg in Denmark to start discussions with them about how they can work together with us to be in a world-leading position in ten years. The same is true for robotics, supply chain logistics and leadership.
I think one of the most interesting developments of this R&D work is supply chain logistics. When your business is growing from USD 5 to 45 billion in six years and your are using subcontractors in more than 30 countries, you are building platforms on the other side of the world, then supply chain management becomes very important.
When a company starts producing one drilling package, they are creating over three thousand drawings which will go to subcontractors in more than 30 countries. You need to know the language, culture, leadership, regulation, quality assurance, pricing, taxation etc in these countries. The Norwegian companies will need to follow the elements of the construction process and the overall timing and after this it will be sent to its destination. It takes around three years to the finished platform. We are working closely with universities to build up knowledge in this sector.
As a final question, there’s a book being written about you and the history of NODE. The growth from 2006 to today has been historic, but what is your ambition for the years ahead?
Very simply, I want to help these companies to be in a world-leading position. One of our most important jobs is to inform financial institutions and the global community about the total knowledge collected together in our region. This is one of the most important jobs for me and in the future of the organization.