As companies seek to innovate, they have in recent years begun to work with other companies and with universities, using “open innovation” tools and processes to grow their businesses. Indeed, as University of Texas at Austin President William Powers said in a May 2011 speech, “The role of the university in society has expanded from one of primarily training a workforce, to becoming partners in innovation for the private sector, entrepreneurial communities, and other educational institutions.”
A partnership between UT and National Oilwell Varco (NOV), a $12 billion oilfield services company, shows how an open-innovation project has not only helped NOV innovate, but helped the company transform its innovation process. NOV, which has over 45,000 employees spread across more than 60 countries, had been pursuing a strategy of innovation by acquisition. However, an aggressive acquisition strategy was not enough. NOV’s acquisitions were bringing the company new products, creating opportunities for innovative new cross-divisional products, said Trey Mebane, Director of Business Development at NOV. “We needed to create a social network of innovators,” Mebane said. Such a network would increase NOV’s innovation capacity.
But how to tackle such a challenge at such a large, global company? Intrapreneur Mebane didn’t turn to traditional solutions, such as hiring a consulting company. Rather, he sensed the answer lay in jumpstarting value creation. To do that, he partnered with UT and its Master of Science in Technology Commercialization (MSTC) program – one of the few technology commercialization degree programs in the country. Mebane had discovered the program after upper management urged him to get an MBA. “I've never really thought of myself as an MBA-type of person because I've always been focused on growth strategies within an organization,” said Mebane. But NOV already had a fair number of MBA graduates in the organization, and Mebane, an engineer by training, felt he could better serve the organization by focusing on new value creation. He discovered the MSTC program when he began to look for a graduate degree that played to those strengths.
MSTC director Gary Cadenhead contrasts the one-year MSTC degree program to an MBA, saying, “It’s very focused, with a very specific goal of identifying new technologies that have market potential and, once found, taking those technologies to market through an existing corporation or through a new venture.” Students learn to assess technologies for market potential, create business plans for them, win funding and develop operational plans.
Having completed the MSTC program himself, Mebane realized that the principles it taught could address the challenges facing NOV, and he encouraged NOV to send other engineers through the program. Three years and 25 NOVers with MSTC degrees later, Mebane realized the MSTC program was the perfect vehicle for NOV to achieve its goal of creating that social network of innovators. But in order to do it, “we were going to have to get more people through this program,” Mebane recalled.
So, Mebane took the knowledge he gained from the MSTC and applied it to create NOV Ventures, a custom program that would “create a critical mass of intrapreneurs — innovation leaders — like him who could accelerate technology commercialization in the organization,” said Chantal Delys, assistant dean for executive education at UT.
In partnership with Cadenhead and Delys, Mebane “cherry-picked” the pieces of the MSTC degree program most relevant to NOV for a four-module program (four one-week sessions in Austin, Houston, Amsterdam, and Kristiansand, Norway) spread over nine months. The resulting custom program, NOV Ventures, would focus on what its innovators needed most — commercialization methodology and leadership skills — while bypassing modules already handled by other parts of NOV, such as intellectual property management and internal financing practices. In addition, NOV and UT partnered to tailor the courses and to synchronize the custom program to NOV’s product development cycle. “As an example, we do our financial budgeting in the October timeframe, meaning you have to have ideas formalized ahead of that. With our first module, we focus on Idea Management, which gets us to a point in our second module where we are selecting and budgeting in October,” Mebane said.
A key part of the program was selecting which employees would participate. “We asked the VPs of engineering and product line management in all our business units to identify who they thought their fast-track innovators were,” Mebane explained. After selecting the participants, “we put them in assigned teams, and the intent of the team assignment was to basically coach them on power of diversity. We grouped both young and old — people who've been with the company for 20 years paired with people who've been with the company for four years. We've got them working across business units and across geographies. It's not uncommon to have one person on the team who may be focused on downhole solutions, working with another person who may be focused on drilling equipment.”
Bringing together engineers from different countries and business units had a twofold advantage — creating a unified innovation culture across the company and enabling new value creation across product lines.
First, since NOV was growing by acquisition, many of its 4000 engineers did not know each other. “Most engineering departments operated in a silo,” explained Tom Pargac, cLink Process Manager. “What the [NOV Ventures] program did was to bring these engineers out of their silos into a collective conversation where collaboration could take place in support of a more comprehensive vision for the company.”
Second, “when business units meet, they naturally focus on innovating within their own product line,” Mebane said. “NOV Ventures allows us to look at ways to innovate across product lines. When you think about innovation capacity, by moving across product lines, you're giving yourself a bump that you didn't have before.” Disparate entities at NOV are now working together to build never-before-seen technologies.
The result of the partnership with UT exceeded NOV’s expectations. Success of NOV Ventures is being measured by “ROI based on potential revenue for the first five years,” Mebane said. “The cost of the program is substantial, when you send 50 people through it, but the return we are getting out of it is already demonstrating itself to be exceptional.”
Eleven NOV teams, comprised of five members each, examined 22 technology ideas (out of 70 generated by NOV) before identifying 11 on which to focus. “We used actual project ideas that NOV had been tossing around,” said product engineer Clayton Hargis.
“We had people conceiving new ideas and then formulating the strategy to bring them to market,” explained Mebane. One of those ideas was the "SPRED rig," a technology that decreases the time to drill a pad of wells threefold. “It was a concept rig for tomorrow. We put together the business plan and business case for it, and the team presented it to our Board of Directors for review.”
“Out of the 11 ideas worked on, we are moving forward on more than 50 percent, which is really good,” said NOV Corporate Vice President and Chief Technology Officer Hege Kverneland, one of the original NOV proponents of the “social network of innovators” concept.
“Some [product ideas] are already in the process of being launched,” Cadenhead added. “The dollar amounts projected from the 11 different technologies is staggering.”
As Mebane stated, “NOV Ventures will create a culture of innovation centered upon intrapreneurship.” The culture change taking place at NOV can already be seen. New job titles, such as commercialization director, have been created that reflect the importance of bringing technologies to market. The social network of innovators at NOV is thriving; participants work across business units and product lines. “NOV Ventures creates a forum for innovators to not only get to know each other, but also to create something which the market hasn’t seen before,” Mebane said.
NOV employees described the value of the MSTC program: "I'm an engineer, and as engineers we don't necessarily see the business aspect of what we do,” said Frank Springett, VP of Engineering at NOV’s Pressure Control Group. “A lot of times we focus on what's neat, not on what's viable from a business standpoint. So it gave me a perspective not only on developing appropriate products, but appropriate products that have a business opportunity associated with them.”
“There's a new excitement about commercialization inside the organization,” said Joe Blanc, now commercialization director at NOV. “There's no question in my mind that the skills taught in this program will advance the company. The fact that we've got people from all over the world, in different disciplines, being pulled together into teams, it can't do anything but be good for us. I wish everyone could take the program.”
As Professor John Daly, who teaches in both the MSTC and NOV Ventures, summarized, “You can't plan an innovation, but you can plan an innovation strategy. You can’t guarantee that a given innovation will take, but you can guarantee that an innovation strategy will have payoff.”
A new class of NOV employees will be starting the NOV Ventures program this month.