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How DNV changed its business model with knowledge harvesting
By Tony Teo
In the early 1950s, Georg Vedeler, CEO of DNV from 1951-1966 said, “We have no choice; whether we like it or not, we have to do research.” At that time, DNV was still a relatively small marine classification society with approximately 200 employees around the world, primarily supporting Norwegian shipping interests. DNV’s services and classification rules were largely copied from those of major international competitors, and had been little updated since 1919. This was clearly an unsustainable position. DNV faced two options, subsequently expressed by its first head of research—and later CEO—Egil Abrahamsen: Expand or die.
From that new beginning, DNV grew from a small company serving primarily the Norwegian market to an international corporation with 6,000 staff, most of them with high levels of technical qualifications, working across a wide range of disciplines and markets worldwide.
The shipping phase
Georg Vedeler’s arrival as the new CEO of DNV in 1951 implied a marked shift towards a new age in which science and competence would play a major role. Ship classification was the only business area, and DNV’s rules were up for a major revision.
Vedeler’s decision to base the new rules on scientific methods rather than primarily empirical required a strong focus on method development, analysis, and testing. Therefore, DNV’s main research efforts were put towards developing classification rules, both by refining the analytical approach used in the 1953 rules for tankers, and by implementing experience from operation of the ships. The research department undertook active troubleshooting of accidents and damage, both in the field and through laboratory testing. It soon became clear that the complex computations needed for rule development, as well as for analyzing the ships, implied extensive computations that were difficult or impossible to do with traditional hand calculations. Driven by these needs, DNV became a pioneer in using computers, acquiring its first in 1956.
The offshore phase
When oil was first found in the Ekofisk field in 1969, a new opportunity opened for use of the knowledge and tools that DNV had originally developed for the shipping market, relating to such aspects as structures exposed to harsh environments, materials technology, and coping with fire and explosions.
DNV embarked on its most active research period in terms of research and technology development. By 1984, the research department staff had grown to an all-time high of 340 and was performing research as well as customer projects and technical consulting. The many engineers recruited and trained in this period, later working throughout the organization, have been crucial to DNV’s growth in new areas.
In the late 1970s, Norway suffered an exodus of ships and shipping companies. At that time, 80% of DNV’s customers were Norwegian. A prolonged shipping downturn stemmed from the oil crisis of 1973, made worse by excessive newbuilding orders in the preceding years. There were also setbacks in the oil industry, and adjustments had to be made regarding DNV’s service capacity towards this sector during the second half of the 1980s.
To meet the challenge of this downturn, DNV moved systematically towards a more decentralized organization during the 1980s, with local centers around the world. In this way it was possible to build close links to owners and yards outside Norway. The intention was to establish “mini-DNVs,” with services similar to those provided from the head office.
Around 1990, key industries such as vehicle manufacture, led by the United States, began requiring their suppliers to demonstrate and document their quality management systems. With its new competence in management system assessment through the International Safety Rating System, built up following acquisition of the International Loss Control Institute of Atlanta in 1992, DNV soon had a portfolio of customers from many branches of industry.
During this period, DNV built up new types of assessment schemes for other areas such as quality of management systems and environmental performance. These services were generic in nature and provided a platform for servicing a wide spectrum of industries. Along with the assessment schemes came a strong buildup of formal certification services based on international standards.
DNV’s international presence and infrastructure proved to be crucial for expansion and growth. DNV became one of the major certification companies in the world after these early years of dedicated effort.
Networking and cooperation
Egil Abrahamsen realized that “…a company can itself only generate 5–10% of the knowledge it needs to develop. The other 90–95% has to be harvested from external sources. But in this, technology is different from most other types of harvesting in that it requires extensive competence and knowledge in order to make use of the harvest.” Moreover, for cooperation with universities and research institutions to be worthwhile from their viewpoint, it is necessary that DNV itself can bring forward competence and technology of relevance to them. Thus, such cooperation demands depth and relevance in DNV’s own research activities.
DNV has enjoyed close relationships with universities for many years, and has established a DNV University Network. This is a rather informal network in which various forms of cooperation and agreements with leading universities throughout the world have been established.
Tony Teo is technology and business director with DNV North America Maritime.