Innovation, Technology Transfer and New Venture Creation Washington, D.C., December 2-3, 2004

1. Innovation, Technology Transfer and New Venture CreationWashington, D.C., December 2-3, 2004 From imitator to creator 1954-2004Wiggo SmebyChief Technology OfficerAnita Krohn ThraneHead of strategic projects, Corporate Technology and Innovation

2. Objective “To safeguard life, property and the environment” Foundation established 1864 2

3. Innovation phases in DNV

4. Maritime Innovation Phase 1950-1970 • Innovations: • Rules for operation of unmanned engine rooms • Design rules for very large ships • Design concepts for Liquefied Natural Gas (LNG) ships • Success factors: • Focus on technology development to create competitive advantage • Market growth • Technological leadership by Prof. Vedeler • Ability to attract talent

5. Offshore Innovation Phase 1970-1980 • Innovations: • Rules and concepts for steel jackets and drilling rigs • SESAM • Design procedures and standards against fire and explosion loads • Rules and certification schemes for design and installation of sub sea pipelines • Success factors: • Competence transfer from ship sector • Encouragement from Norwegian authorities to foreign oil companies to invest in R&D • Technological and innovation leadership by Dr. Egil Abrahamsen • Ability to attract talents

6. Internationalization Innovation Phase 1980-1990 • Innovations: • Veritec • Risk and reliability technology • Concepts for Floating Production and Storage Offshore • Veritas Petroleum Services was formed • Succes factors: • Following Norwegian maritime customers building ships in Japan and Korea • Solid position in the Norwegian oil and gas cluster • Strong demand for new technological solutions in the North Sea • Large investments in R&D funded by national and foreign oil companies • Modern Quality and Loss Control Management philosophy being adopted • Recruitment of talent from best international universities

7. Diversification Innovation Phase 1990-2004 • Innovations: • Management system certification a new business world wide • Nauticus life cycle product model technology • Total Safety Class combining technical, organizational and human aspects • Success factors: • Innovation leadership by CEO Sven Ullring • Establishment of a strong global infrastructure including IT infrastructure • Ability to attract talents in Norway and abroad • A culture for zero tolerance for failure developed - “The new risk reality”

8. Result: Position 2004: DNV are being imitated 1954: R&D creates fundament for “Thought Leadership” 1950: DNV imitate Lloyds

9. Result: Revenue 1966 - 2002 Asia America Europe Nordic Mainly due to Research JIP’s Norway

10. Result: DNV revenue trends-diversification & new markets Maritime 2000 mill NOK (1998 money value) Upstream & Process 1000 Other industries 1980 1970 1990 2000 1960

11. Result: The power of clustering • The Norwegian maritime cluster • The Korean maritime cluster • The Norwegian oil and gas cluster • The Italian food cluster • The Danish wind energy cluster

12. Result, Impact on industry & competitors • Maritime & Offshore: Standards, cluster strength, renewal pressure, learning, e.g. DNV Research made ca. 1000 internal DNV-reports since 1984, in addition, ca. 320 public papers & presentations since 2000. • Competence centre: DNV considered as “Norwegian graduate school of technology”. • Spin-offs: ScanPower, Computas, Underwater Institute (NUI), Fjerndata, Geco etc.

13. Result, Impact on society • Reduction of injuries and deaths • Protecting environment • Supporting the Norwegian welfare state • Knowledge generation and distribution • Supporting Norwegian technological reputation

14. budgeted R&D further development BA’s own R&D funding 6,8% (of its revenue) DNV Research 50% 3.8% (of its revenue) 1.6% (of its revenue) 37% 40% 72% 30% 13% 12% 30% 16% MI Cons + TS Cert DNVs investment in R&D, 4.2%

15. 100% Most Innovative Cons + TS Fraction of revenue stemming from own R&D MI 50% Innovative Cert 10% Least Innovative 0 1% 2% 4% Fraction of revenue used on R&D and Innovation DNVs investment in R&D, 4.2%

16. Advisory 1864 1970 1980 1990 2000 1900 1950 1970 2000 Remarks DNV 1864 – 195? • DNV would have had considerable challenges to survive without R&D. • Growth in Maritime: • Competence, Tools & Laboratories Classification • Offshore success: • Competence & Tools from Shipping • New competence & credibility • New areas: • Existing tools & competence

17. R&D, historic perspective The only real growth in human history started with the industrial revolution.

18. Value creation from R&D depends on: • Quality, quantity and diversity • Highly educated staff • Critical mass of diverse projects and people • Free funding (not only allocated funds) • Organizational interplay • High intra-organizational cooperation • High customer interaction • High degree of R&D personnel transfer (ca. 20%/yr) • Academic cooperation • Leadership commitment • Long-term perspective of leadership (R&D results + 10yrs, patience) • Personal interest in and understanding of R&D • Willingness to take risks (only 1 of 10 of R&D succeeds, R&D time horizon 5-10 yrs) • Active government participation • Since society benefit most from R&D, and industry under-invests  government must bridge the gap • Co-financing • support industry clusters

19. R&D, in the future • Trends: • Shift from corporate to applied R&D • Weakening of the basic research engine • Universities are aggressive in prosecuting patents, less focus on responsibility as defenders of open science • Globalizations has led to two shifts, • a) number of qualified people to do research is rising rapidly • b) building labs close to the customers • Area: Software and services

20. .. a world still to discover, improve, develop and sustain “Everything that can be invented has been invented” The commissioner, US Patent Office 1899 Nobel Bell Diesel Benz Pemberton