IntelliServ

https://www.nov.com/about/our-business-units/intelliserv

The IntelliServ business was formed in 1999 by Novatek – a research & development company that was acquired by Schlumberger in 2015. The product is a telemetry technology for oil & gas drilling. Over the last 40 years data has been transmitted from the drilling rig to the bit and back using mud pulse telemetry at an average throughput of 5 bits per second. IntelliServ devised a way to “wire” the rotary threaded drillstring components to achieve speeds of 57000 bps. The technology had the potential to transform the drilling process by providing data in realtime, eliminating the time lag – a result of having to wait until the entire drillstring is removed from the well under construction to download and analyze the data.

The business launched commercially in 2006 as a service. IntelliServ provided all of the equipment and personnel to work on the drilling rig along side other service companies. Revenue seemed stuck at $10M/yr, while expenses ballooned to $53M by 2011. Total losses over this period were greater that $200M. In March 2012, it was decided to change the business model from a service to sold product.

Results

I served as VP of Engineering from April through September 2012, and became Business Unit President (1 of 16 within NOV) in September 2012. Over the next three years I was able to increase revenue from $10M to $40M and decrease Cost of Sales from $53M to $18M. These results required rapid decision making and rapid execution – no stone was left unturned. Improvements in the business over this period fall into four categories: 1) Reliability, 2) Cost of Goods Sold and Throughput, 3) Total Cost of Ownership, 4) Customer Experience.

1. Reliability

The product reliability was low 80% and was a barrier to adoption and company growth. Customer interviews and survey indicated 95+% was required. Through a disciplined roadmap process and a dedicated VP of Engineering (Mark Walker), we were able to make the required changes quickly and get them into production. The two primary changes were: 1) overhaul of the inductive coil to make it insensitive to handling damage, 2) overhaul of the battery powered DataLink to fix various failure modes. Within 18 months of starting this effort, reliability increased to 98%.

2. Cost of Goods Sold and Throughput

In July 2012, each unit of 30 ft long drillpipe required 12 hours to convert it from standard drillpipe (purchased from Grant Pride co) into an IntelliServ wired drillpipe. We were able to reduce from 12 hours to 3 hours. This was possible by redesigning the production process and installation of faster lathes for machining and gundrilling. The elimination of unproductive 100% product testing was also a part of the throughput improvement.

To support faster production of wired drilling tubulars, a new inductive coil assembly cell.

A second throughput improvement was for the battery powered DataLinks. The changeover from “workshop” process to standard work assembly line resulted in a dramatic throughput improvement from unit per shift with 3 people to 5 units per shift with 2 people. The assembly line had the potential to scale output with minimal incremental headcount.

3. Total Cost of Ownership

The inductive coil from the reliability improvement had a secondary positive effect. Because the coil was reusable (rather than one time use), the cost to use the technology decreased dramatically – on the order of 80%. Drilling tubulars are damaged during use – in particular one of the threaded ends. The redesign made the wired components insensitive to this damage during use, and the coil could be removed and after repairs reinstalled.

4. Customer Experience

Prior to the change in business model from service to sold product, the “surface equipment” portion of the technology had been designed for internal use. As such, the design was quite crude and unprofessional looking. All of the surface equipment (cabling, computers and touchscreen user interfaces) were completely redesigned for a best in class customer experience. By all accounts this was successful.

Summary

The turnaround of IntelliServ was a success through a combination of: 1) sense of urgency, 2) rapid analysis and decision making, 3) disciplined execution, 4) continuous assessment of our progress and adaptation as required.