Interview conducted by TWA Business Benchmarks editor Stephen Forrester.
Clay Williams is the chairman, president, and chief executive officer of National Oilwell Varco (NOV). Previously, he served as NOV’s president and chief operating officer and its executive vice president and chief financial officer. Before its merger with National Oilwell, Williams served as Varco’s chief financial officer. He also served as vice president of finance, vice president of corporate development, and vice president of pipeline services for Varco and Tuboscope before the merger of the two companies. Before Tuboscope, he worked for SCF Partners and Shell Oil Company. Williams also currently serves as a director of Benchmark Electronics. He holds a BS degree in civil and geological engineering from Princeton University and an MBA from the University of Texas.
The current downturn has been one of the worst in a generation, both in terms of the severity and length of the decline. Despite this, NOV has recently made several high-profile acquisitions, including Fjords Processing and Trican’s completion tools business. How do you determine what acquisitions to make in a troubled market?
First and foremost, NOV has to continue to evolve and execute a strategic plan. The Fjords and Trican acquisitions move us further in that direction, though actually those were only two of 13 transactions in 2016 that allowed us to evolve our portfolio of businesses, products, and services. What is really important is to look at acquisitions that have high growth potential for the next big upturn. In particular, production technologies and drilling and completion technologies that we have brought in have positioned the company to benefit in the next upcycle. You have to invest for the very long term and identify trends and developments across the industry that align business and customer needs.
Your extensive background in finance and business development saw you taking a very active role in successfully executing mergers and acquisitions (M&A). Do you still have that level of engagement as CEO, and how has that background helped you to make business decisions today?
I enjoy working with our M&A team a lot, and I think they do a thorough job of finding deals that are beneficial to both parties. I have really loved working in M&A because it spans all portions of business; you get to know great entrepreneurs who have built unique brands; you get to deal with real-world challenges and opportunities that businesses face; and then you strategically position your company for growth. Working in M&A is challenging, but also really fun. I learned, in particular, to condense intricate business challenges and problems to their basic elements, which generally are cash, risk, and time. There is a method of thinking through complex challenges that involves breaking things down to those basic elements, which has been extremely useful to me as a businessperson.
In order to avoid lengthy development cycles, companies will sometimes hire third parties to manufacture products for commercial deployment. How does NOV achieve balance between insourcing manufacturing and contracting third parties?
Due to the deeply cyclical nature of the business, we see wide variations in demand and activity. Observing and understanding these high levels of volatility in the market allows us to develop a strategy. We first attempt to control as much of our supply as we can. Once the upturn comes and we are pressed for delivery, we have to be able to control timely and quality distribution into major projects. That said, though we may tend to insource a little more than our competitors, you can never insource everything—demand varies too rapidly, and we have to balance the manufacturing of our products and services with what the market actually needs.
In the same vein, it is not uncommon for companies to opt to purchase a technology to more rapidly expand their service portfolio instead of developing an in-house solution. How do you determine when to acquire a new technology vs. allowing the technology to develop organically with internal resources?
All products and services allow companies to develop lessons learned along the way. If there is a preexisting company that has a technology that we are interested in, they have probably already navigated a business minefield that we have not even stepped into. It ties back in with what I mentioned earlier—cash, risk, and time. Generally, the opportunity to buy a mature technology means lower risk and shorter time, with the tradeoff being the cash investment. Sometimes it makes sense to allow our engineers to naturally research and develop a technology over a longer product life cycle, but sometimes waiting too long causes missed market opportunity.
Training and competency development in the oil and gas industry, both in the sense of technical aptitude and career advancement, can be an important but costly initiative. What level of priority do you put on training during a downturn?
Downturns force companies to look at all aspects of the business, including employee development and training, and what we want to do vs. what we need to do. In a time where we are having to reduce our workforce we have to take a close look at the value that we are getting for training. We have reduced it, but importantly, not eliminated it. In particular, technical training is critical.
We introduced a master’s program for rig service technicians who have been underutilized due to the downturn to allow them to develop their technical skills in preparation for the next upturn. We also try to support employees’ educational pursuits outside of the company on a more limited basis. In the long run, the success or failure of the company is driven by the workforce. It’s all about striking a balance.
This has been a time of unprecedented change for the oil and gas industry. Where do you think the industry is headed in the future, and what steps will NOV take to ensure that it is ready to face those new challenges?
The biggest thing to hit this industry in a generation has been the microchip, and our opportunity is to take that further. We want to focus on big data and predictive analytics to make the equipment we sell more reliable and enable our customers to more intelligently maintain that equipment and improve uptime and efficiency. We are bringing software and closed-loop automation to the drilling process to allow rigs to learn through heuristic algorithms. We also want to focus more on the human element of bringing technical support to our customers. In the big picture, I think software and technology will continue to drive positive change in the oil and gas industry, make it safer, and reduce its environmental impact.
Advice to Young Professionals
You have done and seen a lot in your many years in the oil and gas business. Can you tell me about your personal career journey, what inspires you, and how you have seen the industry transform through the years?
I started my career working for Shell in Alaska, and at the time Shell was building man-made ice roads and gravel islands to drill dozens of miles out in the Beaufort Sea. My very first thought about the industry at the age of 22 was, “How cool is this?” This is an industry that is doing such amazing things with technology, and since then I have seen the way we drill and technology employed become more advanced and drive greater efficiencies. I also love the people in this industry and how proud everyone is of what they do.
Most importantly, I think, is that this industry lifts up standards of living of people around the world; it touches every aspect of our lives. People once could not have imagined traveling or communication between continents, but now we are able to enjoy a life that is significantly better than that of our ancestors. I would argue that the oil and gas industry has been more transformative in improving lives than any other industry, with the exception of maritime trade. Knowing how much we affect the world around us is a powerful motivator for me.
As someone with a diverse range of experiences who has achieved a position of significant influence, what advice do you have for young professionals entering the oil and gas industry?
Number one: Be true to your craft. Google Martin Luther King Jr.’s “Street Sweeper” speech and give it a quick read. He basically tells the readers to be proud of what they do, take ownership, and strive to be the best they can be, whatever their job and wherever they work, and I agree wholeheartedly with that message.
The second piece of advice I would give is to always hold yourself accountable. Businesses only perform well if individual team members are all accountable to one another. There are so many times in our day-to-day lives where we make commitments, and I think it is very important that we deliver on those promises, however small. Business and performance will succeed if employees execute their roles effectively with a high level of integrity and accountability. It is a deceptively simple truth.