The Preliminary Specification Part I

For the next few months I want to talk about the output that the community will produce for the Preliminary Specification. Although I have hesitated in the past in making any comment about what the output would consist of, it may be appropriate at this time to offer some suggestions just to get the ball rolling. I don’t wish to limit in any way what the scope of the output would look like, only to offer a few suggestions as to how I might see the output of the Preliminary Specification. These posts will be able to be aggregated under the PS-Output label of this blog.

In general the first requirement of the Preliminary Specification is that it will have no consideration of any technology. It is all about the oil and gas industry and the people that will be using the application. Consideration of the technology is not valid in this project, technology will accommodate the needs of the users when the time comes. This means that the General Ledger, the Relational Database Management System, Java etc are not pertinent to the considerations of what is required in the Preliminary Specification. (Please note however that we have selected this Oracle Stack as the base of Detailed Specification.)

Secondly we are looking at the global scope of the energy industry. Or as been stated elsewhere, the producers, services industries, society and individuals. That’s maybe a bit broad and could use a bit more detail. What is intended to be included in these classification is as follows.

Producers

• Start-ups
• Junior
• Independents
• Integrated Oil Companies
• National Oil Companies

Services Industries

• Field Services 
• Research
• Development
• Operations
• Engineering
• Project Management

Societal

• Royalty
• SEC
• Tax
• Compliance
• Environmental

Individual

• Employment
• Entrepreneurial

As we can see the functionality and process management of the application modules will include organizations and individuals outside of the producer firm. Transactions, interactions and collaborations occur outside of the producer and these are being captured by the People, Ideas & Objects application and therefore will be used within the various firms, agencies and industries noted above.

The output of the Preliminary Specification will therefore include the needs of these other organizations and people in addition to the producer firms. Their inclusion in this process is not limited to just managing transactions. A thorough review of the Research & Capabilities and Knowledge & Learning modules reflects the needs of the producer and service firms transaction management are not the only aspect that needs to be considered.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

Research Question # 3

The Preliminary Research reports third research question builds on the probable positive outcome of the second question. That being, if innovation can be reduced to a quantifiable and replicable process “Will the Joint Operating Committee facilitate the means to innovate?” In addition to having the scope and understanding of the processes of innovation quantified and replicated. The breakthrough from this research question is that the Joint Operating Committee is the ideal organizational construct to facilitate innovation. I will highlight two key points in this post, and follow up with much more detail throughout our ongoing review.

The two key points are simply ideas and decisions. Two elements that can not be handled by computers. Ideas and decisions are the higher level work that humans need to be involved in, with computers taking over the repetitive and transaction oriented activities.

When we consider the changes in the oil and gas industry, particularly from the point of view of an expanding understanding in the earth science and engineering disciplines. The Joint Operating Committee is designed to generate ideas and make the decisions for the producers represented, making it the ideal organizational construct to support the successfully innovative oil and gas producers. Building ERP systems like People, Ideas & Objects Draft Specification that identify and support the JOC are what’s required to facilitate that innovation.

In terms of idea generation, collaboration is the ideal means in terms of identifying and solving problems. Contrasting the difference between collaboration and consensus is an important point. Consensus is when the majority can agree on a certain decision or direction. Collaboration is when the best solution is being sought by those with a mutual interest. I see the JOC using collaboration as a means to find the innovative solution and making the decisions based on a consensus of understanding.

The operational decision making framework of the industry is with the Joint Operating Committee. What becomes very clear in reviewing Professor Dosi’s paper is that decisions play a critical role in innovation. Professor Dosi states that not all efforts are successful, many fail, and from the failure sometimes the most important lessons are learned, and everyone inherently understands this. The ability of an industry to learn through their collective efforts will mitigate the subsequent similar failures and their costs, and enhance the success over a larger population of companies.

Some of the advantages of using the Joint Operating Committee that were listed in Preliminary Research report were;

• All participants are motivated equally. Financial opportunity drives consensus.
• The JOC is the legal, financial, operational decision making, cultural and communication frameworks of the oil and gas industry. All the internal processes tacitly support this fact.
• The participants in the JOC hold significant technical and managerial capabilities.

The scope of the operational authority of the JOC is constrained by the participants financial interest in the property. The JOC’s formation is traditionally formed around a geographical area, is traditionally limited in its geological and areal extent. This naturally limits the focus of the committee to that facility. The JOC is therefore financially motivated, has the appropriate level of focus, has the operational decision making authority and brings together the collaborative idea generation and consensus building needed of an innovative organization.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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More on our Business Model

The business model and value proposition of People, Ideas & Objects are fundamentally different then any other software provider. Based on a number of assumptions that involve the use of the Joint Operating Committee (JOC) and the cloud computing delivery model, this post details some of those elements of this software development project.

Using the Joint Operating Committee presents some interesting opportunities and difficulties. Providing producers with a software development capability, and software applications that support start-ups, Independents, International Oil Companies and National Oil Companies is necessary as the partners within a JOC could and will be formed from any and all of these types of producers. Partners within a JOC need to have the same systems in order to optimize the interactions between themselves. Having only one producer working off advanced collaborative systems like that proposed in the Draft Specification, severely limits the value realized by each and every one of the producers. 


Take for example the situation that deals with the decision making authority of the JOC. Participants are asked to approve a course of action to increase natural gas production. AFE’s and a proposed team to undertake the program are voted on by the members of the JOC. Seventy six percent of the working interest ownership agrees with the program, surpassing the 75% necessary for a decision to pass. Since all members of the JOC are using the same software, the AFE’s become active within the system, and the individuals calendars and tasks are updated with the approved program. The speed in which the program is approved and implemented is facilitated by the collaborative elements of the People, Ideas & Objects systems. 


Each member of a JOC will be able to participate virtually through their mobile / desktop device. These systems will be recording the key decisions and initiating the actions that are decided upon in these virtual meetings. In the future, the oil and gas industry participants will need to be able to decide and implement plans of action on a much faster basis then today. The speed and volume of the decisions that will be needed within the innovative oil and gas producer, I expect will grow in the near future. It is my opinion that the speed of the decisions being made today are the reason for the poor performance of the oil and gas companies. Poor performance in terms of reserve replacement and production increases. This is because the decisions that are being made are not at the Joint Operating Committee level, the JOC has the authority, but these processes are obstructed by the internal decisions being made within each producer (management). 


When each of the participants are supported by the same systems and software development capability, each are able to collaborate and implement the decisions based on the outcome of the voting. Accessing this type of operational efficiency is one of the inherent values that People, Ideas & Objects provides the producer firms. When we discuss the value proposition of People, Ideas & Objects, this type of value is one of the benefits that producers earn from using the Draft Specification. 


Additional value is generated when we realize the costs to the producer, to have this software application available to them, is allocated over the entire population of oil and gas production profile. The industry as a whole is being assessed the costs to develop the software, once. Compare this to the current model of purchasing software from a vendor who’s key asset, the software application, is sold to each producer. People, Ideas & Objects competitive offering is based on a software development capability, not on the software code itself. A competitive offering that is not constrained to one static piece of software code, a competitive offering that mirrors the incremental changes in the innovative oil and gas producers.

Another assumption that is inherent in the value proposition of People, Ideas & Objects is the determination of what an innovative producers competitive advantage is. That is the oil and gas leases, the physical producing assets and the earth science and engineering capabilities applied to those assets. These are the attributes of the producers unique competitive offering. Having SAP or any other accounting system, including People, Ideas & Objects, is not the basis of competitiveness of the producer firm. What we can do, and is the competitive offering of the Community of Independent Service Providers, is provide the producer with the most profitable means of oil and gas operations. That is to say that the system will not make a silk purse out of a sows ear, only that the most efficient means of operations will be attained by using People, Ideas & Objects and the CISP. 


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Collaboration Capabilities Innovation Value-Proposition

The Scope of the Application

In a recent post we talked about the scope of the development in terms of the Preliminary Specification. Today I want to discuss the scope of the application itself. It may seem that these are the same points, however, I think that there is enough of a difference to warrant this post.

To provide the innovative oil and gas producer with the software tools they need, the end user needs to be involved in the design and development of those systems. People, Ideas & Objects is focused on the end user in its developments. Organized around a comprehensive vision of how and what the systems consist of, the Draft Specification details the vision of the application. Organizing the user in these developments has been our priority throughout these developments. Anyone proposing the development of systems for innovative oil and gas producers would have to include the user in this manner. Yet People, Ideas & Objects is the only software developer that is focused on the user. Does SAP provide a comprehensive development of systems based on user input? Do the current bureaucracies believe the issues of the oil and gas industry can be solved without comprehensive user based software developments?


People, Ideas & Objects fills the traditional “ERP” or Enterprise Resource Planning classification of applications. It is a comprehensive solution designed to manage the operations of Joint Operating Committees and producers needs for accounting, administration and management. The Draft Specification defines the general framework of the application. It is anticipated that most, if not all, employees of a producer firm, the service sector and partners of Joint Operating Committees will have access to the application. The various disciplines that are employed in an oil and gas firm, geologists, engineers, landman, accountants and others are included in this definition.


In the People, Ideas & Objects software applications we seek to capture the ways and means of the optimal innovative oil and gas producer. The understanding of the industry is beyond the scope of a handful of contributors and involves the multiple disciplines noted earlier. The collaborative output of the application is well beyond the scope of one individuals understanding of the industry. Therefore clarification and compromise will be a necessary and difficult part of the process. Using advanced business techniques, focused on the conflicts and contradictions that arise, the output will resolve many of the issues within the industry and its application to the Draft Specification. This is a business design process that will involve literally everyone and anyone with experience and understanding of the oil and gas industry. More specifically it is a place where people can contribute their ideas and build their own service based offering in support of the innovative oil and gas producer and end users of the developing People, Ideas & Objects software.


Producer firms also have a critical role to fill in these developments. Their participation helps to define the applications scope of operations. Will the applications include the geographical regions of each area of operations of a producer firm? Will the applications include the types of oil and gas operations that the producer participates in. Without direct participation of the producers in funding and defining the scope of the application, the producer may or may not have all their regions and operations covered. This why the producer needs to participate in these developments now. With the Preliminary Specification set to start on January 1, 2011, and include the scope of the application, now is the time for producers to begin the process of supporting and participating in these developments.


Adding to the scope of the application is the market definitions of the producer firms targeted. The application is proposed to work for International Oil Companies (IOC’s), National Oil Companies (NOC’s), Independents and Start-ups. Using the Joint Operating Committee as the key organizational construct provides value for all producers in the industry. To preclude any market definition would unnecessarily limit the scope and value of the application. Joint Operating Committee’s include all types of producers. Producers need to participate in these communities and ensure their operations geographical and operational needs are met. If you have comprehensive operations, working within these communities at the onset provides real value.


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Scope of the Preliminary Specification

We have therefore established January 1, 2011 as the commencement of the development of the Preliminary Specification. What does this involve and what are the objectives of the specification? This post will provide a general outline of the work that will be done during 2011.

Firstly we should establish what a “collaboration” is. In many instances the terms collaboration and consensus get confused. I see these as two distinctly separate terms. What I feel happens is a group will define what a consensus is by determining what the majority will agree to. On the other hand, a collaboration is the hard work of determining what is the optimal solution. Collaboration is a process that achieves breakthroughs and discoveries.

The Preliminary Specification is a consensus of the producer community. It is important to have the input of subscribing producers to define the overall scope of the application. If a producer has operations in the Gulf of Mexico, extensive NGL or heavy oil operations they should ensure that the Preliminary Specification’s scope captures those requirements. If they don’t actively participate to define their needs within the application, at the commencement of this development, it will be significantly more difficult to assert their needs in subsequent iterations of the development.

The Preliminary Specification is a collaboration of the end user community. These are the people who will need to use the application. They are the best resource to define the application process and functionality that they need to do their jobs. It is their tacit knowledge that is and will be employed in the oil and gas industry. Tacit knowledge can not be captured and employed by computer systems. What users can do is build the software tools they need to deploy their tacit knowledge. Collaborating to define and discover what tools would work best is therefore their responsibility. No one else can do this critical definition for the user community.

The Preliminary Specification is a collaboration of the Community of Independent Service Providers (CISP). This group of individuals, teams and firms are the glue that holds the developers and the users together. They are resources that provide the users with the delivery of their software tools.

The Preliminary Specification has been previously defined as 100 People years of effort. The population of users, producers and CISP participants in making up this 100 People years is very large. In the several thousands. The larger the participation, the better the output of the specification will be. In essence we are trying to capture as many of the ideas that are available in the various communities, the needs of the producers, determining which are the breakthrough discoveries and settling on a scope of functionality of the application. A quotation of Version One defines this as breadth of the application.

To effectively deal with scope on an Agile project, specifications must be considered in two dimensions: breadth first and then depth. It is essential that we understand the breadth of what we want to build early in the project. Dealing with the breadth of the solution helps the team understand scope and cost and will facilitate estimating and release planning. The breadth of a project begins to frame the boundaries of the project and helps to manage the organization’s expectations. Looking at the breadth of the requirements is a much smaller investment of time and resources than dealing with the entire depth. The details are most likely to evolve as we progress through the project so defining them early has less value.

The two constraints placed on the Preliminary Specification are they must use the Draft Specification as it's starting point and be focused exclusively on the business of oil and gas. Technology is not part of this specifications deliverable. The depth of the application will be determined during the Detailed Specification.

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Agile-Scrum Budget Collaboration Development Preliminary

Changing deck chairs on the Titanic

I should thank SAP for this post. They have published a YouTube video of their use of Google Wave, and its all that I thought that Google Wave could be used for. Here's the Video.

What the video doesn't show is the level of security being used and the location of the individuals. It is more then reasonable to assume these individuals are located at various different places and could theoretically be anywhere, and through a standard browser. It is also possible to provide the highest levels of security that are technically possible to those users, wherever they may be. And these attributes are well reflected in the video, but I have to argue the damage that a tool such as this would bring to any oil and gas company.

What is it that SAP is missing in terms of providing this solution? What we learned in the Preliminary Research Report was that change needed to be introduced in the proper fashion. Specifically the cognitive and motivational paradox are key issues that are not being addressed in SAP's use of Google Wave. The cognitive paradox identifies that people perceive the new with an understanding from the old. Taking the old and superimposing their understanding on the new is a danger in SAP's use of Google Wave. The motivational paradox recognizes that people are concerned more with production, or getting their job done, then learning the new methods or tools. These two paradox have been critical in the need to understand how change is introduced in the Draft Specification. Simply there has to be a clearly defined break from the old. A significant break in which the new can be approached in the manner that is somewhat a blank slate.

Change for the sake of change, is wrong. Particularly with SAP's use of a new technical tool. Technically driven change is a disaster in the making. That is why People, Ideas & Objects is basing these changes in the strong economic forces in today's depression. Orchestrating this level of change is not possible unless there is the type of economic reforms that people like Professor Carlota Perez speak of. The old dinosaur bureaucracies are failing, actively destroying shareholder value, and are leading to the renewal for new and innovative ideas and organizations. This opportunity is ours to take.

I see serious problems in allowing this type of powerful technology (The Google Wave application, not the SAP application) introduced without any support for the changes made. And more importantly without the full consent of the management or ownership of the firm. In this video they introduce a number of people who collaborate on a new process that does not have the requisite authority or responsibility to make any changes. Designing things because they can collaborate does not make it a valid process. In oil and gas I could take Google Wave and quickly write a new process that would involve the collaborations of any number of producers involved in a Joint Operating Committee. This would be dangerous and irresponsible, that SAP misses this point is of concern to me. This is also why the Draft Specification developed the Military Command & Control Metaphor.

Particularly for a publicly traded company, decisions and actions have to have a document-able audit trail, compliance and governance implemented and operational. When we think of a JOC we have multiple organizations legal, financial, operational decision making, cultural and communication frameworks. It is my opinion that allowing this type of application, of which many examples have been written about here, is irresponsible for the management to allow. I also have an opinion that management are not that interested in working that hard to stop this type of activity. Just as they do not go out of their way to be more proactive with respect to compliance or governance. As I said it is just irresponsible of management to "allow" this to happen, but chaos may be the better choice for them to make.

In oil and gas management's sole concern is the compliance and governance of the company. It is People, Ideas & Objects "design" to have the compliance and governance moved from the bureaucracy to align them with the legal, financial, operational decision making, communication and cultural frameworks of the Joint Operating Committee. As one learns in most MBA programs the separation of operational decision making and compliance leads to no accountability. This is managements to exploit in the current market. There motivation is to ensure they are not eliminated by having compliance and governance more accurately managed within the software.

We have also learned that the division of labor is the primary means of enabling economic growth. The video shows the influence of many different people involved in the process, however, it is more a matter of convenience that these people are motivated and the scope is based on expedience. When we consider the interactions of people through a JOC we have interactions that, if left to an ad-hoc development, would not provide the value that the appropriate analysis would bring. As I have frequently mentioned, the current oil and gas industry is populated with potentially thousands of different jobs as a result of the growth of the industry. Allowing poorly implemented technologies such as SAP is doing in the video can lead to a destruction of that division of labor for something that is not efficient. Leading to the chaos mentioned and presenting to all the kings horses and all the kings men, the never ending story of Humpty Dumpty.

We are entering a world where the tools are very sophisticated and capable of significant benefit to society, if used properly. We are also viewing the world from a high level of sophistication in terms of its economic order or division of labor. These are being altered without an appreciation or understanding of how fatal even a small decline might cause the company. Management should be concerned at what might happen when falling from these lofty heights. Making undocumented changes and not implementing the appropriate levels of compliance and governance is irresponsible, bordering on criminal. Managements have been able to disassociate themselves from the shareholders and investors by entrenching themselves in a rigid compliance framework. This is also why no one has ever been fired for recommending SAP.

Ah the things you can say when you've been ostracized for your ideas, truly liberating.

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Collaboration is a necessity.

The Oil and Gas Journal have a comment from Mohammed Al-Qahtani, Executive Director, Petroleum Engineering and Development, of Saudi Aramco. He stated simply,

Recovering the world’s remaining oil resources will require a collaborative effort of national oil companies, international oil companies, and service companies.

This quote resonates with a number of assumptions that went into the Draft Specification. How the service industry and the producer companies are able to work closely in this most difficult of tasks. The Resource Marketplace Module is the collaborative medium in which the resource industry is able to market their offerings and contract with the producers that need them. Having an electronic marketplace that enables these connections, and facilitates the contracting is a necessity in my opinion.

The Research & Capabilities Module also provides the producer with a window on the work being done in the service industry. As I mention in that module, the producer receives 100% of the revenues from the sale of oil and gas. These financial resources need to be allocated to the service industry to conduct the research the producers will need in the long run. Funding these activities directly are what will be necessary for the producer and service providers to achieve what Mohammed Al-Qahtani also says in the article.

In addition, he noted that the world would need an additional 90 million b/d to offset declines in existing oil fields to reach a 125 million b/d level by 2030. Current world production is about 80 million b/d.

Finding 90 million b/d will be tough without the ability to collaborate in this manner. Another assumption that I have mentioned before is that the National Oil Companies will become active partners in making these plans real. Their nations reserves could best be developed in collaboration with producers from other nations. Much as Saudi Arabia has always done.

These assumption need to be incorporated in the systems that producers will use from now to 2030 and later. Systems built with the full involvement of its users. Please join me here.

Technorati Tags: Poeple's Collaboration Call-to-Action Innovation Leadership
 

The Prototypical Producer

"Build it like your going to operate it forever."

That is the expectation of the CEO of BlackPearl Resources Ltd. John Festival, who sold BlackRock Ventures Inc to Shell Canada in 2006 for $2.6 billion. As I mentioned in a recent post companies are being formed with the intent to sell them within a five to ten year window. These people are able to put together a firm and sell it for substantial gains.

Nonetheless the expectation is to "build it like your going to operate it forever". The oil and gas assets of the producer are the value that is being built. Why would anyone approach the building of those assets with anything but the long term perspective. The dichotomy is that you are building the company for a quick sale. A team can put together a valuable producer in a short 5 to 10 year period that can then be sold for multiples of the cost to build the firms.

I see in the BlackRock team the prototypical 21st Century oil and gas producer. The ability to find and develop the resources, build the assets and then sell them to start all over again. It is happening consistently on this grand of scale, it is also happening on a smaller scale where less "proven" teams are building their capabilities up with each successive start up and subsequent sale.

It is these teams that I have in mind as being the ideal candidates for both the People, Ideas & Objects Draft Specification and the associated Community of Independent Service Providers (CISP). My logic is as follows; why does a firm that is focused on developing a firm's assets, based on a team of capable leaders need to burden themselves with the overhead associated with systems, procedures or even the staff to manage the day to day. What if they could access the systems and people necessary to manage their assets development? What if they were to find their most profitable operations were best managed by the CISP and People, Ideas & Objects application modules.

From an outsourcing point of view people will have preconceived ideas of what works and what doesn't. To think of this as just outsourcing limits the opportunity for the producer and the industry as a whole. Adam Smith proved that the division of labor and specialization were the keys to organizational efficiency. Since these concepts were proven they have been the driving force behind all economic growth. Greater specialization and division of labor are what organizations have been able to do to improve their performance since the late 1700's. The Draft Specification considers this as a critical aspect of the systems means of providing the producer with increased speed, innovation and performance.

One of the key aspects of the Accounting Voucher Module is to provide the means to design transactions. A transaction for the purpose of this example is the drilling of a well. The work that will be undertaken by whom and when is defined in the Accounting Voucher as the value adding process. This process is not too much different today as it will be in the future. However, the number of people that would be involved in that transaction may total one thousand people when we consider the producers CEO all the partners staff and on up to the invoice clerk at the water hauling firm. Clearly the division of labor has already been used to good effect.

Now to enhance the capabilities of the producer and particularly the industry, will require a greater division of labor. Lets assume that this transaction in the future may involve triple the numbers of people to successfully complete the transaction. Already the Joint Operating Committee employs only a handful of these people. How many will need to be directly employed by the JOC in this future scenario? Will it be more or less? I think it will require sizable more individuals reporting directly to the Joint Operating Committee.

Many more individuals spending substantially less time then they do today, over a shorter period of time. How will this be handled by the JOC? The ability of having this larger number of people spending less time on a transaction will be one of the direct results and benefits of the Information & Communication Technologies. The ICT can handle this type of activity, and what I am suggesting here is that irrespective of the size of the producer, only the key team of CEO, COO and CFO would need to be in the office at all times. The thousands of people available when and where they are required, managed by the People, Ideas & Objects application modules and the Community of Independent Service Providers.

In this future scenario BlackPearl Resources needs to coordinate and manage the efforts of thousands of individuals who have a significant influence on their success or failure. Some of the key attributes of this is that the "transaction" must be flexible enough to have the influence of the decision makers involved intimately with the aspects of the transactions that they can influence the success of the transactions outcome. For the industry to increase the overall productivity of the people imputes the speed of these transactions will turn over much quicker. If the performance criteria is to drill X wells today, then tomorrow may require X³ wells drilled. Or it may be stated better by saying the engineering, geological and overall work required for each barrel of oil triples.

This is the only method I can see of how the fixed number of people working in the industry can become three times as productive. The market for energy is rewarding these firms with the pricing of the commodity which values all aspects of the producers operation. China, India and the rest of the world is joining the "Western World" and the demand for energy will only increase.

They key to the worlds energy demands being satisfied lies with these teams of people, as represented here by BlackPearl. The ability to do what they do is an intangible that lies in the minds of oilmen. This talent is very rare and very difficult. I don't think that without the motivation of the potential of a billion dollar payday, these teams would form. Which brings me to the point that I mentioned here a few weeks ago. Clearly International Oil Companies are buying most of these producers. National Oil Companies are yet to realize their value in developing their countries resources. What if Pemex were to use these teams to help maintain their production volumes? As I mentioned in that post the idea that these producers are closed behind some communist or dictatorial mindset has receded over the past few decades. The only thing that needs to be done is the IOC's, NOC's and teams fund the development of this software to make this real. And as a key component of the Community of Independent Service Providers, all you need to do is join me here.

Technorati Tags: People's Energy Collaboration Community Development Market

McKinsey conversation with John Chambers

McKinsey have posted a conversation with one of our favorite technology presenters, Cisco Chairman and CEO John Chambers. I have highlighted his talks three times before. (Here, here and particularly here, where he coins the phrase "Content will find you".) I find his presentation skills to be second only to Steve Jobs and is unquestionably the best presenter of business related technology today.

In the first video segment Chambers talks about how he is unleashing the most aggressive set of initiatives he has launched as CEO of the firm. Counting the number of initiatives he launched in the previous 4 recessions at one or two. Chambers states "we're gong to be the most aggressive we've ever been in our history." And is launching 30 initiatives in this downturn. His experience shows that recessions last longer and are deeper then most people expect. Nonetheless he believes his biggest mistakes are as a result of not moving quick enough. 

Chambers warns that moving too quickly is a danger if you don't have the structure and discipline necessary to deal with the speed and change. As we recall the dot com meltdown was particularly difficult for companies in technology. Cisco was one of three companies with market capitalization well within the $400 billion mark. (GE and Microsoft were the other two.) The initiatives he undertook in that recession enabled the new structure and discipline to form, and with today's new collaborative technologies he feels he has the speed and capacity to take on those thirty new initiatives. 

Cisco is just one company. The need or demand for the changes Chambers implemented may have been presented to Cisco in the dot com meltdown. Today I believe the oil and gas industry has similar calls and demands for the entire industry to take action. Yet to date the oil and gas producers have collectively done nothing to change the underlying approach to the business. Do we believe that doing more is the answer to our energy problems? Last years performance should have provided the evidence that more is no longer adequate. Spending record levels of capital, to drop production by 5 - 6% is not positive for the managements. Did they consider doing nothing as an alternative? That may have been the wiser choice. 

Back to the video, Chambers documents how his use of technology has affected the way that he does his job. Blogging, and particularly video blogging is the major form of communication he uses for all of the 56,000+ Cisco employees. The new collaborative technologies are a key enabling technology for Chambers to get his ideas out. But there's more. I have written about Cisco's Telepresence on this blog before. Chambers says Cisco's internal use of Telepresence has cut its annual travel costs from $750 million to $350 million. 

In the third, fourth and fifth installments of this video presentation. It seems as though Chambers has bought into the kool-aid that Silicon Valley has been brewing. It may seem that way to a lot of listeners but I think it is very important to note that his experience with the dot com meltdown was personal and extensive. The use of alternative business models and organizations augmented with the current collaborative technologies are what are providing Cisco with the ability to innovate and move at speed. So much of a firms future competitiveness is capabilities based. The oil and gas industry has a capacity that is below what the market demand for energy is. Oil and gas companies have no plan and no idea what to do. I think it is imperative that people listen to the experiences of Cisco in making their organization perform at these levels. If after thinking about it you still believe it is Silicon Valley kool-aid induced thinking, then I would advise you to consider who Cisco's top competitors are, and what they think of the Cisco juggernaut. (Nortel Networks is selling off major parts while in bankruptcy. And Alcatel / Lucent lost €5.2 billion in 2008.)

Key to capabilities based competition is the enhanced role that leadership takes in the revised business model, organizational structure and technology. Clearly the leadership at Cisco, as represented in its CEO and Chairman have the means to prosper in this new environment. He makes it clear that collaboration requires much more from its leaders. Chambers states the following.

The classic question is, "Well if I'm going to lead, I've got to have people reporting to me, and I've got to control budget" and the answer is 'No', and "No".         

Budgetary power and authority are out. Command and control are the impediments. Clearly he expects the efforts and actions of his firm today will show in the performance criteria in three to five years time. And expects that the earnings and performance of Cisco are baked in the cake as a result of the actions the firm took three to five years ago. We must step off this earnings and performance focused cannibalization of our companies. As Chambers says "you've already won or already lost". 

Lastly, Chambers refocuses on the customer. Selling a vision and communicating it through the multiple channels of Telepresence, Web 2.0 and collaborative tools. This is what I have chosen to do with People, Ideas & Objects. Some may think that is hypocritical of me to suggest the customer is of importance. I have gone to great lengths to criticize the current oil and gas companies. And that is because I do not consider these current oil and gas companies as our customers. It is the Users of the People, Ideas & Objects application that are the customer for this software development project. Our Users in turn have the oil and gas producer as their customer. Please join us here.

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99.9986% uptime.

Yesterday I lost the final two hours of work on a post I was writing. Frustrating yes, but that is the first "loss" of work in 2 full years. I'm talking about the use of Google Apps for our domain (www.people-ideas-objects.com). I was writing when suddenly my browser failed and I had to restart it. And as a result, when I logged back in the file did not reflect the last two hours of work. It was the same as I had left it the day before. For whatever reason during that two hours the browser would register my edits, but not write them to the file on Google's servers. Either one of these two technologies, the browser or Google Docs failed for that period of time. 

I am also partially at fault for not doing a hard save on the file during that two hour period. I rely almost exclusively on Google Docs picking up all of my saves and have become overly reliant on these automatic saves. 

Now Google Docs is just one product of the suite of applications that are available. These other applications are used extensively and maybe should be factored in when I determine Google's up-time percentage. Then there is that price. At $50.00 per user per year, this is the deal of the century.

I also have to mention the costs and risks of maintaining our own environment. I don't think in the past two years we would have had the same up-time. Probably not even close. And that doesn't factor in any of the heavy costs of servers, bandwidth and applications. Therefore mark me down as a very satisfied Google Apps user. 

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More comments on the 36 hour work day.

Last year I noted the pace of development of this software's development was accelerated through what I called the 36 hour work day. A global application developed by the global oil and gas industry has the benefit of accessing more regions simultaneously. Earlier I wrote the following;

Lastly I want to add fuel to the fire of my adversaries by noting that the compression of time is something that will be implemented in this application. Instead of budgeting for four years, I think it can be done in two and half years to initial commercial release. (Maybe even less!). We are approaching a systems use that may start the day in Russia, China and India, move to the Middle East, Europe and then the United States. Users from these regions will be able to collaborate in an asynchronous manner. Hence providing for potentially a "day" of user driven development that totals 36 hours. 

The more that I have thought about this type of development, the more I have difficulty in recommending any other method. Software development has been, for at least a decade, a collaboration by individuals and groups that are scattered around the world. Many never meet, ever. Whether the development team is just outside the door to your office, or the other side of the globe. It makes no difference in the methods used to develop the applications. The Open Source model has proven time and again to be the superior means to develop software. 

Since I first wrote about this concept the main issue that I have focused on is the User / Developer interactions, and I have the following comments. The Draft, Preliminary, Detailed and Final Specifications aggregate the industries knowledge in the form of wiki's and globally accessible medium. Starting with the text of the Draft Specification, Users will build the detail, UML, diagrams, voice, picture and video mediums to express their understanding and needs of the system. As the Developers interact with the Users through these rich media, it matters not where the individuals, teams and groups are located. All will have the current understanding available to them, and more importantly the history of how these decisions, standards and specifications were determined. A rich, searchable environment that defines the key attributes of the innovative oil and gas systems necessary to support the innovative oil and gas producer. 

And it won't stop there. The code that is developed based on the Users specifications is accessible by the Developers and Users of the systems. This is done for a number of reasons, firstly to ensure that the systems are doing what is expected of them. The days of attaining assurance of the software vendors code accuracy and consistency. Assurance being attained by the size of the software developers balance sheet and cash balance I expect is over. These assurances don't provide any value in comparison to the variety and volume of eyeballs that can and will access the code the applications are derived from. Reading the code that makes up the application is reviewing the facts. Facts that Oracle and SAP don't provide for, I wonder why that is?

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What's expected.

It's important that I revisit the status of the project now and then for a quick update. Particularly for those that may have joined recently. As of today the Draft Specification has been reviewed by over 500 people. I consider this quite remarkable considering the topic of discussion, oil and gas systems is rather obscure. We are now just past 9 months from the point in time that I published the specification and the ideas inherent within are being broadcast across a very large community.

The scope of the People, Ideas & Objects application is truly global. Through LinkedIn I have been able to discover many like minded people that may be recruited to define the Preliminary Specification. This recruitment will continue for the remainder of 2009 with the objective of securing the 100 people necessary to make the Preliminary Specification as diverse and well documented as possible. 

Therefore effective January 1, 2010 we will be in full development of the application. I now want to detail some aspects of the budget and reiterate my involvement in the definition of the software from this point forward. I have no intention or capacity to further details the scope, functionality or anything to do with the application. This project is well beyond the ability of one person to comprehend each and every aspect of the oil and gas industry. This is a collaborative project for the simple reason that it must be. It is far better for me to step aside in terms of what can and will be done by the application and its modules. The application will be left to the community to determine the ways and means that their input is necessary and required. 

The key role that I can provide is the generation and distribution of the resources necessary to keep the development moving forward. That is a task that will be more then enough for any one individual, and one that can determine the success or failure of the entire project. The budget for this project is declining as the costs in the industry become more affordable through the lack of demand. How long this will last is probably short lived. Primarily as I think the lack of either equity or debt to fuel the producers efforts will be replaced through the reallocation of the market prices to fund these desperately needed energy resources. Therefore I am hesitant to suggest that the project will require less resources than what is originally estimated. That being in the area of $1 billion U.S.

In order to define this project I have detailed four stages of the specification. I completed the Draft Specification last July 2008. The Preliminary is set to start at the end of the 2009, with the Detailed and Final Specification to be determined by the community of users that is forming. The total costs associated with these phases of the specifications will be set at 10% of the total budget. Therefore $100 million will need to be raised to support these activities. 

This application is unique in that using the Joint Operating Committee (JOC) necessitates the global scope of functionality of the application. Hence the large nature of the project. Something of this scope is only possible during a time when organizational and business models are being revised through economic changes. Of the $100 million allocated to determine the specification, $30 million will be allocated to the Preliminary phase.

I expect to have at least 100 people involved in defining the Preliminary Specification. Participants should expect to incur approximately 500 hours on average. That is a total of 50,000 man hours that I am now setting the compensation for at $125 / hour or $1,000 / day. This work can be undertaken as soon as we have the financial resources established. 

I know these numbers are frighteningly large. The justification for these costs is based on reviewing the Draft Specification and the unique nature of using the Joint Operating Committee. Review of the business model of People, Ideas & Objects will show how this development is truly the most cost effective and appropriate means to continue. 

Our two defined groups of financial support are the governments involved in collecting royalties and the producers themselves. As this is an industry wide approach, we see these large costs allocated over the involvement of the government and industry. Making this a cost efffective solution. What I think is also paramount to consider. Is that this is the first and only user based development. It is the oil and gas users that know how to do there jobs that make up the community in the Preliminary Specification. 

The only deliverables that I have set for the Preliminary Specification is the determination of the geographical scope and functionality of the application. Other then these, the entire process of development is being handed over to the community through the Preliminary Specification. Please join me here.

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Users. The 5 w's and how.

Yesterday I highlighted an article from McKinsey regarding the rebels that are needed to overturn the poor non performing bureaucracy. Establishing that one of the objectives that I am trying to meet for 2009 is the recruiting of 100 "users" for extending the Draft Specification into the Preliminary Specification. I thought it might be worthwhile to clearly identify what I think these people will do, and answer some of the questions that may be asked. First of all the community of people that read this blog on a regular basis are here for a reason, and that first and foremost means you may be interested in further exploring what needs to be done and how you could fit into the community.

I want to reiterate the terms of these first 100 individuals by defining what is expected of them and what is required. The first item of business will be to review the process of how they join the community. Special emphasis should be placed on the summary submission of your contribution. This should include how you expect to extend your organization as a key or cornerstone "Community of Independent Service Provider".

Why will these people join?

They know in their hearts that the current system is not working. That the need for the industry to move to a higher level of performance is necessary, and they have ideas that will make a difference.

Who are these people.

People who have worked in oil and gas for at least 5 years. Engineers, earth scientists, administrators, accountants, developers and generalists. People who are from the oil and gas companies, investors in oil and gas, government agencies and the service industries that depend on the energy industry. Anyone who can trace their salary or revenue from the energy industry as a whole. The focus is the Joint Operating Committee and therefore is limited to the up-stream end of the business.

These are people who are looking to establish their own service based offering to the oil and gas producers. This will be developed by using the People, Ideas & Objects software applications they build here, and use to deliver to their client producers. This is a business opportunity to the first 100 individuals that sign up. This is not an exclusive arrangement, it will be offered to everyone that joins the development. It is just these people will be the first 100 and will therefore have access to the knowledge and understanding to establish a service based offering.

Where are these people located.

From all corners of the world. One of the Preliminary Specifications deliver-ables is to determine the geographical scope of the application. I have set the minimum to be North and Central America. However, the demand for this type of application is universal and needs to consider the many voices who are part of the global oil and gas industry.

When are these people needed.

Today! Ideally we should have the full complement of 100 by this time next year. They will then undertake to establish their own guidelines, organization framework and deliver-ables. The scope of their undertaking is to set in motion the minimum required application functionality and process management.

How are these people going to do their job.

I have purposely left the Preliminary Specification as a blank slate. Although I expect the Draft Specification to be used as the initial input, there may be better ideas out there. These should be considered at the earliest possible time. The method that this will be done is through the collaborative environment established through the Google Apps for People, Ideas & Objects. This environment currently has many tools and is more then capable of providing what is necessary for these people to work throughout the world from their office and their home.

That's correct. I don't expect anyone to lose or have to quite their job while they are making this critical investment in the software or their service based offering. All of the activities in the Google Apps for People, Ideas & Objects are encrypted via https. Your boss will only know of your activities if you show them, or they too are members of this community.

What will they be doing.

Assessing what is possible and probable. What is the first commercial release of the application going to need and how will it attain that. What needs to be done in the client producer's to make the application available technically and business wise. In short answering a lot, if not all of the "what" and "how" questions that are needed to be asked before developers start to build the application.

In summary.

I do not expect to be inundated with a flood of initial contributors. However, these people will need to be of a fairly diverse subset of the industry. The need to have a good representation leads to much of the need for the high number. However, it would be up to those to determine how they organize themselves once they are together. Some people who apply may not initially be accepted. This does not preclude anyone from joining in the second round of recruiting. It is important to remember the second round will be a fully sponsored round, where contributions of both the first 100 and subsequent people will be paid for their efforts of working on this software. Industry has been very slow to pay any attention to this project. In other words $0.00 has been the income to date. And if we wait for them to start funding this development, it will be far to late by then. It is assumed by me that the opportunity to establish your service based offering in this initial round will provide tangible monetary results in the very near future. I therefore ask you to please join me here.

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The Economist on Cloud Computing.

A "special" report has been written and is being distributed by the Economist magazine. The download is being provided through sponsorship from AMD. The Cloud Computing paradigm is the method that will be used to host the People, Ideas & Objects application. The Economist starts with the following quote.

Information Technology is turning into a global cloud accessible from anywhere, says Ludwig Siegele. What does that mean for the way that people conduct business? p. 1

Google is the best example of a firm that has all of their applications delivered in this fashion. People, Ideas & Objects has been using Google Apps for our Domain for over one year now and have found this model of application delivery provides real value. I recently noted that we also evaluated SalesForce.com and will be implementing that application into our organization to better manage the producers involved in this software development. The cloud model is sound and provides some unique attributes that are not available in other Information Technology architectures.

The rise of the cloud is more than just another platform shift that gets geeks excited. It will undoubtedly transform the information technology (IT) industry, but it will also profoundly change the way people work and companies operate. It will allow digital technology to penetrate every nook and cranny of the economy and of society, creating some tricky political problems along the way. p. 1

This can seem to be much of the same claims about technologies influence in business. To suggest otherwise is difficult to prove. I would argue that our current market meltdown will be comprehensive in its elimination of the manner in which we conduct business. For it is the large bureaucracies that have failed in meeting the needs of society. If we are to re-build our organizations brick by brick and stick by stick, the use of new IT architectures will be necessary. Bureaucracies have had their day. The following quotation shows how difficult it is to foresee our way through our current difficulties by using an application like SAP.

Corporate IT has  always promised to make companies more agile. In the 1990s many companies re-engineered their business processes when they started using a form of software  called  enterprise resource planning (ERP), which does things such as managing a firms finances and employees.  But once these massive  software packages were in place, it was exceedingly difficult to change them. Implementing SAP, the market leader in ERP, is like pouring concrete into your company, goes an old joke among IT types. This  helps  to  explain  why  in  many firms IT departments and business units have traditionally been at loggerheads. In recent  years  tensions  have  worsened. Companies must grapple with ever changing markets and regulations, yet IT budgets are being cut. Many firms now have a huge backlog of IT projects. pp. 11 - 12

Why would People, Ideas & Objects using this new architecture be successful? I think the primary reason we would be successful is that our approach is not based on these technologies. That is to say we are not focused on the cloud to make the changes and provide the value to those that will use our application. Using the Joint Operating Committee (JOC) as the key organizational construct will bring into alignment the cultural, financial, legal, compliance & governance and operational decision making frameworks of the industry. This will also have the effect of bringing those participants in the JOC closer in terms of conducting joint operations, which is the global and systemic way of the industry.

Again, the software industry has been promising this for some years under the banner  of  service oriented architecture, discussed  in  an  earlier  chapter.  Yet  the adoption of SOA has been slow and many projects have failed, says Chris Howard of the Burton Group, a consultancy. The reasons are not just technical but cultural; for example, some business units are not used to sharing data. Cloud computing will help resolve  some  of  these  problems.  Many web based services are built to be integrated into existing business processes. p. 12

Adam Smith proved the theory of division of labor and its impact on production and productivity. Economically we have taken division of labor and specialization to substantial levels. To take it to the next level will require alternate means of organization and a much finer level of how work is performed.

In the Draft Specification it is also assumed that the oil and gas producer will be focused on their core competitiveness. The innovative oil and gas producer will concern themselves with their reserves, land base and most importantly their earth science and engineering capabilities. Providing hardware and software in which to operate the firm is about as distant to their competitive advantages as one can get.

What eff…ect will all this have on the nature of the firm? If IT systems really allow companies to become more modular and flexible, this should foster further specialization.  It  will  become  even  easier  to outsource business  processes,  or  at  least those parts of them where firms do not enjoy a competitive advantage. Companies will increasingly focus on their "core" and shed the "context", in the words of Geoffrey Moore, managing director of TCG Advisors. p. 12

This makes the approach to how the industry operates change fundamentally. The need to have different ways of operating, ways in which we can align the culture of the industry, is what the Cloud provides. These means of operation are a natural and necessary part of the oil and gas firm. People, Ideas & Objects should be considered the "industry operating system" of the oil and gas industry.

Both trends could mean that in future huge clouds which might be called  "industry operating  systems" will  provide basic services for a particular sector, for instance finance or logistics. On top of these systems will sit many specialized and interconnected firms,  just  like applications on a computing platform. Yet this is only half the story. The cloud changes not only the plumbing and structure of firms and industries,  known  as  the  "transactional layer", but also their interactional layers, a term coined by Andy Mulholland, chief technologist of Capgemini, a consultancy. He defines this as the environment where all  the  interactions  between people  take place,  both  within  an  organization  and with its business partners. p. 12

In the Accounting Voucher of the Draft Specification. It specifies the move away from transaction processing as the key functionality. Transaction processing is to a large extent expected in any system, and is not a competitive differentiation of the People, Ideas & Objects application. What is necessary and is built into the module is the transaction design that will enable the analysis of costs and the manner in which the work gets done.

Companies may not have much choice but to open up, says Mr Mulholland. Employees will increasingly resist constraints on their use of technology, and they will have a growing need to reach beyond the corporate firewall. Twenty years ago, he argues, 80% of the knowledge that workers required  to  do  their  jobs  resided  within their company. Now it is only 20% because the world is changing ever faster. "We need to be open to new and unknown connections with people and content," he says. p. 13

This last point shows cloud computing may become more of a main stream technology. Microsoft announced on Monday October 27th their Azure platform. Ray Ozzie of Lotus Notes fame said:

"We are in the early days of a transformation to services across the industry," said Ozzie at the conference.

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