Showing posts with label Job-Order. Show all posts
Showing posts with label Job-Order. Show all posts

Wednesday, May 06, 2015

Our Solution Part XIII

For today’s post I went into the Research & Capabilities module to a get a quick refresher of some of the elements within that module. I have to say that I could not select which module is my favorite. Maybe my favorite will always be the last one I read. Anyways, the value that this module provides the dynamic, innovative and profitable oil and gas producer is not as quantifiable as the other areas. It will however have a significant impact on the performance of the oil and gas producer. The elements that I want to point out are the key issue that it resolves in the oil and gas industry. And the detail regarding the two major processes of innovation.

There are two material processes that the Research & Capabilities module controls. The first is to divide the labor between research and development and the execution of those resulting capabilities. This process is separated into the Research & Capabilities and Knowledge & Learning modules. The other material process is to move the knowledge to the area where the decision rights are held, the Joint Operating Committee. Professor Richard Langlois notes in the following.

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 9

The Research & Capabilities enables the movement of knowledge to where the decision rights are held. The Joint Operating Committee is the operational decision making framework of the industry. There is a major conflict occurring in the industry when the Joint Operating Committee's decision rights are attempted to be moved to the producer firm by the bureaucracy. This conflict, or rights assignment issue, is unresolved in the current industry structure. By the Preliminary Specifications aligning the compliance and governance frameworks of the hierarchy with the Joint Operating Committees legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks. We resolve the many conflicts and problems, such as the rights assignment issue, that exist within the industry.

We also define what a “capability” is in the Research & Capabilities module. Professor Carliss Baldwin of Harvard University states that “knowledge begets capability and capability begets action.” Professor Richard Langlois defines it as the “knowledge, experience and skills of the organization.” To which we have added “knowledge, experience, skills and ideas.” It is the capture of the firm's capabilities that is achieved in the Research & Capabilities module. However, only the explicit knowledge, the tacit knowledge of the firm is deployed through the Job Order system that we will be developing.

The producer firm through its interactions with the service industry develops new and innovative capabilities that are captured and documented in the “Dynamic Capabilities Interface” of the Research & Capabilities module. The interactions with the service industry are through a variety of interfaces in both the Research & Capabilities and Resource Marketplace modules. Using the football analogy the Research & Capabilities module is the practice field where the team is developing new and innovative plays to be worked on and perfected before game day. Game day is when the capabilities are published in the “Dynamic Capabilities Interface” which enables them to be deployed in all of the Joint Operating Committees that the producer has an interest in. This process enables the producer firm to eliminate the unnecessary “trial and error” learning from being repeated in each and every Joint Operating Committee. The learning can be done once, and limit the cost of the innovation by reducing the unnecessary repeated experimentation. As I stated this is the primary process of innovation.

If there was a secondary or optional process of innovation in the Research & Capabilities module it would be based on the following. This is from Professor Richard Langlois’ paper “Innovation Process and Industrial Districts.”

Innovation is based on the generation, diffusion, and use of new knowledge. p. 1

Opportunities do occur at times and in places that are not planned for. Innovation is something that frequently falls within this description.

While it is possible to conceive of a firm that is so hermetic in its use of knowledge that all stages of innovation, including the combination of old and new knowledge, rely exclusively on internal sources, in practice most innovations involving products or processes of even modest complexity entail combining knowledge that derives, directly or indirectly, from several sources. Knowledge generation, therefore, must be accompanied by effective mechanisms for knowledge diffusion and for "indigenizing" knowledge originally developed in other contexts and for other purposes so that it meets a new need. p. 1

These are the highlights of the Research & Capabilities module. There are many other aspects of the module that are of interest and more specifically the modules makeup in terms of its software configuration. With a revised organizational structure where the C class executives, earth science and engineering resources, some land and legal, and support staff are the stripped down, lean producer firm. They will be able to focus on their key competitive advantages of their earth science and engineering capabilities, and their land and asset base.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here

Friday, April 20, 2012

The Preliminary Specification Part CCXXXVII (R&C Part XLVII)


Today we are going to reinforce the way in which the Research & Capabilities module captures the knowledge within the producer firm. In providing for the capture of this knowledge the Preliminary Specification is limited by the attributes of the different types of knowledge and the culture of the oil and gas industry. These two forces have formed the manner in which the Research & Capabilities module deals with the knowledge and its capture. It is in Professor Richard Langlois’ paper “Chandler in a Larger Frame: Markets, Transaction Costs, and Organizational Form in History” that he states the following.

Much knowledge - including, importantly, much knowledge about production - is tacit and can be acquired only through a time-consuming process of learning by doing. Moreover, knowledge about production is often essentially distributed knowledge: that is to say, knowledge that is only mobilized in the context of carrying out a multi-person productive task, that is not possessed by any single agent, and that normally requires some sort of qualitative coordination - for example, through direction and command - for its efficient use. p. 359 

We’ve discussed before that the tacit knowledge can not be captured within any written form. Therefore the “Dynamic Capabilities Interface” can only refer to the tacit knowledge held by others. The tacit knowledge is deployed in the Research & Capabilities and Knowledge & Learning modules through the Job Order system. Since it is knowledge that “normally requires some sort of qualitative coordination - for example, through direction and command - for its efficient use.” There are three critical elements for coordination of operations in these two modules of the Preliminary Specification.

  • The Knowledge captured in the “Dynamic Capabilities Interface”.
  • The “Planning & Deployment Interface” including AFE’s and Job Orders.
  • The Military Command & Control Metaphor.

Therefore the interface elements of the “Dynamic Capabilities Interface” will contain knowledge of “what” and “how” regarding production or the operation of concern. Times when the tacit knowledge needs to be documented will have to be replaced by rich media and references to the appropriate individuals for the operation to be undertaken. We should note that the knowledge is often distributed knowledge carried out by multi-person tasks. All of these tasks should be captured for one operation and included as one capability in the interface. Dealing with these different types of knowledge is how the Research & Capabilities and Knowledge & Learning modules “capabilities” are defined.

As I stated in the opening, the culture of the industry also has an influence on the design of these modules. These conditions reference the boundary of the firms and markets and determine the changes that will be needed. Since we are dealing with the service industry, and all but the smallest number of producers practice sourcing their field operations from the market. We are consistent with the culture of the industry. Nonetheless Professor Langlois notes three factors are important. Application of this framework to the methods used in the Preliminary Specification provides an understanding of the choices that were made.

1. The pattern of existing capabilities in firms and market. Are existing capabilities distributed widely among many distinct organizations, [Yes] or are they contained importantly within the boundaries of large firms? [No] 
2. The nature of the economic change called for. When technological developments or changes in relative prices generate a profit opportunity, does seizing that opportunity require a systemic reorganization of capabilities [No] (including the learning of new capabilities), or can change proceed in autonomous fashion along the lines of an existing division of labor? [Yes] 
3. The extent of the market and the level of development of market supporting institutions. To what extent can the needed capabilities be tapped through existing arrangements, and to what extent must they be created from scratch? [Existing] To what extent are there relevant standards and other market-supporting institutions? [Good] p. 360

I have answered the questions in the [ ] provided. The service industry is robust and dynamic. What is needed is for the oil and gas producers to build the interfaces described in this post. Once they have their capabilities documented and deployed in such a manner the natural evolution of the service industry will continue, although at a faster pace and with more competitive offerings.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

Monday, April 16, 2012

The Preliminary Specification Part CCXXXIII (R&C Part XLIII)


We continue on with our review of Professor Richard Langlois’ research in this our fourth pass through the Research & Capabilities module of the Preliminary Specification. The last few posts may have been a little confusing in that the focus might have appeared to be on the Knowledge & Learning module with the strong Joint Operating Committee focus. That is one of the possibilities with these specifications being so close in terms of their functionality. Recall too that the “Capabilities Interface” which is detailed in the Research & Capabilities module is populated into the Knowledge & Learning module for deployment purposes. This confusion between the modules will appear from time to time and is otherwise unavoidable and immaterial.

It is in the “Capabilities Interface” that we are seeking to document the “what” and “how” of the operation the Joint Operating Committee will undertake. It is very important to note at this point that the tacit knowledge that makes up that operation can not be documented. It will however be invoked through the orders in the Job Order system. The depth of “knowledge, skills and experience” that is documented in the “Capabilities Interface” includes the members of the Joint Operating Committee, their roles and responsibilities, and the field operations personnel. Detailing what and how they need to do their jobs in order to attain the objective of the operation. In a paper entitled “Transaction Costs in Real Time” Professor Langlois notes:

Although one can find versions of the idea in Smith, Marshall, and elsewhere, the modern discussion of the capabilities of organization probably begins with Edith Penrose (1959), who suggested viewing the firm as a 'pool of resources'. Among the writers who have used and developed this idea are G.B. Richardson (1972), Richard Nelson and Sidney Winter (1982), and David Teece (1980, 1982). To all these authors, the firm is a pool not of tangible but of intangible resources. Capabilities, in the end, are a matter of knowledge. Because of the nature of specialization and the limits to cognition, organizations as well as individuals are limited in what they know how to do effectively. Put the other way, organizations possess a pool of more-or-less embodied 'how to' knowledge useful for particular classes of activities. pp. 105 - 106.

That’s an effective way to state what it is that we are trying to achieve here. The “Capabilities Interface” is a how-to database of capabilities the firm has for getting things done. Or;

'Routines,' write Nelson and Winter (1982, p. 124), 'are the skills of an organization.' p. 106

Now here is the point where we need to pay attention. Both figuratively and literally. In this post as well as in any and all oil and gas field operations. The ability to do any of these tasks on auto-pilot doesn’t exist. And the implications of the next quotation is far reaching.

Such tacit knowledge is fundamentally empirical: it is gained through imitation and repetition not through conscious analysis or explicit instruction. This certainly does not mean that humans are incapable of innovation; but it does mean that there are limits to what conscious attention can accomplish. It is only because much of life is a matter of tacit knowledge and unconscious rules that conscious attention can produce as much as it does. p. 106

It will need to be the explicit instruction contained within the “Capabilities Interface” that guides the field operation. The conscious attention necessary to follow the program is a necessity. However, this is also about innovation. If there is an opportunity for further innovation. There is the Job Order system in which to invoke the request for a change in orders.

In a metaphoric sense, at least, the capabilities or the organization are more than the sum (whatever that means) of the 'skill' of the firms physical capital, there is also the matter of organization. How the firm is organized - how the routines of the humans and machines are linked together - is also part of a firm's capabilities. Indeed, 'skills, organization, and technology are intimately intertwined in a functioning routine, and it is difficult to say exactly where one aspect ends and another begins' (Nelson and Winter, 1982, p. 104). p. 106

One thing I can say for certainty is that the technology begins with People, Ideas & Objects. By developing the Preliminary Specification the producers will be able to attain the level of innovativeness and operational control that is described in these posts.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

Thursday, April 12, 2012

The Preliminary Specification Part CCXXIX (R&C Part XXXIX)


I have a few more comments to make on the coordination of the markets through the “Capabilities Interface” of the Research & Capabilities module. It might seem that we are contradicting ourselves when we criticize the bureaucracy yet put in place such extensive coordinating mechanisms to control the oil and gas operation. This post will show the differences between the bureaucracy and operational control is a matter of decision rights and authority. One of which, the bureaucracy, is redundant. I will also show the level of control that is implemented in the People, Ideas & Objects system is through the Job Order system.

Multi-lateral and Multi-frac wells are rather large and expensive operations. For that matter drilling a conventional well is a large risk for most producers. The need for operational control is not a nice to have but a necessity. The need to have the integration of the oil and gas and service industries to the level discussed here in the Preliminary Specification is a large and expensive undertaking. One that fits within the scope of the Preliminary Specifications $100 million budget to determine the overall needs of the system. And also within the scope of the People, Ideas & Objects eleven module application in its initial commercial release, which comes with a budget of $1 to $2 billion. Lets not fool ourselves, the scope of change that we are creating here is dramatic. To achieve the integration between these two industries needs to have this type of approach to make it successful.

It is in Professor Langlois paper “Industrial Dynamics, Innovation and Development” that he strikes the right approach in terms of the issue of the Preliminary Specification and these software developments.

Industrial economists tend to think of competition as occurring between atomic units called "firms." Theorists of organization tend to think about the choice among various kinds of organization structures - what Langlois and Robertson (1995) call "business institutions. But few have thought about the choice of business institution as a competitive weapon. p. 1

In terms of operational control the “Capabilities Interface” provides a means to have everyone on the team operating from the same hymn sheet. Everyone knows what the plan is and everyone knows what everyone else is doing. Now we need a means in which to execute the plan. In the “Planning & Deployment Interface” as well as in some other interfaces users will have access to the “Job Order System” of the People, Ideas & Objects application. This will provide the ability for a member of the operational team, with the operational authority as designated in the Military Command & Control Metaphor, to issue a Job Order to execute a certain operation. Simply nothing is done during the field operation without the Job Order being issued.

This next quotation might be confusing without some discussion. It is from a Berkeley study and is dated in 1989, a time when the Japanese and the Americans were fighting over dominance in the micro-chip manufacturing industries. Apparently the two industries were configured quite differently, as Berkeley notes below. And it is the Americans that grew to dominate the industry at the Japanese almost total capitulation. The organizational structure of these industries is interesting to see some twenty three years later.

In one of the few contemporary academic examinations of this industry, a study by the Berkeley Roundtable on the International Economy concluded that; ... with regard to both the generation of learning in production and the appropriation of economic returns from such learning, the U.S. semiconductor equipment and device industries are structurally disadvantaged relative to the Japanese. The Japanese have evolved an industrial model that combines higher levels of concentration of both chip and equipment suppliers with quasi-integration between them. whereas the American industry is characterized by levels of concentration that, by comparison, are too low and [by] excessive vertical disintegration (that is, an absence of mechanisms to coordinate their learning and investment processes) (Stowsky, 1989) p. 3

My point in highlighting this is that we are relying heavily on the decentralized marketplace in the service industry to provide the oil and gas industry with the products and services it needs. We are however, also providing the Joint Operating Committee with high levels of coordination of the operation during the times it is employing the service industry. This is not a contradiction, one is a market, the other is an operation. The oil and gas industry depends on a highly innovative service industry and this will be expected from the marketplace. It also demands precision from the field operations that it conducts. Innovation will arise from both.

Thus in radio it was not the case that an integrated path of learning within a large firm gave rise to innovation; it was rather that innovation, channeled within a particular structure of property rights, contained the path of learning within a single large firm. p. 16

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.