Monday, July 31, 2006

North American and European stock exchanges.

There has been some discussion on the cooling effect that Sarbane's Oxely (SOX) legislation has had on companies listed on the New York Stock Exchange and NASDAQ. The discussion lately has focused more on the impact that the additional regulations are having on companies, and the easier or less stringent London and European exchanges. Noting in some articles that American based companies would establish their listings in Europe as their stock markets are easier to comply with.

If I am not mistaken isn't this backwards. Isn't the perception in the investment community that the legislation is seen as being positive? Isn't it a benefit from the investor point of view, as opposed to the company? An additional check and balance on the activities of management? I would be leery of any management that wanted to move from the NYSE or NASDAQ to the London exchange. I would questions their motives and find out why they were thinking that would be a positive.

But this brings up another point. Recall that SEC Chairman Christopher Cox is implementing the compliance regulations in a number of XML based XBRL Tag Libraries. Enabling the power of the technologies to replace much of the compliance bull work. This is an important consideration. If the metadata or semantic web is able to monitor compliance through the transactions and interactions then the load that the management has to take on would be limited to the high end compliance activities. Rules and regulations are what technology has been able to provide a solution for a significant period of time.

The other concern is that their is no power in the universe that would ever try to approach repealing of Sarbane's Oxely legislation. Passed by a congress that was eager to prove to the world that the Enron's and WorldCom's are not acceptable. The message of any subsequent legislation that may lessen the impact of Sarbane's Oxely compliance would be still born. The U.S. Congress passed the legislation almost unanimously and would need to find some extremely critical data to motivate it to even consider any alternative.

I think the shoe is on the other foot. The legislation is a benefit to those investors who invest in the U.S.. Companies that are not interested in complying can certainly move to the foreign exchanges, but I would think this may not be in their best interests. After all the investor is the customer. Soon the compliance tag library will be available for all companies to implement. (Certainly within the next 5 years.) And at that time the companies will be able to purchase some extra large servers to manage their compliance requirements.

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Thursday, July 27, 2006

McKinsey Strategy Series Part III, Tacit Interactions.

"Tacit interactions are becoming central to economic activity. Making those who undertake them more effective isn't like tweaking a production line."
This article states that tacit interactions, consisting of collaborative and complex problem solving, are the primary means of future economic value. The majority of these interactions are found in western based economies and are conducted by those that earn higher salaries. The article goes on to say;
"During the next decade, companies that make these activities - and the employees most involved in them - more productive will not only raise the top and bottom lines but also build talent based competitive advantages that rivals will find hard to match."

"But building these advantages won't be easy: companies must alter the way they craft strategies, design organizations, manage talent and leverage technology."
I particularly like that "Design Organizations" bit. It implies that the need and value of the hierarchy are last century. Today the technology exists to collaborate at a basic level. In the next ten years the development of collaborative applications will enable those firms that choose to increase these tacit interactions, with "competitive advantages that rivals will find hard to match."

McKinsey goes on to better define what is meant by tacit interactions noting "the searching, coordinating and monitoring activities required to exchange goods, services and information". The developed economies are finding the volume of tacit interactions are growing faster then in any other category or job description. Making up almost half of the resources in certain industries. The developing world is not far behind and have opportunities that could match the developed worlds pace in a very short period of time.

Automation of the business process, or transactional activities, does not augment the performance of tacit interactions. How a firm may increase those tacit interactions and increase performance is not well known or defined at this point.
"But that must now change. Executives will have to learn to innovate, and manage in era when tacit interactions dominate and drive performance."
Facilitating the people within your organization to increase tacit interactions requires the management to provide the tools for their people to do their jobs. In oil and gas, I would suggest that direct participation of all members of the joint operating committee, collaborating in a virtual environment is how I see the Genesys application being developed. Each engineer, geologist, administrator and developer are there to represent their companies interest in the area. Collectively the groups are able to collaborate and have the software support their thinking and decisions with tools that handle the business end of these interactions. For example, if it is determined that a sand frac is to be used on the well the following processes would be invoked;
  • the contracting firm is chosen
  • a purchase order is created
  • a contract is made
  • the invoicing and payment for those services are completed
all as a result of the decisions made by the joint operating committee (JOC). This frees them to conduct greater volumes of interactions and innovations that are necessary to meet the market demands for energy.
"Workers engage in a larger number of higher quality tacit interactions when organizational boundaries (such as hierarchies and silos) don't get in the way, when people trust each other and have the confidence to organize themselves, and when they have the tools to make better decisions and communicate quickly and easily."
McKinsey has conducted a survey of 8,000 companies and determined that certain sectors had higher levels of tacit interactions. Within each industry the number of tacit interactions was widely variable and appears to have a direct correlation to the overall performance of the firm! McKinsey goes on to say;
"The need to move forward is both substantial and urgent."
High levels of tacit interactions were consistently show to have built substantial competitive advantages. These advantages were difficult to be replicated by competitors as their "power lies in the collective company specific knowledge that emerges over time."

McKinsey goes on further to state that these require a;
"New Management Science" and "require changes in every facet of business, from hatching strategies, to organization, to managing talent, and leveraging IT."
Readers are encouraged to read the 200+ articles in the archives of this blog to see the manner in which this McKinsey Strategy Series dovetails with what has been suggested here for the oil and gas industry. The Genesys systems that will be developed with the joint operating committee as the organizational focus. Will enable high levels of tacit interactions and collaboration throughout the enterprise, the partnership in which the JOC is represented, and the industry as a whole. The what and how this is proposed to be done is documented in this blogs archives.

Consistent with the need to revisit all aspects of the firm, McKinsey believes the role and purpose of strategy and its development take on a higher importance then they do now. This becomes the critical task of senior management to provide the overall scope of interactions and their derivative innovations. This implying that innovations occur at the front lines of the business, not in the management ranks. The means that companies use to enhance the volume and value of tacit interactions is captured in the following;
"Tacit interactions reduce the importance of structure and elevate the importance of people and collaboration. Some of these changes are already underway. In many companies people now come together in project teams, address an issue, and disassemble to start the process again by joining other informal teams. In fact this approach is common in certain professional services and engineering firms, so their organizational charts rarely reflect what is really happening in them. Hierarchy busting has been a theme in the business press for years, but the pace of change has been slow and its effectiveness questionable."
The technology that companies will need to employ is fundamentally different from those used today. In addition to the enhanced communications, these technologies needs to be brought into context for the next ten years that McKinsey suggests these changes will occur. At this point I would assert the Genesys technical vision that I have documented here, here, here and here. This technical vision is necessary for these interactions to grow in predictable ways. Key will be the asynchronous process management and its ability to mirror the unpredictability of events as they occur. This is the real key of the entire discussion of these systems.

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Tuesday, July 25, 2006

McKinsey Strategy Series Part II, The Adaptable Corporation

"To survive corporations must execute in the present and adapt to the future."
This according to the author of this McKinsey article Eric D. Beinhocker. Click on the title to access this article, I highly recommend it's review. The author notes through research that two types of companies have evolved over the past century. High performance companies, which historically are unable to sustain their success vs. long term adaptors, companies that survive for long periods but do not perform well. The author provides research data that only a handful of organizations are able to achieve high performance and long term adaptation.

I have suggested this performance paradox is in play in the oil and gas industry today. And the solution to it is the hypothesis of the Plurality thesis underlying these blog entries. This solution involves identifying and supporting the joint operating committee. Building software that is consistent with the joint operating committee as the organizational focus. It is also my contention that this theory is the main point of conflict within the energy industry. To have McKinsey state explicit support for this type of thinking makes me realize that I have not pursued these ideas in vain.

The adaptability of a firm is dependent on three barriers, People, Structure and Resources.

"People, the price of experience"
The author notes that the "bias of over optimism can make organizational change efforts seem less urgent." I would add the confirmation bias, and as I noted in my Plurality thesis, both the motivational and cognitive paradox's. The confirmation bias enables people to see what they would like to see. The motivational paradox suggests that users lack the time and effort needed to learn new applications due to the overwhelming concern for though put. And the cognitive paradox notes that people tend to apply what they already know in coping with new situations.

Nonetheless each of these bias' and paradox point to the same issue. The installed base of management becomes a facilitator of execution, but also an albatross to adaptation to new situations.

"Structure, the risk of complexity catastrophe"
"As an organizations size and complexity grow, its degrees of freedom drop. The complexity of execution inevitably leads to inter-dependencies and organizational complexity, which in turn create the potential for gridlock."

I suggest that this implies that the performance of the firm would seriously degrade prior to the onset of gridlock. Is this what is occurring in oil and gas? Is the industry being challenged with new pricing and value metrics, facing an insurmountable change paradigm that management is unable to approach? If so it would be reasonable to assume that gridlock is right around the corner. It appears the majority of energy users demands are not being addressed or even recognized. If gridlock is the inevitable outcome as the author suggests, does this assume that we have to await its arrival before we take effective action? Or alternatively, will these software developments be driven by the users needs for a more effective and hence less timely way to do their jobs.

"Resources, the path to dependency."
"As managers search for complementary business processes and plans, over time those constrain the organization in its ability to expand its horizons."

"Creating an adaptive social architecture."
"Companies have two ways of overcoming these barriers. One is what Jack Welch called the "hardware" of an organization (its structure and processes), the other the "software" (norms and culture). The two sides must be consistent and mutually reinforcing to create a coherent social architecture."
It is suggested 3 approaches to overcome the gridlock and constraints:
  1. Reduce the hierarchy.
  2. Increase autonomy.
  3. Encourage diversity.
However, addressing these hardware concerns provides only half the solution, you must also align the "software" of the organization.

"Organizational Software"
"Flatness, autonomy and diversity are diametrically opposed to the control, coordination and consistency that successful execution require. But the software of norms and culture can help organizations have their cake and execute it too."

The author notes the following 3 attributes are consistently seen in all high performing and adaptable organizations. These are as follows.

Co-operating norms.
As opposed to having the hierarchy enforce norms of trust, reciprocity and shared purpose. In this proposed solution, the joint operating committee operates at a level where the participants have control over these metrics. The focus is jointly shared by the participants collective motivation to optimize the investment.

Performing norms.
Replacing the role that senior management plays in pacing and setting performance requirements "by instilling norms that create strong expectations for individual performance." To offset senior managements centralized role of performance, individuals can be motivated to go the extra mile knowing success will be rewarded.

Innovating norms.
"Facts matter more that hierarchy" and "good ideas can come from anywhere." This blog is dedicated to the innovative producer. It is my assertion that the prices of energy commodities is a reallocation of the financial resources to support innovation. Innovation being a subset and mutually reinforcing cycle based on these underlying earth science and engineering disciplines.

Back to the original point that the author states. Companies need to execute in the present and adapt for, and to, the future. With the pace of change in the business community those that are able to effectively adapt will have the ongoing strategic capability to essentially continue on. Those that are unable to adapt are pursuing strategies of gridlock and quickly eroding competitive advantages.

I have stated many times in this blog that I do not see the structured hierarchy as being the means for the industry to adapt to these new realities. These realities are playing out and are addressed in this fine article. An article that provides an explicit solution that senior management must relieve some of their concerns for performance and place it in the hands of the front line. In the case of the oil and gas industry, the joint operating committee.

Part of the conflict that is prevalent in oil and gas companies is attributable to the "hardware" structure and processes of the organization are not aligned with the "software" components. The "software" being the culture and the norms of the organization are clearly based on the joint operating committee. Is it the legal, financial, operational decision making and cultural frameworks of the global oil and gas industry. Yet no company explicitly addresses this key organization method. This point is the source of the conflict in the industry and the source of its future adaptability.

If a user is faced with the change paradigm in this software development proposal, because it is consistent with the norms and culture of the industry the solution is very evident. The lack of cooperation between the joint operating committee and the hierarchy is the issue. The methods of management for the hierarchy have always conflicted with the joint operating committee. And over time no one questioned if this was the right direction. In other words, to adopt the joint operating committee will eliminate the majority of the conflict that is present in oil and gas administration and management.

Not pursuing this opportunity to develop these systems leaves the industry further behind where it should be in it's transition to adaptability. I can only assume at this point that the reason that these software developments are not being started is that the industry has attained that lofty point of gridlock.

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Saturday, July 22, 2006

A new McKinsey Strategy Series, Part I

The title of this entry will lead you to a series of McKinsey articles that provide some pertinent material for this blog. The majority of the focus of these articles is the transition from the technology induced forces that are active in business today. Within this series is a copy of the John Seely Brown and John Hagel III article "Creation Nets". I would point the key reason for this entry is to highlight how the article relates to this blog, as in this quote;

"Change is a constant in today's global business environment: new consumer preferences, innovative attackers, and technological discontinuities can challenge current leaders suddenly. This issue of McKinsey on Strategy examines three ways for companies to embrace the challenge of continual change. One is to reconcile the conflict between executing in the present and adapting to the future. Another is to embrace new knowledge and information trends that can make talented workers more effective and to look outside corporate boundaries for ideas, knowledge, and technology. The third is to counteract the common psychological biases that make executive hang on to failing businesses and products."
I can't think of a better summary of this blogs purpose and role. I have introduced significant change paradigms to the way that oil and gas companies are structured. I have noted that to change the structure requires that systems be built to define and support the new organizations, or as I have noted, SAP is the bureaucracy. And I have attracted significant resistance and as have stated before, and McKinsey is saying in this series, resistance is futile.

I will take each article and break them down into separate entries over the next few days. The first is the results of a Survey McKinsey conducted and their 10 trends.

An executive take on the global business concerns. A McKinsey Survey.

"Macroeconomics Trends"
"1) Centers of Economic activity will shift profoundly not just globally but also regionally."
Clearly China and India are having significant influence in the globalized economy. This trend will continue and bring with it the increase overall demands of energy. Underestimating the overall demand for energy is a fault of the energy producers. Thinking that prices are temporarily high is based more on past events then the globalized economy.

McKinsey notes that these trends are going to be with us for 20 years. The overall changes will be in concert with regional changes that are as dramatic. Noting that Europe and Asia may equalize in their economic size and influence.
"2) Public sector activities will balloon, making productivity gains essential."
This trend notes the demands in health care and other areas of the government will increase in the near future, and that increase has to be met through the enhanced productivity of the public sector. There simply won't be enough people to deal with the demand.

However, this trend is also in play in the oil and gas industry. Retirement of the brain trust will occur in the next 20 years. Methods of sustaining the reserve base requires more active science and engineering. These will have to be done as the fields get older and the targets smaller with less people then what are involved today.
"3) The consumer landscape will change and expand significantly."
Possibly intimating that the west will be the only one market of consumers, when India and China's middle classes continue to expand, the market for all products will be much stronger then the west is accustomed too. The energy sector is also directly affected by the consumer markets.

"Social and Environmental Trends"
"4) Technological connectivity will transform the way people live and interact."
Offices need to be designed to accommodate the new methods of completing work. The ability to conduct business anywhere, anytime is quickly becoming a reality. Telecommuting I think is a bad example of how this change will occur. Contact with a much larger population of workers and their regions will demand that the traditional methods of working needs to be considered.
"5) The battlefield for talent will shift. (Global labor and talent strategies)"
Dove-tailing with the technological connectivity trend, having people scattered in various regions will become commonplace. The ability to conduct operations where ever they are required is augmented by the capability to seek and source talent from remote areas.
"6) The roles and behavior of big business will come under increasingly sharp scrutiny."
Particularly in the energy industry. The Kyoto, CO2 emissions and general nature of the energy industry attracts those that have a strong environmental focus. Big business is also known to hog the lions share of consideration. The competitive and strategic advantages of size may become oriented to the smaller firms.
"7) Demand for natural resources will grow, as will the strain on the environment."
Well stated. McKinsey suggests that energy demand may grow by 50% in the next two decades. For me this certainly puts in perspective the scope and size of the problem in energy. Without energy, there is nothing. It is the lifeblood of an economy. If we intend to continue to develop these energy demands must be met. High energy prices are not a temporary pricing aberration from the conflict in the Middle East.

"Business and Industry Trends"
"8) New global industry structures are emerging."
Due to the proliferation of technologies and regulation like Sarbanes Oxeley, new business models are emerging. Here in Canada the development of private capital and trust conversions have dominated the energy sector. These business models were of limited use as little as 6 years ago.
"9) Management will go from art to science."
This trend is suggested as big businesses savior. The ability to continue on with size requires that the firm employ technologies throughout the organizations. Such that automated decision making replaces the current management structure of organizations. Read the McKinsey article if you have difficulty believing this.
"10) Ubiquitous access to information is changing the economics of knowledge."
This trend indicates to me that the real value in the future is intellectual property. Knowing is one thing, have access and authority to use many of the innovations in the future will be based on a completely different structure in industry. Who knew what and when will be more the deciding factor in creating value. Making licensing and publication more important elements of all businesses, but particularly energy.

I will continue on tomorrow with the next section of this series "The Adaptable Corporation."

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Friday, July 21, 2006

Vaporware vs. Clean Slate

It could be argued that the focus of this blog is a software product that falls within the classification of vaporware. It could be argued this because that's what it is, vaporware. I would put some spin on the classic definition of vaporware and call this a clean slate approach to oil and gas systems. The situation that this "product" is in is difficult to define and therefore difficult to build without the express support of the oil and gas industry. This blog is communicating these concept far and wide and is finding its audience.

I am articulating a vision of what a new approach could do in the systems area. It certainly is vaporware as no group or company has ever approached the joint operating committee as the central organizational focus. How can I, as I am reduced to one individual, do all this work in order to make a viable system for the producers? The clean slate approach has to be communicated in the way that it could and should be built in order to accurately describe the features.

Two points that present the future difficulties I see in oil and gas systems. Partnership accounting and the Genesys technical vision that are the foundation of this solution. All these aspects of software systems have to be addressed and neither SAP, Oracle or IBM have a solution or vision for it.

To be more specific, the perspective of using the joint operating committee brings new and better ways of managing an oil and gas enterprise. From a systems point of view oil and gas has ignored and avoided the joint operating committee as it conflicts with the underlying purpose of the bureaucracy.

This project was originally proposed to the industry in 2004 as an $85 million software development project. As a producer I have to ask, isn't it more appropriate to keep your options open. What if SAP and Oracle continue to provide their current offerings, will those be adequate in the future?

Is there an expectation or belief that the bureaucracy and its use of last centuries technologies can hold a candle to this vision? These technologies and the forces of change in all areas of the economy have to be addressed. Oil prices are up almost 300% reallocating the financial resources to support innovation. Organizations are constrained in their speed and innovativeness due to the bureaucracy and its refusal to accept the joint operating committee as the explicit form of organization.

We have consistently seen successful companies that were able to integrate technology into their strategy and form strong competitive advantages. Companies such as HSBC. Homogenization on SAP is not a competitive strategy. I have now counted 12 calls to action that Harvard, Oxford Analytica, MIT, McKinsey, John Hagel III and John Seely Brown, Secretary Bodman, SEC Chairman Christopher Cox and a variety of others. Add to these calls the demands of the consumers. The time to act and put these software developments into play is now.

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Wednesday, July 19, 2006

Sir John Browne On MIT Video.

The title to this entry will take you to the MIT video of Sir John Browne, Group Chief Executive BP p.l.c. An excellent speech entitled "The Purpose of Business".

Sir Browne developed his meaning or purpose of business as:

"We are fulfilling our purpose by supplying goods and services at a price people can afford and in a manner in which makes the activity sustainable."
Which is a fundamentally different then we are here to make money. In his speech Sir Browne documents the long lead times in oil and gas operations. Providing an understanding of the time and difficulties it takes to accomplish the development of oil and gas resources. Although it took 15 years to develop these assets, BP probably would not have been able to accomplish what they did in Azerbaijan in North America any easier! The scope and scale of this business is such that the lead times are ridiculously long.

Sir Browne talks at length about the time in which BP went into Azerbaijan in the early 1990's and developed their offshore resources. Offshore resources that probably would have still been untapped if it wasn't for the perseverance of Sir Browne and BP. To invest $15 billion over 15 years without seeing any revenue, to have the investment risked due to the political instability of the region shows the lengths that producers are having to take in order to access the commercial fields. As he notes, the supplies of oil and gas are concentrated in Russia, The Middle East and Africa.

Sir Browne talks about the things that he has to do for the future.
"And perhaps most important of all we need new ideas and knowledge, we need the advances in sciences which we as engineers can apply."
This is 100% consistent with the objectives of this blog and the use of the joint operating committee as the organizational focus. How can it be expected that the bureaucracies will be able to keep up to the demands of the changes in sciences. Layer on the political risks and operational difficulties and one can see the complexity of the business is systemic in all areas of operation. The bureaucracies are doing the job today, but at what speed. Is it fast enough to provide the market with their demands for energy?

The head of one of the largest oil and gas companies suggesting the same objective as discussed here. This has to be considered a call to action, and if we were counting that would make it 12.

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Tuesday, July 18, 2006

A visit to the tarsands.

U.S. Energy Secretary Samuel Bodman was in Calgary over the weekend. After a quick tour of the heavy oil facilities in Fort McMurray Secretary Bodman stated that;

"The U.S. is ready to work with Canada to remove roadblocks facing Alberta's oilsands sector."
"Suppliers of oil in the world have really lost control of the market."
Recall MIT highlighted a video of Secretary Bodman that I reviewed here. The question that seems to be answered by Secretary Bodman's visit is that yes the oil sands are a critical part of the U.S. energy security. Declaring the oil sands a "world resource" certainly puts the energy issues into context, and puts their development on a higher priority.

If it was only so easy. The problem comes in the area of infrastructure. There is not the basic necessities to support the current $100 billion in investment being made in Fort McMurray. The mayor of Fort McMurray has stated that the ability to sustain the current pace of development is in jeopardy. There are not enough people, 75,000 in Fort McMurray, to assess as a tax base to begin to even address the current issues, let alone the future oil sands developments. A pretty serious situation for any city to handle.

What we need Secretary Bodman is help with our problems here. There were indications that the kind of help that may be provided from the U.S. was the U.S. based refineries and pipelines be upgraded to handle the oilsands output. First that is not the problem, and secondly Alberta, irrespective of our leaders opinions of the situation, is not a hewer of wood and drawer of water. A few weeks ago I wrote how our leaders had hired a Texas based consultant to review why Alberta was unable to support the development of a $10 billion super refinery. Now is not the time for our leaders to suggest that foreign groups develop the infrastructure necessary for heavy oil development. Invest here in Alberta where the problems exist. Don't move the raw material into the final market, essentially ignoring Alberta as a second class citizen.

The areas that we need help is in the development of the appropriate civic infrastructure in Fort McMurray. What we need is engineering and knowledge on how to build the super refineries, pipelines and associated infrastructure for full development. Lets work together to solve the energy needs of the continent. That is what is possible and that is what we are ready to do with our very good friends, the U.S.

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Monday, July 17, 2006

"SAP misses forecasts"

In a "surprise" announcement SAP's second quarter results were not as projected. Growth in revenues were down to 8% as opposed to the usual 15 - 17%. Market share was lost to Oracle.

All and all bad news from the number one business software maker. I would point out that they were scheduled to release their results next week, yet chose to slide them in under the door on Friday.

SAP was off in all analysts estimates. This indicating to me that something happened that was unexpectedly. I would like to think that something was companies beginning to turn away from the large software packages towards more natural forms of organization, and much more focused software.

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Saturday, July 15, 2006

Idiots, a.k.a. Petro Canada shareholders.

What our favorite company is up to is a mystery even to themselves. As a shareholder I will be rabid when on July 27th this company issues its quarterly report. I thought that Petro Canada may surprise the market with an early release yesterday. An early release who's impact would be lessened by the lack of attention over the weekend. This is a particular vile and spineless tactic that only cowards would do. Maybe there is some hope for them yet?

On the topic of a July 27th release date. Does this late of date postpone the bad news to the absolute latest available date? After the full volume of the second quarter reports has died down, then we will hear the extent of the losses of Petro Canada.

When the noise of all the surprise announcements from all the other industries is in full song, Petro Canada will sneak a loosing quarterly under the door. This also on a day before the August long weekend. There is no hope what-so-ever for this firm.

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Friday, July 14, 2006

This is where it starts.

Ever wonder how the revolution that I frequently speak of happens? How the people who diligently work in oil and gas begin to turn against their long term employer? How hard working diligent employees begin to percieve things with a jaded eye regarding their commitments to their employers? How they begin to take the opportunities, and apply them for themselves before they even consider their company?

Intel today announced it will layoff 1,000 managers or about 1 percent of its workforce, across the entire company as part of an effort to reduce bureaucracy and costs. Add 1,000 former soldiers against the revolution, now fighting for the revolution. The numbers of people that see and realize that Intel, being a prosperous company, maybe their comfortable days as the bureaucracy are numbered, and they need to do something about it. At least hedge their bets.

This is how and where it begins for the legions of bureaucracies that are plying their trade for the large corporation. Come on in the waters fine.

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Metcalfe's Law, social networks and Geologists.

The wikipedia entry explaining the law and its origins is available by clicking on the title of this entry. I had also commented on an MIT video that featured Dr. Robert Metcalfe. I find him to be one of the most understated and brilliant individuals of our time. I am writing about Metcalfe's law due to the triggering of something that was said on Fred Stutzman's web log yesterday. I highly recommend reading his entry and the referenced research of Odlyzko and Tilly before continuing. Stutzman is questioning the value of social networks and imputing there is more then just Metcalfe's law in play. I want to take this idea and apply it specifically to a network that should employ the benefits of Metcalfe's law. That is the earth scientists and engineers that are actively employed in the oil and gas industry.

I want to frame the context of my comments in this entry to the scientific domain of an oil and gas earth scientist or engineer. There has been an aberration in the method of these sciences development. Due to the commercial nature of the oil and gas industry these sciences have taken an era of the comical "Top Secret" or "Spy vs. Spy" type of interactions. Much of this stupid behavior and thinking is limited to the policies and procedures that are developed within the firm. This science may have also been restricted in its application due to the types of basin's and zones the firm were operating within. In other words from a very practical point of view the scientists within the firm may have become myopic in their approach due to their veil of secrecy, regions being exploited and geotechnical applications.

I know of one geologist with a master's degree, who over a thirty year career had made some of the most significant discoveries in the entire western sedimentary basin. Commercial fields that may have produced upwards of $10 billion in gas sales. I find it ironic and sad that this individual, who was the president of the firms that made these discoveries, could only point to one mention of any of his scientific discoveries. And this was in the academic field as a result of his master's thesis. What the %&*# has happened to the geological, and geophysical sciences? Has it become a secret backroom corporate holly grail? Where only certain people are ever exposed to the knowledge that underlies the firm? (Monty Python coconuts seems somewhat appropriate here.) Why haven't we seen many of the papers and thinking that is the underlying value of the entire industry? Certainly the individuals who have been able to apply the science have been able to attain significant monetary success, but they are not credited with their theories and the developments and benefits that they brought to the sciences. And far worse these ideas remain secrets that are locked away where no one else can benefit from them! Applying Metcalfe's law this is a network of 1. Which derives the benefit of 1 to the power of 1. Sad ridiculous and maybe a crime. "What I know is what I know and I will not let anyone know what I know because then they will take it from me?" This is pathetic thinking for an individual that has been educated in the scientific disciplines. It is also pathetic that this is not being actively addressed and corrected today by some new thinking individual who publishes their thoughts in a blog. Publishing is the only manner of securing your intellectual property. Use technorati to document what you know and when you know it. And let the rest of the world benefit and build from the ideas.

Off the soap box now and talking again about the network effect of Metcalfe's law. Can the earth sciences and engineering disciplines benefit from some thinking that is logarithmically better in its speed and quality. What if workers in oil and gas openly published their earth science theories and thoughts. Could we then move the entire industry to a fundamentally new basis of value. Could these scientists have the benefit of knowing that their thoughts were unique and valuable to society, and reap the monetary benefits. To not publish is to deny what is yours to give.

Somebody somewhere has to start a social network for the earth scientists to start thinking together. (I can only assume that the oil and gas companies are going to be unhappy with me again.)

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Thursday, July 13, 2006

A new security risk?

This is a warning to oil and gas companies regarding a new and significant security risk. Normally I don't concern myself with these, however, the following is the most prolific risk in technology today.

Pod slurping has been known to be a reasonable risk since the beginning of the iPod craze. Podslurping involves high speed copying of hard drives onto an iPod at an unauthorized location. The difficulty is having physical access to connect an iPod device to the network and then copy the disk images to the iPod for later review. With these iPod's being upwards of 60 gigabytes, significant volumes of data can be taken in less then 2 - 3 minutes. That is until now.

If as Microsoft has claimed, their new iPod killer will be wireless, then the physical access is not required. A visitor to your office may be able to access the data on hard drives wirelessly and maybe not even require physical access. I believe this may be a significant risk.

The only remedy is to encrypt literally everything so that the information is useless in the wrong hands. This can be done by ensuring all;

  • data is stored in encrypted form.
  • network connections are on a virtual private network.
  • wireless connections are encrypted, and not broadcast.
Trust Microsoft to introduce the device that brings the greatest risk to data integrity. Which brings up the other risk. The ability to load programs and other data on to a harddrive is also a concern. The ability to store something in non-encrypted form would still be a threat if it were a script or, other compromising data.

When a company of size considers how many hard drives are accessible in this fashion it gives one the willies. Each computer is essentially a potential entry point when one considers that a wireless USB port can be augmented with a 802.11 b/g or Bluetooth connection in less then 10 seconds. Permitting anyone to create a new wireless network for their own use. However, it would be fairly easy to see someone using a computer in an unauthorized fashion, the iPod could be actively downloading information during a regular meeting. The network computer and service oriented architectures have never been more justified.

Now based on Microsoft's release schedule, their iPod killer won't be out until 2015. However, Apple won't sit idly by and let Microsoft introduce any innovation that isn't on their platform first. If there is to be a wireless iPod it could be seen as early as this years Apple World Wide Developer Conference in August. The time frame therefore to encrypt one's data is now, with very little time to do it.

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Wednesday, July 12, 2006

Accidental innovation.

Harvard Business School has published an interesting interview in their Working Knowledge for Business Leaders series. Click on the title of this entry for the article. There are a number of interesting comments in the article and I am going to highlight two here, and then discuss the accidental nature of how I came upon using the joint operating committee as the key organizational paradigm for innovation in oil and gas.

"We have to be careful of these stories, in part because they make such good stories. Some scholars are skeptical of them, but the sheer number of them is interesting. And many scientists, like Fleming, talk very explicitly about the role of accident in their work. Some even argue that the orderly way people sometimes describe processes of discovery and invention, of the progress of science, is nothing less than fraud."


"Q: Is there a way innovators can encourage good accidents? In other words, is there anything we can control to foster this process?"

"A: Great question. Artists think they develop a talent for causing good accidents. Equally or perhaps even more important, they believe they cultivate an ability to notice the value in interesting accidents. This is a non-trivial capability. Pasteur called it the "prepared mind." There's an interesting analogy to evolutionary models of creativity here. In 1960, a guy named [Donald] Campbell proposed that we think of creativity as "Random variation + Selective Retention." That is, we need two processes, one to generate things we can't think of in advance, and another to figure out which of the things we generate are valuable and are worth keeping and building upon. In science, the arts, and other creative activities, the ability to know what to throw away and what to keep seems to arise from experience, from study, from command of fundamentals, and interestingly from being a bit skeptical of preset intentions and plans that commit you too firmly to the endpoints you can envision in advance. Knowing too clearly where you are going, focusing too hard on a predefined objective, can cause you to miss value that might lie in a different direction."

"In business, there's a saying that goes "if you don't know where you're going, any map will do." You can almost always get managers to nod in agreement with this suggestion that you might as well not start something if you don't have its end objective well defined. Working without a clear definition of your objective is considered wasteful, inefficient. But if you are trying to get outside what you can anticipate and see in advance, if you are going after the truly new and valuable, this way of thinking can be a problem. This is one truth about innovation that artists seem to understand a lot better than managers."

"Actually, though, I would not really label this "accidental innovation." The innovation itself can't really be said to be "accidental," even though it involves accident. It takes a considerable capability to see the value in an accident, and to build upon it to create even more value."

It seems like forever since I have been pushing this concept of the joint operating committee. If this method of organization for oil and gas firms has the perceived effect of what I think it does, then I certainly am not wasting my time by pushing it. I recall the early part of this century as a time when I was extremely busy. I was working as a CFO for a small oil and gas firm, I was taking courses for my MBA and I was haunted by the devastation that this software company had exercised on me. They were the worst of times, they were the best of times.

One of the things that bothered me about the software business was that I was more or less forced out by a number of mistakes on my behalf. All the value that had been created was dying on the vine. I felt the competitive advantages that were built up were fading quickly as others caught up with better technology and / or thinking.

In 2003 I can recall that I was thinking how could I strategically reclaim the higher ground and get back into the business on a full time basis. This was a raging thought throughout the three years I was studying. I then was required to pick a topic for my thesis. I thought that it would help me to combine my thesis and my intellectual property, together as one project to save time. The time pressures of my thesis came into play and I was desperately wanting to establish more intellectual property. This was based on my own realization that intellectual property was the only sustainable competitive advantage for any business, but particularly the software business.

I was therefore thinking through the entire process of the oil and gas industry and trying to analyze the key piece of data and information that the industry could be made to be more innovative. The ability to become innovative was more or less going to be a revision of the organizational structure, and I can remember vividly it was December and I was parking my car when it just hit me. The joint operating committee needs to be recognized as the key point of the organization. It is the point where most of the conflict and contradiction flowed from. The oil and gas hierarchies have been more or less in direct conflict with the committee for possibly 100 years. The efficiencies of the hierarchy in the large organization were diminishing, the technologies were moving to provide alternatives and the joint operating committee was sitting there as ripe fruit ready to be picked and put into play in the industry.

As soon as I thought of this it was like everything that I was doing was solved. I could build better software, I could increase the organizational capacity of oil and gas producer and I could finish my thesis with a killer topic. All my Christmas' had come at once.

Thinking the idea would sell I published the document to only realize afterwards that no one was going to support the idea. The bureaucracies I criticized and declared redundant, owned the budget process. And said bureaucracies were quick to show me how little they thought of the idea and the rest as they say is history. Being somewhat ostracized from the industry is somewhat refreshing I have to say. The time that I have been given has provided me with lots of opportunity to put more meat on these concepts and acquire more intellectual property through the publication of this blog. The pay is nothing, however, I can exist for as long as I need to finish off the concepts that I am researching and publishing. Besides I can't think of anything I like more then writing this blog. It is challenging and rewarding, the two things that I need the most.

Back to the Harvard article was this the result of a "prepared mind," yes most definitely. With 25 years experience in the industry, a masters level education, competitive stimulation, revolutionary technological opportunities were all factors. As the article also states, knowing that this was the point to push I think is also a key point. I could have easily justified letting this slip away under the basis that, it's too difficult, it would never sell or any other excuse. The last point that the article notes of interest to me is that I had a clear objective in mind, how to increase the innovative performance of an oil and gas producer. I was looking for some key attribute in this area and this remains the overall objective for now and for the long term.

But maybe most importantly, was I lucky? Yes, unquestionably. Serendipity is a good thing.

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Tuesday, July 11, 2006

Petro Canada piles it on, again.

A press release from our favorite company notes that they have increased their offer for Canada Southern Petroleum Ltd. from $11.00 to $13.00. Recall that Petro Canada was more or less disgusted with the Canada Southern Petroleum Ltd. expectations when they were negotiating with them, I wonder how the management feel now. This whole episode could probably have been avoided if the pig headed management of Petro Canada just sat down with Canada Southern Petroleum. This latest offer bumps the original offer of $113 million a whopping 73% to a total of $195 million.

I'm sorry to be the one that explains that this whole situation is taking on an enhanced perception of panic on Petro Canada's behalf. With only 55,000 shares tendered to their $11.00 offer the message to Petro Canada is more. Will Petro Canada figure that this is a game that they are not able to play and fold, or will they pull out the heavy artillery and acquire more bank debt to acquire this tiny little firm.

To the management of Petro Canada, give your head a shake, at least until it hurts. Your acting like you haven't got a clue about what your doing. The message that this transaction is sending the market is that management is running around in "fire fighting" mode. Stop it and let this bad piece of history die quietly. Now that is my advice and it hasn't actually cost you anything has it.

You have a quarterly report that will be out soon. This report is going to show how bad things really are within the company. Regroup for that public relations nightmare and forget about this Canada Southern Petroleum fiasco, your out of your league.

Start the PR machine to mitigate the effects of your loss of operational control of your flagship Terra Nova property. And the inevitable financial losses of the firm. Canada Southern Petroleum is too small to provide any cover from a PR perspective.

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Energy Secretary Samuel W. Bodman

This video is on MIT World and is accessible by clicking on the title of this blog entry. At almost 60 minutes it is time well spent. Recall that MIT has declared that energy is the great challenge of the next 50 years. Describing it in terms that are best summarized as a "perfect storm". MIT has arranged as part of their Energy Research Council, U.S. Energy Secretary Samuel W. Bodman to speak on "Our Energy Future: Why American Science and Technology Must Lead the way."

Many of the things that Dr. Bodman speaks of are directly pertinent to the topics and thoughts within this blog. Quoting liberally from his speech:

"Science and Engineering can and should be used to advance the public good. To solve complex problems and to help our society and economy to adapt in a complicated global environment."
"A time for breaking down the walls that could limit our future economic growth. And in many cases the tools that we use to do this will be found in breakthroughs in science and engineering."
"At a time of increasingly aggressive global competition America must do what we have always done best. We have to take risks, we have to lead, we must invent, we must innovate."
That last quotation is directly in line with the justification for using the joint operating committee, and direct support for these software developments. These are the same points to a large extent that I wrote in my plurality thesis. That science and technology are constrained by the organizational conflict, and bureaucratic interference that limit and kill speed and innovation.

Bodman notes that the majority of his funding for the scientific research and technology has been as a result of a reallocation of resources under the Presidents "American Competitive Initiative"(ACI). He goes on to state that the:
"scientific disciplines are increasingly being linked." And that the effort of the energy department and the ACI go to the "future economic well being and security of our country".
Also noting that he is expecting more then just the development of new knowledge from these government funded research programs.

Although the research that he mentions in his "Advanced Energy Initiative" is on ethanol, hybrids, fuel cell, solar, wind, nuclear and clean coal. It is fair to assume that he fully aware of the demand of the U.S. for gas and oil is and will remain high. His approach currently seems to be limited to establishing some of the alternatives as viable enhancements for the long run in the U.S. and he noted as such the expectations of the market makeup of energy sources.
"Science and Technology must lead the challenge to provide good, clean and abundant energy."
Some noted targets, facts and objectives.
  • Ethanol = 5% of the current supply = 14% of the U.S. corn crop.
  • The department of energy expect that Ethanol supply will grow to 5 million barrels / day in 20 years.
Needless to say based on these facts the expectation of the US is to continue to use fossil fuels as its primary source of energy. Bodman sees the parallel between these energy related difficulties as similar to those in the cold war inspired space race. Having the Secretary of Energy making these types of comments adds some real depth to the issues at hand.

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Monday, July 10, 2006

Topics of the week.

Oil prices have reached record highs. This seems to be a bigger surprise to the producers than the consumers. I believe the prices will continue to rise due to the increased demand of China and India, duh. Other contributing factors are the general health of the global economy. More people are living better today than at any other point in time and these economies operate on energy. No energy, no economy. With the far larger number of participants in the global economy the more energy is and will be demanded.

The second topic of the day is the cost escalation at Fort McMurray based heavy oil plants specifically. And in general, the increased costs of the oil and gas companies regular operations. Shell and its partners are suggesting the costs of their heavy oil plant are escalating 50% to $11 billion. Which is not bad for a project that started out at $3.5 billion. Would these heavy oil plants benefit from using a system such as Genesys? Yes most definitely, so why has this not happened? I have no idea and would ask any readers that may have an opinion to share it through the comment facilities of this blog.

Many of the participants in heavy oil projects also have conventional oil and gas operations, and many of the plants they own have their own joint operating committees to manage the needs of the plant development and operation. Joint operating committee's are synonymous with good industry practices. This is systemic throughout the industry, the bureaucracies only get in the way.

The only question that remains is how much longer this Genesys software development project will sit on the shelf waiting for the day in which it begins full development. The market needs the producers to produce more and faster, and the community needs to rally around the various calls to action that I am noting here in this blog.

Whether it is the producers that finally say "enough" and finance the development. Or the community of users that says "enough" and finances the developments themselves, these developments need to be done. Who and when are the questions that I ask. With so much academic support such as Hagel & Brown, the various other blogs that provide further insight, the use of the joint operating committee makes so much logical sense that to not attempt to build these systems is foolhardy, I think in the extreme.

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Sunday, July 09, 2006

The producers paradox.

I had been catching up on some of the better blogs and noted the commentary on Peter Rip's Early Stage VC. He noted a few things that are not only unique in Silicon Valley, but are applicable here in Calgary as well. He of course was talking about enterprise software. How the market for the software had all but dried up and was more of a wasteland in terms of venture capital. I can attest that the oil and gas marketplace suffers from the same symptoms as he speaks of in California.

To be more specific the only software that will be purchased by producers is SAP and Oracle. The producers believe the ability for smaller software players to provide any valuable product or service doesn't exist. However, we all know that the level of innovation and capability being built into these two jurgernauts is non-existent. So what is a company to do? What is an oil and gas producer to do? They could call IBM who have all the solutions if you listen closely enough. The producers are in the unfortunate position of needing something to enhance their performance and make them more innovative. Something more then just a blog, such as this one.

I am tempted to say that you reap what you sow. But since I still would like to do business with most of the producers, I of course won't say that. The paradox comes into play as the most innovation that has occurred in oil and gas systems in the past year was written in the theoretical vacuum of this blog. Nothing happens with the big software vendors because they truly don't understand the producers business. Besides they sold them the latest do-dad just last week.

At the lower end of the market. The place where I exist, nothing happens because we are too small to do anything of "value". That is other then I get to claim a lot of valuable intellectual property.

I could if I wanted too, sell the intellectual property to one of the big software vendors. Well of course I tried that, IBM said they weren't interested. I would not deal with Oracle as our last relations ended in them claiming ownership of what was rightly ours and one bitten, twice shy is the best way to restate that situation. And lastly I don't speak German. Now to be fair to SAP Calgary is one of the smaller ponds in a market that they don't really concern themselves with. Oil and gas is poorly handled by SAP and they seem to be more proud of that then anything else.

Anyways I determined that there was no market for any sales of the intelectural property "product" to the big guys. The producers are therefore left to cobble a series of tiny vendors with Cobol code together to make up their software systems. Ensuring that these software companies are run ragged and fed a diet of rice for sustenance. All and all a great situation.

So now we have a situation where the market is deemed as mature. The software companies are pursuing other industries like automotive and health care, and maybe in Houston the SAP sales rep will show up for a meeting. Here in Canada producers can continue to look down their nose at the small vendors across the table and generally complain about the poor state of any offerings. Meanwhile back at the stock market the demands for more continue to escalate and they are unable to figure out why they are having more trouble making money in this high priced environment!

I can assure anyone that may have a good idea on how to solve the producers paradox, your better off staying at home. The industry is just full of demanding users that are never satisfied and can only complain. Besides there is always hope that someone somewhere will pop out a new, all encompassing software application that they just cobbled together in their parents garage.

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Saturday, July 08, 2006

Hagel & Brown, Pull Models, Part II

Continuing on with the review of this fine paper from John Hagel III & John Seely Brown.

Exploring the layers of pull platforms.

This paper continues on discussing the various layers of pull platforms. Needless to say these points have what the authors call a "High Tech Focus." A technological envrionment where the community of oil and gas workers and producers can and will be supported by the various frameworks. The implementation of these communication technologies creating the communities of users that aquire more elaborate and sophisticated capabilities.

Summarizing the information within a table provided by Hagel & Brown;

Infrastructure Layers

1.) Communications Networks

Facilitate the basic movement of information and goods.
2.) Service Grids
Provide enabling services to create more robust and tailored connections.
Performance Fabric Layers

3.) Technology enablers
Create more flexible ways of organizing and mobilizing resources.
4.) Social networks
Increase willingness and ability of people to share resources, especially knowledge.
Creativity Framework Layer

5.) Aggregation networks
Create metadata to help connect participants and resources.
6.) Process networks
Orchestrate capabilities to create new products and services.
7.) Networks of creation
Establish collaborative environments to generate new practices.
(Please note items 1 - 7 are verbatim recreations of a Hagel & Browns table.)

The activities within the pull platform are augmented by "Find, Connect, Innovate and Reflect in each layer of pull platforms." Hagel and Brown go on to further define the categorization of the layers in Infrastructure, Performance Fabrics and Creativity Frameworks. I highly recommend downloading this article and reviewing the details closer.

A key attribute of these Networks and Frameworks is to provide enhanced capabilities to all those within the pull systems. Reflecting on the oil and gas industries potential use of these networks. There could be such a rich environment to operate within. An environment in which the desire and capability of each individual and producer are enriched by their potential of employing resources in this optimal pull manner.

An environment where the limitations of participation are reduced to the lowest common denominator. Where anyone and everyone who has value can contribute. To open a much larger dialog where the collective knowledge and capabilities of larger communities are applied in the most efficient manner. And as Hagel & Brown say
"These communities can also amplify the power of reflection and accretion by bringing together a diverse and often distributed set of participants." p. 38
Or what I foresee is the elimination of the bureaucracy that invades, restricts and limits the potential of companies and individuals. A bureaucracy that has fullfilled its role in enabling the communications and technology markets to be built. A bureaucracy that must now fall on its sword as opposed to fight for its inevitable elimination.

In addition of the bureaucracy stepping aside Hagel & Brown suggest the core capabilities of the company will need to reassess its purpose and role within the community. Companies that limit their role to the "Innovation, Learning and Capability" realize these can be achieved through other intermediaries then command and control. Enabling "each other to reach new levels of awareness and understanding".

Hagel & Brown also suggest as companies begin to adopt these communities of practice the performance tragectory will accelerate quickly, such that companies that choose to maintain command and control will have fewer competitive advantages in the marketplace. I foresee Genesys impacting the performance tragectory of oil and gas firms such that it would be very difficult to maintain any current competitive advantage without its use.
"In a world of pull platforms, the rationale for the enterprise itself must be re-examined. Enterprises will continue to add value in one of three ways; accelerate capability building within communities of practice; orchestrating capabilities across multiple enterprises in process networks or aggregating so that they can be more conveniently found and accessed by other participants in pull platforms. Ultimately, the success of these enterprises will depend on their ability to master different approaches to talent development, including the deployment of more flexible IT support systems to develop talent." p. 42
In oil and gas the reality of this environment is what Genesys provides. The joint operating committee as the key social and organizational construct is the only logical choice. With the legal, financial, operational decision making and cultural influences reflected within oil and gas operations over the past 100 years, how could their be a more effective means in which to define and build software to support the producer.

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Wednesday, July 05, 2006

Follow on article from Fast Company.

The title of this entry will take you to an article from Fast Company. The article entitled "Team Doctors Report to ER" asks if the focus on teams is misguided or appropriate in certain situations. In light of yesterdays article "The Social Aspect of Software" I think it has some very valuable insight.

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Tuesday, July 04, 2006

The social aspect of software.

Ross Mayfield writes one of the more popular blog's and also comments on the "many to many" blog site. He is the CEO of social text, a wiki platform that I am reviewing as a possible addition to this blog. I recommend visiting his websites as the commentary is of a high quality and he speaks with authority on the topic of social software.

Mayfield's July 3 posting "Markets are Social" provides a link to an excellent research article called "How not to build an online market: the sociology of market microstructure." this is a research article that was written by Peter Kollock of UCLA and E. Russel Braziel of Bentek Energy. This research reflects on the B2B exchanges that were the rage in the .com boom days and provides an excellent analysis of the social aspect of markets.

In the article the success of the propane B2B exchange in Texas is contrasted by its lack of market acceptance in the smaller California market. The information is invaluable, I think. I want to add a related matter before I discuss the implication and affects in oil and gas. Implications that are directly related to these entries and as it applies to the Genesys software developments.

I want to introduce another comment from another blog Professor Andrew McAfee has also written an article that is closely related to Mayfield's. Entitled "Raising the least common denominator" McAfee notes from a comment that there is a risk that the effect of too great of participation could erode the quality of the business decisions. If everyone has a say then the collective wisdom may be reduced to the least common denominator. A concern that these social markets have and one that I think can and should be addressed here.

McAfee notes in essence that the broader participation is already evident in many things that we do these days. Google searches provide the entire world of information, yet we generally are able to discern the right provider of what we are looking for. The technology is more a tool of the users and as a result the users decide what is satisfactory.

The UCLA research paper describes the success that the propane exchange experienced in Texas and also shows why the same software failed in California. Two completely separate markets with Texas being sizeably larger due to the international flavor of the operations. The Texas market was large enough that the software did not impede the communication that the market participants wanted. The size of the market enabled everyone and anyone to conduct their business as they needed. With ample buyers and sellers in the market, it was able to operate just as a commodity market should with a high level of anonymity.

In California the market only had a few small players. Their understanding of each other made the transactions transparent and everyone could essentially discern the buyer and seller behind each transaction. Here is where the software failed as it didn't capture the personal relationships that the buyers and sellers had. Going on to state that employees of the various companies were more like employees of the market as opposed to the firm. And it was their job and their benefit to help and get along with the other players. In essence creating a market of favors that someone would do for someone else when and where they were needed. These personal attributes were best dealt with over the phone and the software was unused, unlike the Texas marketplace where the software was a success.

Mayfield's posting notes in "Markets are Social" that most markets fall within the California category where the generic manila transaction based software was of no value. The social aspect circumvented the California market and the players created there own "favor" market.

How do I see these "social" aspects playing out in Genesys' software. I think clearly the two articles define exactly the role and nature that people will have in using this software. What I see happening is that the people that you do business with now would not change fundamentally other then providing access to greater numbers of partners and participants.

The decisions remain with the people that are involved and the personal face is implied in the software through codification of the agreements and understandings that the partners have. The way that I see things happening is the people will be able to rely on the system to document, facilitate communications, and process transactions based on these personal or social attributes. In essence sharing a social environment that is noted in the UCLA paper and captured in the collaborative tools that are essential features of this software. Whether they are blogs, wiki's, email or instant messaging, the commercial components and transactions will be handled with these communications as a result of the communications.

For example, if I agree that we will drill a well at your recommended location, the systems would record these transactions and report them as a basis of the fall out from the communication. Essentially eliminating the capture and processing of the data as separate, instead it will be implied and processed as it is agreed to.

I foresee these transactions being a critical part of the communications that are part of the joint operating committee. The participants in the industry will feel more of a belonging to the partners reflected at the committee level as opposed to the investor that they work for. The joint operating committee has for over 50 years on a global basis operated in that fashion. It is only recently that the bureaucracies have been preoccupied with accountability requirements and are essentially disregarding the tools and value of the joint operating committee.

Given that the focus will be on the property that is jointly owned and operated, this will allow these social aspects to flourish. The understanding and speed that the communications and transactions can move will be directly dependent on the capabilities of the collective ownership group and participants. The accountability will fall out of these processes as opposed to driving them, as they do so poorly today.

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Monday, July 03, 2006

Hagel & Brown, Pull models, Part l

John Seely Brown and John Hagel lll have written another excellent paper entitled "From Push to Pull, Emerging Models for Mobilizing Resources." (October 2005) These two researchers continue to impress me with their leadership capability in this new technology frontier. As I have stated here before, they have been pushing these themes now for over 5 years that I am aware of and continue to be the leading edge thinkers.

The final paragraph of the introduction captures much of what I believe and write about in this blog.

"By mastering the techniques required to make this new model work, companies will be well positioned to create substantial value. Those who adhere rigidly to the old model will likely destroy significant value." Hagel & Brown p.4
Contrasting the efforts of Petro Canada in this blog is designed to provide a real life example of what this blog is attempting to solve. If the "pull" model of innovation and creativity were operational in the oil and gas industry, this commentary would have achieved its objective. However, there is ample resistance to these changes. Many vested interests have aligned against these ideas and Petro Canada to me provides the greatest contrast to what this blog is not proposing. If by reviewing this Hagel and Brown document, we can gain additional insight from these two top notch researchers it will be well worth the effort.

Forces that are driving the search for alternative mobilization models, Hagel and Brown identify 5 forces that undermine the push model.
  • Increasing uncertainty.
Push models require stable environments. "In today's environment it is harder to deploy resources in anticipation of demand." p.14 Oil and gas producers seem to be unable to agree on why the high energy prices persist. I believe they are a fundamental reallocation of the financial resources to encourage and reward innovation. The companies themselves seem to believe they are a temporary aberration.
  • Growing abundance.
With bigger markets, involving more competitors and shorter product cycles. China and India have joined the Former Soviet Union and eastern block countries in consumer based economies. The production from these areas is substantial and the markets are immense. All of these markets will demand greater volumes of energy.
  • Intensifying competition.
Outsourcing of secondary tasks like accounting. Push models are overwhelmed "by extended business processes." p.17 The authors are essentially noting the interdependent nature of the supply chains are growing longer and more diverse. I fundamentally believe that the joint operating committee configured with the proper software is the best way for the industry to deal with these "extended business processes". The complexity of the supply chain, the diversity of the offerings leads to greater opportunities for innovation.
  • Growing power of customers.
Hagel & Brown cite iTunes and other applications that are effectively disintermediating large portions of distribution channels. Due to the oil and gas industry being capital intensive I don't see the risk of disintermediation, however, the efficiencies that can be had with better systems is something that the industry needs to consider today.
  • Greater emphasis on learning and improvisation.
Training is replaced by coaching and apprenticeship. The retirement of the oil and gas industry veterans will need to occur after their tacit knowledge is captured.

Pull Platforms.

I believe it is a testament to both Sun Microsystems and Dr. James Gosling that so much effort and time has gone into providing Java with superior exception handling capabilities. It is not by accident that pull platforms are identified by Hagel and Brown as heavily relying on exceptions to the standards.
"Pull platforms are designed from the outset to handle exceptions, while push programs treat exceptions as indications of failure." p. 22
and then go on to say;
"Because of loose coupling of modular design, pull platforms can accommodate a much larger number of diverse participants. The more participants, the more valuable the platform becomes."
Although this may currently run against the more secretive culture of the oil and gas industry. The demands for energy are now insatiable and remove the competitive nature of the industry. This competitiveness is, I think, going to be replaced by coopetition.

Pull platforms have the following characteristics which work to encourage creation and use.
  • Find
All the necessary resources are available at the critical time they are needed. The authors note WSDL (Web Service Description Language) an XML description of a resource. Just as I have noted the value in XML tags here before, WSDL provides an automated manner of discovering new resources.
  • Connect
With other participants of resources as required through elaborate networks. The technologies that are available today are designed to provide greater participation. Participation with like minded groups that are able to identify and resolve issues in the oil and gas industry.
  • Innovation
Provide a more flexible environment to innovate with the resources made available to the producers.
  • Reflection
Recombine and improvise with much more rapid feedback regarding their impact.

I will cut the conversation at this point and pick up the rest of this document in another post starting with "Exploring the layers of pull platforms."

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Sunday, July 02, 2006

IPv6 is available today!

That's right today. A cornerstone of the Genesys technical vision, IPv6 can be implemented now. The title of this post will take you to "Command Information" a web site that is designed to "leverage the change" to IPv6. This is significant news to this blog's developments in that there is now no technology that is not available today. The market for technology is moving so fast now that these software developments are possible with today's commercial technologies. Please click on the IPv6 technorati tag below to aggregate the posts I have written on this subject.

According to this website (downloading the two .pdf's is very valuable) President George W. Bush in his state of the union address on January 26, 2006 launched the American Competitiveness Initiative. Within this initiative it was noted that the majority of the east Asian countries have already implemented IPv6 in their network backbones. That for America to compete requires the rapid implementation of IPv6 in their networks.

"This paper emphasizes that American organizations must adopt IPv6 today." Describing what IPv6 provides as accommodating more devices, faster speeds, greater mobility, enhanced connectivity, integrated security, enforceable privacy and easier management. IPv4 provides 4.3 billion unique addresses, IPv6 provides 3.4 trillion, trillion, trillion, trillion (340 undecillion) unique addresses.

The .pdf's also provide an understanding of the key impact areas such as:

  • Mobility. Maintaining constant fixed point (static IP address) no matter where you are or move to.
  • Security from better architecture and limited ability for viruses.
  • Real time / peer to peer, or as I call it "the elimination of the client server model".
  • Providing a faster broadband and less costs by removing the need for NAT boxes. (Network Address Translation).
IPv6 is available in operating systems from Apple, Microsoft, CISCO, HP and Sun. Your ISP will be linking to root servers this summer. The good news is that the entire IPv6 infrastructure is available today. Genesys only needs to purchase Internet service from a tier 1 telecom provider in order to begin developments and operational use of IPv6 within oil and gas.

The author of this .pdf refers to a recent government report that states the move to IPv6 will cost $1 billion per year for the next 25 years. The returns will be over $10 billion / year in savings. The costs are mostly bourne by software developers, such as us in reprogramming to use the enhanced feature and capabilities.

Is IPv6 big? Bill Gates thinks so. He is quoted in the article that "Enterprise Applications will be the "Killer Application" that makes IPv6 necessary."

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Saturday, July 01, 2006

June Business Report


Petro Canada continues to provide ample material for analysis and comment, and we are anxiously awaiting the companies second quarter results. The results of this marketing are beginning to provide the exposure that we seek, particularly locally.

In the Technorati service we are still jumping around a fair amount, however this last month we have seen our ranking down to the low 500,000's. Not bad for a six month blog, and considering the total number of ranked blogs has jumped to almost 42 million.


We set out to see what kind of pace we can attain in terms of the frequency of blog postings. With the stated May objective of writing one article per day, I am now putting this in place for the long term. The discipline to write one story per day is a rather torrid pace for one individual. But it has an indirect effect of increasing and focusing the quality and value of the entire process. Therefore I want to try and establish a new guideline for July, that being of 8 posts per week, and, one per day as new minimums in posting.

My Favorite entries.
My favorite entries for the past month are:

Technical Architecture

No changes to the overall technical architecture were made in June 2006. GlassFish continues to soar in terms of its acceptance and value to the community. Discussion with BEA Systems were brief and uneventful. The cut off point between GlassFish and a business oriented functionality is unanswered at this point. The more I research this area, and the more we define the unique areas of using the joint operating committee, the more I believe that we may be best off developing these ourselves.


Revenue to the end of June: $0.00

July 1, 2006 budget items. (All costs are in U.S. dollars and include the 33% premium for the development copyright fee.)

1. Project management and development = $300,000
2. Sun Grid The first thing we need is a home for the code. The grid provides everything we need in this instance, and the Grid that I selected was Sun's. At $1 per processor hour, a very affordable way to secure the resources we need. I think that our first years requirements would be amply satisfied with 10,000 hours of processing for the remainder of 2006 calendar year. Total requirement = $13,300
3. Ingres Open Source database and part time DBA, Total requirements = $57,000, Collabnet, I would like to have a generous budget for this critical tool. Provides the code management, community process, project and issue management. Budget includes tools, appropriate setup and consulting services. Total requirements = $34,000
4. General and Administrative, first 6 months of operation Total requirements = $60,000
5. Membership in W3C Total requirements = $9,000
6. Total Capital and Operating budget, 2006... $484,000

  • Sponsors, producers, and user contributions and donations are accepted.
  • Please recall that this community is and will be supported by the producers. Based on an annual $ assessment per barrel of oil. For 2006 the assessment was fixed at $1 per boe per day per year.
  • A company such as Encana in Canada would therefore be expected to support the community to the tune of $700,000 for the 2006 calendar year.
  • These Monthly Business Report budgets are being proposed on a pay as you go basis for 2006 to support the community and ensure the community develops in the manner that is expected.
  • Your donations are greatly appreciated, no donations mean no development work is being done.

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