Saturday, March 31, 2007

Professor Whitesides, on MIT Video

This video has an interesting point of view, one that states the United States will at least be challenged for leadership in science and technology. Professor Whitesides suggests that areas such as K - 12 education need to be amended to accommodate the ways that academia and corporate research are undertaken.

Two of the important points that he suggests is that the Chinese have a very low cost structure. This cost structure extends in all areas of their economy and includes research. Noting the Chinese also have very large foreign currency reserves that could be used to help sustain the long lead times necessary in research. This provides them the opportunity to challenge and possibly lead the world in research and science.

Professor Whitesides notes that energies problems will require science and technologies to advance to solve these issues. I would suggest that this is correct, the problems are many, they are diverse in nature, and are key to a countries competitive position. I have suggested here that the oil and gas industry needs to aggressively employ the sciences in order to meet these challenges. I have also suggested that the tie in to the academic community is necessary. As Professor Dosi has suggested technology influences science, and science influences technology. Industry and academia need to be working together. And to do this effectively I believe industry needs to reorganize themselves for these purposes around the Joint Operating Committee. A bureaucracy will most certainly fail in these critical energy challenges.

The question and answer session in the last half of this video is a must watch as well. The participants for this presentation are the who's who in terms of who is interested in providing solutions to these issues.

Technorati Tags: , , , ,

Thursday, March 29, 2007

What I would do.

In the instance of having some companies with qualified opinions on their financial statements. If this project was proceeding as it should, I would have struck a committee of the large accounting firms to discuss what would be necessary to ensure that the companies had unqualified opinions next year. And then set out to do just that.

The source of this problem is the sale of Qbyte last year by IBM. The new vendors gave notice that it would not support Qbyte after 2009, and therefore has put the energy companies in a situation where on a go forward basis they have to qualify their opinions in the financial statements.

Why did IBM sell? Their frustration with the industry to do anything with their systems on a go forward basis was discussed many times in the past. What were they to do? I can't blame them in the least.

The industry reaps what it sows.

Technorati Tags: , , ,

Annual Report Season

Canadian Natural Resources Ltd have filed their 2006 annual report. Within its financial statements there is a small qualification of managements opinion on internal controls. But first lets go back to 2005 to see what they wrote.

The accompanying consolidated financial statements and all information in the annual report are the responsibility of management. The consolidated financial statements have been prepared by management in accordance with the accounting policies in the notes to the consolidated financial statements. Where necessary, management has made informed judgements and estimates in accounting for transactions that were not complete at the balance sheet date. In the opinion of management, the financial statements have been prepared in accordance with Canadian generally accepted accounting principles appropriate in the circumstances. The financial information elsewhere in the annual report has been reviewed to ensure consistency with that in the consolidated financial statements. Management maintains appropriate systems of internal control. Policies and procedures are designed to give reasonable assurance that transactions are appropriately authorized, assets are safeguarded from loss or unauthorized use and financial records are properly maintained to provide reliable information for preparation of financial statements.
PricewaterhouseCoopers LLP, an independent firm of Chartered Accountants, has been engaged, as approved by a vote of the shareholders at the Company’s most recent Annual General Meeting, to examine the consolidated financial statements in accordance with generally accepted auditing standards in Canada and provide an independent professional opinion. Their report is presented with the consolidated financial statements. The Board of Directors (the “Board”) is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls. The Board exercises this responsibility through the Audit Committee of the Board. This committee, which is comprised of nonmanagement directors, meets with management and the external auditors to satisfy itself that management responsibilities are properly discharged and to review the consolidated financial statements before they are presented to the Board for approval. The consolidated financial statements have been approved by the Board on the recommendation of the Audit Committee.
And for 2006
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 15(d)-15(f) under the United States Securities Exchange Act of 1934, as amended. Management, together with the Company’s President and Chief Operating Officer and the Company’s Chief Financial Officer and Senior Vice-President, Finance, performed an assessment of the Company’s internal control over financial reporting based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the assessment, management, together with the Company’s President and Chief Operating Officer and the Company’s Chief Financial Officer and Senior Vice-President, Finance, has concluded that the Company’s internal control over financial reporting is effective as at December 31, 2006. Management recognizes that all internal control systems have inherent limitations. Because of its inherent limitations,internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as at December 31, 2006, has been audited by PricewaterhouseCoopers LLP, independent auditors, as stated in their report presented with the audited consolidated financial statements.
Well who would have thought, sounds like a systems related argument that has been discussed here many times. I'll let you know of whom's head I see rolling down 5th Avenue first.

Technorati Tags: , , ,

Wednesday, March 28, 2007

Technology, Entrepreneurship, and Inequality

Alfonso Gambardella, Sant'Anna School of Advanced Studies, Pisa, Italy

David Ulph UK government, London, UK

February 2003

This paper has some interesting insights as to the makeup of the skilled vs. unskilled workers within oil and gas. The number of unskilled workers in the energy industry is very small. Weather it is in the offices of downtown Calgary or in the field, the level of skill is generally very high. Since we are primarily concerned with the head office staff we can focus just on that "high skilled" group. The research done by these authors provides a good understanding of how the energy industry as it stands today, may evolve.

"This paper develops a model that compares some implications of the rise of these new industries with the traditional organization of firms and sectors based upon the large integrated companies of Chandlerian memory (Chandler, 1990). Our model yields three main insights.
The contrast of the authors in terms of firms is very high. To compare the Chandlerian firm with its structured hierarchy and emphasis on process and regimen, vs., the purely entrepreneurial company that can best be summarized as a Silicon Valley firm. And the two types of workers that are employed at each type of firm. The Silicon Valley skilled vs. the unskilled in the Chanlerian firm are fundamentally different.
"First, our two archetypes - Silicon Valley and the Chandlerian firm - entail two different degrees of inequality between the earnings of the skilled and unskilled workers." pp. 1
"Second, apart from skill-intensity, a notable feature of the new industries is that they entail knowledge externalities." pp. 1
"Third, our model shows that the marginal effect of an increase in the relative supply of skilled people on the total income (and therefore on the total output) of the economy is always higher in the equilibrium where the new industries dominate vis-a-vis the other. The intuition is intriguing as it is a natural upshot of inequality. If the skill premium is higher, then as the marginal unskilled worker becomes skilled, the raise in her income will be higher than if the economy was in the less unequal equilibrium" pp. 2
Which is the logical conclusion to the use of their model. Creating an equillibrium that is unique to the situation, and that is reflected clearly in the next quotation.
"Put simply, German skilled workers, with potential employment in companies like BMW, Bayer or Mercedes, have higher opportunity costs of setting up their own firms vis-a-vis Indian or Israeli engineers." pp. 4
With so much to lose by taking a risk as an independent machinist, it would be foolhardy to attempt entrepreneurship in a country like Germany. And in India it may be the only manner in which a highly skilled machinist could exercise the value of their skills. I would suggest that the equilibrium of highly skilled workers in the energy sector provides little incentive or disincentive for the worker to take a risk in an entrepreneurial fashion. Therefore a mix of both contracting and employment approaches exist for a person to being hired in oil and gas. With some companies such as Encana employing a 50% employee 50% contractor human resource strategy.
"Our model shows that a large relative supply of skilled people is likely to imply a higher total income in the Silicon Valley equilibrium vis-a-vis the one dominated by Chandlerian firms. This suggests that, as the relative supply of skills rises, skilled people may "direct" technical and organizational change towards the formation of new firms and industries that are skill-intensive, rely on knowledge externalities, etc., whereby their inventive capabilities can be best exploited." pp. 5
Well that is music to my ears. The high skilled labor would "direct technical and organizational change towards the formation of new firms and industries." I would normally be on the verge of describing this research as a call to action.

"In sum, the large Chandlerian firm has been a notable shield against inequality across skills for many years. At the same time, the knowledge spillovers produced by the new industries imply that the rise of such industries require co-ordination, which gives rise to multiple equilibria. This explains why even when comparing similar countries or regions, either the traditional sectors or the new business models dominate." pp. 31

Technorati Tags: , , , ,

Tuesday, March 27, 2007

We've been Haacked!

And I do like it. Phil Haack runs a blog that

"attempts to infuse technology and software development with humor and a pragmatic eye... Attempts."
Phil read one of my recent posts and commented on it in his blog.

I certainly would welcome Phil and his community to have a look at this early stage project. The scope is large and therefore, "one day", will have ample amounts of paid developers working on it. No time like the present for a little introduction, and self-promotion, I think.

Technorati Tags: , , ,

Silence Fails, Part B

Continuing on with Silence Fails and the impact that the documents 5 crucial problems have raised.

Starting with the Conclusion on page 18.

"Although Silence Fails focuses on important findings that can predict and explain failure, the most important implication of the study is that potential leaders have to influence success." pp. 18
More then anything the energy industry needs this project to be a success. The time, money and effort that needs to be channeled through this project is not something that can fail. I believe fundamentally the ability for the industry to increase its throughput capacity requires fundamental revolutionary change in the manner that people organize themselves and conduct their work. The time for this to start is not after this software is built, but now, starting today the user needs to be the influence and drive to make this real and successful. Now that this paper Silence Fails has enabled me to dispatch the wrong approach, its time to start planning how the process gets under way. I think Google is going to be announcing the integration of JotSpot into Google Docs & Spreadsheets. This will enable me to put up all the blogs content on that Wiki and have any and all people that this project appeals to to begin posting their content. From there the users will determine what's in and what's out and what should be there. The project scope, the budget etc.

First lets continue on with the review.

Getting People to Speak Up Well.

This is something that I can see is important and I think I have been able to maintain the scope of the project as a result. Many times I have been approached with alternative methods of dealing with this project. A compromise here and a compromise there and the project is on a go forward basis. This hasn't happened because the time and effort necessary for success is not there. You also can not compromise on such a large and important project as the basis of the first step. If it is necessary to say no, I apparently have said so. The paper deals with this specifically;
"Across the problem areas, about half of leaders make some attempt to speak up. But most are ineffective. Some speak up but they water down their concerns, so the issues are never fully aired. Some speak up but do so in a way that provokes defensiveness from others. And a handful - are able to share their full concerns by the end of the conversation, feel their views are understood and respected."
"The study also shows that while the skill of the initiator is a key ingredient in ensuring these crucial conversations are held well, the receptiveness of the other party is similarly important."
"Unless and until leaders take extraordinary measure to ensure their environment is conducive to holding crucial conversations, a number of issues will remain unaddressed, invisible, and fatal."
The authors then note a number of key steps to make the changes that are necessary for this project.

Develop a Business Case for Change:
  • Begin by making the problem visible. Track and publish data about project successes and failures.
  • Distribute Silence Fails to generate discussion about the root cause of current under performance.
  • Engage senior leaders in a "listening campaign" where they lead structured focus groups to validate whether these crucial problems affect current results.
Well I have been doing this with the blog but that is not enough. As soon as I get a Wiki up and operational it will enable more voices to express what they want in terms of systems etc. I am also hopeful that I can find the kind of software that prepares and manages the Java Community Process. Have a look it's ideal for the purposes of this project.

Measure Behaviors

What gets measured gets done. The authors have prepared a Silence Fails Assessment to help measure and monitor the conversations that need to be carried out. The scoring of this assessment will help the project leaders assess where the conversation is missing and initiate steps to get it back on track.

Invest in Skills

The two sponsoring firms in addition to preparing the report and assessment, have prepared training materials in this area for project managers. This is of course how they make their money. The training looks to be very thorough and is designed to teach the project managers how to carry out these difficult conversations. I believe these programs have value and will explore them when we get our funding. Until that time I will have to muddle through with the material that has been published by the two sponsors The Concours Groups and VitalSmarts. In addition, the program states;

Hold Senior Management Accountable

Ultimately this project will survive and endure the difficult road ahead through the determination of a few strong CEO's in the marketplace. Their commitment to making this project successful can not wane or fade.
"Make leaders the teachers. People will change their behavior more rapidly if leaders deliver the training than if staff trainers or outside consultants do so. When leaders teach, the speed of change can be two or three time greater than when those who aren't as credible and connected in the organization lead instruction."
Make Heroes of Early Adopters

In order for the candid comments and conversations to be carried out The early adopters of these principles, the ones who stand up and take a risk and raise the conversation should be identified publicly with the recognition and support of the project leadership.
"Be sure to send a clear and public message that these conversations aren't just important, they're crucial and those who raise them are highly valued."

Technorati Tags: , , , , , , ,

Monday, March 26, 2007

Silence Fails, Part A

The title of this entry will take you to a website that will enable you to download a .pdf entitled Silence Fails.

In the process of determining what the proposal for the targeted 135 producers (T135) will be. It is necessary to review the project completely. The scope has changed slightly. The target market is different and I think they need a fundamentally different approach. Particularly from the point of view of the knowledge, ideas and undertakings discussed here in this blog. These ideas and the basic premise that the Joint Operating Committee (JOC) is the key organizational construct for oil and gas. Unless they stumbled onto the blog they would have heard very little about this project. Specifically the May 2004 research report was not targeted at them. Times have changed and the need to start over again is the approach that has to be made to them. Therefore I have revised the first years budget requirements at $375,000.00 and will be looking for a number of T135 producers fund this first year. The purpose of these funds has changed radically as well. As opposed to doing any construction of the project deliverables I want to create a number of "conversations" with the industry. This will be done by continuing on with reviewing the pertinent academic research as I have been on the innovation in oil and gas blog. This is the most effective area of where I can spend the next year. The addition of a Wiki to deal with the project scope, budget, deliverables and associated material gets developed. These need to be determined through the population of users that this project is targeted at. They need to be involved in these determinations. This change in tactical approach is as a result of the prompting of the "Silence Fails" research report that I am in receipt of.

Silence Fails is the name of a research report that has been published by it two research sponsors VitalSmarts and The Concours Group. These companies are described as follows.

"An innovator in corporate training and organizational performance, VitalSmarts helps teams and organizations achieve the results they care about most. With award-winning training products based on more than 25 years of ongoing research, VitalSmarts has helped more than 300 of the Fortune 500 realize significant results using a proven method for driving rapid, sustainable, and measurable change in behaviors. VitalSmarts has been ranked twice by Inc. magazine as one of the fastest growing companies in America and has trained more than 500,000 people worldwide"

The Concours Group
"The Concours Group is a new breed of professional services firm, supporting senior executives through the blend of leading-edge intellectual capital and pragmatic business applications. The firm works with more than 300 of the Global 1,000 firms, helping leaders turn human and technological potential into business value. The Concours Institute is the research and education arm of The Concours Group. Concours research discovers and develops future best practices in business, technology, and human capital; its education articulates them and motivates their adoption; and its innovative senior-person Advisory Services enables clients to implement them quickly and achieve business results."

The sponsors research involved approaching a variety of companies with more then 2,200 projects ranging from $10,000 to billion dollar organizational restructuring efforts. It sounds like these research projects are almost directly in-line within the scope of what this project entails, organizational change with information technology.

Silence Fails; The Five Crucial Conversations for Flawless Execution.

The project focused on five conversations that should occur within the project, however rarely do. These five conversations, or rather their lack of them, were determined to be the reason for "91% of all large scale corporate initiatives fail". These five conversations make it clear to me that I was on the wrong path. Expecting that a top heavy project would be able to lead the Users to the ultimate destination of better systems is clearly the result of the lack of the conversations that need to be done. Going through these five conversations also show me how it could be done with less risk, greater accountability and potential success.

The five conversations are simply conversations that should be carried out, but aren't for a variety of human resource and psychological reasons. They are:

  • "Fact Free Planning"
    • "A project is set up to fail when deadlines or resource limits are set with no consideration for reality."
  • "Away With Out Leave (AWOL) Sponsors"
    • "A sponsor doesn't provide leadership, political clout, time, or energy to see a project through to completion."
  • "Skirting"
    • "People work around the priority-setting process."
  • "Project Chicken"
    • "Team leaders and members don't admit when there are problems with a project but instead wait for someone else to speak up."
  • "Team Failures"
    • "Team members are unwilling or unable to support the project."
This listing does not provide a lot of comfort that this would be an appropriate direction to follow. But reading the entire report gives a perspective that transcends just the listing of the necessary conversations. Reviewing the report provides an understanding of why projects fail implicitly. Anyone who has worked on projects will understand why these conversations will have an effect on the outcome of projects. So lets look at each conversation and attempt to capture what the research report is providing.

The Silent Crisis

To mitigate failure, management has turned to hedge against failure by implementing
"Formal systems. Over the past twenty years, project professionals and management experts have focused on improving the formal systems related to program governance, project management, and project related technologies." pp. 3
"This study... demonstrates that project leaders can substantially improve their organizations ability to execute on high-stakes projects and initiatives by breaking a code of silence on five astoundingly common yet largely un-discussed and ignored problems that contribute significantly to almost all project failures." pp. 3

Key Findings

"When one or more of these problems is not controlled - or not confronted well - it festers, sets off workarounds, and produces politics." pp. 5

One of the key findings is that when four out of five of the projects fail when one or more of these conversations is missing. The good news is that one in five projects succeeds because the conversation was used by the project leaders or the project was turned around based on introducing the conversations. The authors of this report go on to note;
  • "Does it affect project success when project leaders speak up effectively?"
  • "Can others be taught to speak up more skillfully with similar results?"
"The resounding answer to each of these questions is yes". pp. 5
"Senior leaders can predict and prevent the failure of high-stakes business initiatives by creating a culture where the five conversations are held quickly and effectively. Silence Fails Also provides insights and recommendation on how senior leaders can develop a business case for change, measure behaviors, invest in skills, hold senior management accountable, and make heroes of early adopters." pp. 6

Crucial Problem # 1:
Fact Free Planning
"A project is set up to fail when deadlines or resource limits are set with no consideration for reality." pp. 8

To this I plead guilty. Using a top down approach as I did, didn't feel right. Yet this un-asked question was never raised outside of the comment that the total amount that was deemed necessary was "sticker shock" the real and necessary conversation about the resources and the sources of project funding did not occur. Therefore it is necessary to start this conversation and have the input from all stakeholders and users detail a plan and budget that can instill the accountability and ownership to the agreed to deliverables. Immediately I can see one source of this problem being the users. In retrospect I was expecting the users to provide their involvement and participation out of the greater good of their employer or in the case of independent workers their time. This is wrong and the developers and users should be paid equally to provide the long term motivation and sustenance of the project. This will form the basis of the conversation as we go forward. It should also be understood that the resources to carry out this conversation are not available. Participation in this next / first year should provide some direction with respect to who the leaders and resources are in the user community so that when the project does have its sponsors their participation can be recognized. The report goes on to say.
"Fact free planning reflects bad planning behaviors at every level. When project leaders realize these practices are taking place, they must be willing and able to call the bluff. If they avoid this crucial conversation and either commit to something they know can't happen or fake their way to success, they set themselves and their projects up to fail."
"Similarly, executives who avoid discussing their doubts about an estimates validity or the team's competence instead use their power in a way that generates political rather than valid agreements. Then when failures follow, their doubts about the team are confirmed, and they feel justified in using more fact-free planning to re-establish their sense of control."
The only way out of this vicious cycle is for project leaders and executives to candidly and effectively express their suspicions, doubts, and data. While these crucial conversations aren't easy, they are the only path to rational commitments."
How common are these problems? Eighty-Five percent of project leaders are faced with "fact-free planning"."

Crucial Problem # 2
AWOL Sponsors
"A sponsor doesn't provide leadership, political clout, time, or energy to see a project through to completion."

Not something that I want to experience. This is a long life project and to have sponsors disappear is not what I want for this project. I don't even know of whom the project sponsor would be. Since this is an industry wide initiative the need to have several committed to the success would be necessary, and therefore possibly the CEO's. This conversation therefore needs to be undertaken in the next year with the funding being sourced.
"Project Sponsors are responsible to provide leadership and political support. And they frequently don't. When the sponsor is AWOL, the project team is stranded and exposed. They're sent off to accomplish a task and don't have the firepower needed to implement the project. For example, key leaders whose help or resources are needed to enable the project may not come through, and the sponsor who has the organizational muscle to hold them accountable fails to do so." pp. 11
Crucial Problem # 3
"People work around the priority-setting process."
"Powerful stakeholders and senior leaders often skirt the formal decision making, planning, and prioritization processes. They need what they need, and they don't want to be burdened with practical considerations. So they work around the process. The results are often outrageous overcommitment, disappointment, and burnout. Projects get approved for which there are no resources, scope creep bloats approved projects far beyond the resources originally budgeted, and team members deliver a succession of disappointing results from battered morale."
Yikes this one hurts just thinking about the possibility. The authors break this category down even further into the various culprits that cause skirting.
  • New projects added without revisiting priorities. 59%
  • Too many projects on my plate. 53%
  • Politics determine highest priorities. 52%
  • Too many high priority on my plate. 52%
  • Low priority projects become emergencies. 49%
  • Some projects should be cancelled but are not. 33%
Crucial Problems # 4
Project Chicken
Team Leaders and members don't admit when there are problems with a project but instead wait for someone else to speak up first.
"When project leaders play project chicken, the status and review process becomes a joke. The team loses opportunities to gracefully respond to problems by revising goal, shifting resources, reorganizing plans, and more. Instead, the project hurtles forward on a collision course with failure while everyone watches - nervous but silent."
As with all of these crucial problems, the issue resonates with the experience and understanding of why some things did not work.

Crucial Problem # 5
Team Failures
Team Members are unwilling or unable to support the project.

Firstly the change I mentioned in Crucial Problem # 1 where users will be compensated for their efforts as well as the developers will help mitigate this problems exposure. Specific problems include Team members;
  • Don't have the right skill set for the projects. 55%
  • Don't put enough time or energy into the project. 51%
  • Not raising issues when they are met. 48%
  • Not making a real contribution. 46%
  • Don't attend meetings or respond to requests. 43%
  • Are difficult to work with. 42%
  • Are remote or otherwise not participating fully. 23%
In terms of expecting the user to contribute to this project on a volunteer basis is foolhardy.

This glaring problem of the users not getting compensated was not seen earlier by me, but thankfully has been rectified. How many more of these types of problems are lurking in this project, to be honest most if not all these are resident within the project. Effectively with this posting I am setting this project back to day one for a re-start. The need to have the resources be represented in the necessary discussion's is obvious for this projects success. As I indicated I will continue to conduct the research that I was doing, the review of the LEM working paper series, and the authors that are on topic with the efforts in this new community. Secondly, with the budget for next year, I will set up and maintain a Wiki and run the Collabnet software so that the community process is completed in the time frame that is requires. I would suggest that this may involve more then one year to establish and conduct these conversations. The key point is, the time - line needs to be established in these conversations. What I can do to help this process is contained within the second entry of this paper I will publish on Wednesday.

Technorati Tags: , , , , , ,

Friday, March 23, 2007

Replicating Organizational Knowledge: Principles or Templates?

Professor Sidney G. Winter
Professor Charles Baden - Fuller

Another paper by Professor Winter, this one co-authored with Professor Charles Baden - Fuller. It poses an interesting question with respect to the activities of the oil and gas industry. Should the homogenization of the administration occur? Will it lead to a lack of competitiveness in the industry? I assert that the producers competitive advantages are sought by their strategic land position, their management and the organizations ability to find and produce commercial quantities of oil and gas. The administrative burden has been codified to a large extent by the various associations and non-profit organizations that have standardized the data model (PPDM) defined the operating requirements (CAPL) asserted the acceptable accounting requirements (COPAS and PASC). A firms ability to differentiate their operations on the basis of the administrative requirements would be an abject failure at the word go. The industry has progressed very far in terms of the acceptable behaviours in the industry. The secret is to have a solid enough inventory of land, seismic and scientists pushing the edge of their sciences. Administration is an after thought, not a competitive factor.

This brings up the issue of how is the homogenization of the oil and gas industries going to occur. Simply its not, the administration will become less of a burden and the speed and innovation of the industry will no longer be organizationally constrained. Specifically, how are the optimum methods replicated from task to task, person to person and producer to producer? This is the topic of Professor Winter's et al paper. Using the two methods of "Principles" and "Templates" the authors come up with some surprisingly strong recommendations.


"We address the challenges of providing operational measure for successful replication, and for comparing the efficacy of principles and templates. By using two longitudinal case studies of replication across the units of two multi-unity organizations, we support the central claim that in certain circumstances replication by principles can be as speedy and cost effective as replication with templates, and deliver results of comparable quality. The principle contingencies affecting the relative performance of the two methods are identified. We also point out that replication efforts can be a source or incubator, as well as an application area, for dynamic capabilities in an organization. We briefly suggest what the results may mean for theories of knowledge - based competition." pp. 2
Of the case examples one firm is in the retail distribution of oil products, with the other case example of the hotel chain in France, do not provide any direct relevance from an industry stand point. However from a large organizational point of view the case examples are effective in displaying the results of this study and their applicability to any and all organizations. The one key difference from my point of view is the capital intensive nature of the energy industry makes these recommendations more valid as the exposure to loss is higher then in a traditional labor intensive business. The bigger issue is the need and opportunity to have the standardized processes codified from an industry wide point of view. How these are replicated starts with a few quotations from Winter et al.
"In replication, an organization is intentionally reproducing or diffusing the success it has itself enjoyed in some limited setting or locale." pp. 3
"The value of replication is therefore the ability to diffuse faster than rivals can either imitate or innovate." pp. 3
"This paper seeks to clarify our understanding of the replication of organizational knowledge by introducing a distinction that has been little noticed. Our central thesis is that most organizations adopt some combination of two strategies or approaches, which we call "Principles" and "Templates". The guidance provided by "Principals" has the flavor "Let me explain why this works and the reasons why I do it is this and then try to make it work yourself - I will comment on any mistakes I see". The "Templates" approach is suggested by "Watch very carefully how I do this; then copy what I do and try hard to copy it exactly - but don't ask me why." The word why is clearly central to this distinction, being at the core of one approach while often considered a pitfall in the other." pp. 4
"Both approaches to replication can be supported by codification - by which we mean a "how to" manual recorded in the symbols of some appropriate, possibly technical, language." pp. 4
"Hence, it is rarely if ever the case that replication can be accomplished merely by supplying the manual to the recipient." pp. 5
The first question we should ask is how much tacit knowledge can be captured and codified in software? The answer to this question may vary depending on your IT capabilities and vision, I see significant benefit from the codification of the knowledge. For example, one of the most clarifying aspects of how the administrative issues are absorbed is with the use of schematics. Understanding of how the oil and gas industry operates is reflected in the physical makeup and physical flows of oil and gas. In terms of codification of the understanding of the "principles" is to have a schematic overlay appear in Google Maps. If that was possible with a dedicated industry related software developer, these schematics could populate the overlay with production flows, it becomes evident to the user how the energy related issues will play out. This is also as a result of the standardization of reporting processes primarily dictated to by the Alberta Government for its royalties, and the Energy Utilities Board here in Canada.
"In what follows, we further develop the contrast between the two approaches and seek to understand the circumstance in which each might be superior. The templates approach is understood, believed in and widely relied upon by managers in retailing and other sectors." pp. 5
"After a digression into history, the paper starts by exploring what is meant by replication, templates, and principles. It then proves the challenging problem of how we can determine whether replication has actually occurred. This sets the stage for the two in-depth case studies, which illustrate how replication by principles works; we finally discuss the factors affecting its success in the cases and in general." pp. 5
"... this opening section is a short digression into the field of economic history to show that using principles to recreate an existing success has a long documented history." pp. 6
"For example, he noted that Ford's moving production line was almost certainly "borrowed" from understanding the causal logic's behind the flour milling and other production line based industries whose "principles" were documented in contemporary magazines." pp. 6
"Hounshell points out that Colt did not gather directly the details of the mass production systems that had been developed to a fine art by the Federal armories at Harper's Ferry. Rather, inspired by their results, Colt set about designing a factory that use the spirit or principles of mass-production he had seen documented in contemporary accounts. Essentially, Colt recreated the instrumental logic for the American System without the necessity of observing the template. The Colt and Takaato experiences suggest that complex knowledge can be replicated without templates when the principles are evident and the copyist has good background knowledge and strong motivation." pp. 6
With these passages we can clearly see that the principles method of replication has been a key component of the success that business has achieved in the past 100 years. The traditional competitive forces creates the need to have some changes introduced to remain competitive. Although it may be argued that in today's market the competitive forces are diminished and the need to achieve an optimum operating focus is now driven through the lack of resources, and excessive demand, the overall objective remains the same. This objective of operating efficiency is the key motivation behind the replication across the energy industry.

What is replication?
"On the face of it, there does not seem to be much doubt that replication happens. The airport concourses and shopping malls of the great cities of the world provide ample (some would say depressing) testimony to the extent of replication activity in the arena of retailing and we know that it also occurs in other sectors. But the fact that the phenomenon is familiar belies the considerable challenge involved in defining it precisely. Indeed, the great philosopher Karl Popper warns us that defining replication requires judgement not absolutes." pp. 6
When we consider a software application that has the capability to replicate the knowledge of the users in most situations. We begin to rely on the knowledge of the user and an intuitive interface to enable the user to achieve what their objectives are. The software interface becomes a key component of achieving the work of the user and the method that the users attention is directed. Competing for the attention of the user is something that we have discussed in this blog before and is aggregated on the label attention economy. We have also discussed the division of labor and how Adam Smith was able to show that re-organizing around new divisions of labor enables economic growth. I have asserted the further division of labor will need to occur in order for the energy industry to expand its capacity. How the work is coordinated between those people and processes is the job of the the software application that I am discussing here. The interface is the manner in which the tasks and information are presented to the user in order for them to apply (replicate) what they know and understand.
"Replication of practices and routines cannot occur in an absolutely strict sense since the people in the organization change (whether on account of time or space) and the environment surrounding the organization is never entirely constant." pp. 7
"More precisely, we are concerned centrally with re-using knowledge of ways of doing things, i.e., it is essentially a matter of replication of organizational routines. Routines that respond effectively to differences in environment circumstance will produce different observable manifestations in different environment, even when replicated precisely." pp. 7
"Our conclusion on these puzzling question is that both process and outcome must matter in a fruitful definition of success in replication. Replication is successful when broadly equivalent outcomes are realized by similar means. On the outcome side, a positive return on the specific investment in replication sets a bare-minimum standard for "equivalence"." pp. 8
"Replication is about leveraging knowledge and is successful when "broadly equivalent" outcomes are realized by "similar means". In a specific context the words "broadly equivalent" acquire relatively precise meaning that are dependent on the replication intent. Likewise the works "by similar means" have more precise meanings that depend on the knowledge that is being replicated." pp. 8
I am going to boldly suggest that this is the primary reason that Users have been found to be critical to the success in the development of software. What has been described to this point is a massively difficult process to comprehend. The comprehension and implementation have to be defined and supported by the users. The iterative nature of the development triggers what the users want in the final product, and in some cases don't see what it is they are exactly after until the process is complete. To state that this process is ever complete is a bold assertion that fails on the belief and understanding that there is always a better way when dealing with the systemic innovation that is being set out to be achieved in this blog and in this software development project.
"We can learn much from the philosophers of science that have struggled with these questions. In psychology, according to Friedman, replication is paradoxical and difficult to define in absolute terms but none-the-less very clear in practice (Friedman, 1967: 149) In physics, Collins compares different kinds of replication including expert systems and comes to precisely the same conclusions." pp. 9

"So it is appropriate to recognize that in the business environment as in science, replication tests are matters of pragmatic truth, in which the understanding achieved in specific contexts carries a great deal of weight." pp. 9
What is software, Principle / Template. Professor Winter indicated that the two methods discussed in this paper were polar extremes. And it is with these two extremes we see the means at which we can replicate the knowledge of the industry to the user of the software that will be built here. The Principle method lets those that are experienced and understanding of the process to immediately run with it. Whereas the template can also help those that are less experienced in an oil and gas be productive and contribute as they learn. A hybrid approach is probably to a large extent necessary as we are dealing with something form a template point of view that is easy to implement and reduce to the lowest common denominator. But ideally that is not what we are after. The objective needs to be one that is supportive of the people who are innovating and expanding the knowledge and productive capacity of their firms and JOC's. In other words the user must be involved.

The point of the user is something that is lost on the SAP's and Oracle's. Their ability to deal with the energy industries needs have been atrocious. Their solutions are a point of view of understanding what best practice is, and implementing that concept within the software's interface. This is why the user is generally reduced to a cog in the wheel of the SAP / Oracle system. They are unable to represent what SAP defines as best practice to the activities of the firm. The JOC is not recognized or supported in these other applications and the ability therefore for the user to operate the system is constrained immediately. On these points Winter et al are clear, and I will leave it to them to explain their point of view in these following references.

How to Replicate
"What are the components of knowledge embedded in organizational processes? How are these components constructed and how do they get replicated? All methods seem to involve three key components: templates, principle's and background knowledge. Templates are working examples of the practices to be learned and principles are higher order causal understanding and rules. Background knowledge is what the recipient has to have to receive the knowledge." pp. 9
"While much of the knowledge in the template may be captured in codified form, in schematics, blueprints or manuals, the codified versions generally fall far short of capturing "all the knowledge." The key point about a template is that, notwithstanding any deficiency of the manuals, all of the knowledge must be there - in the "working example." The problem therefore is to find where precisely the knowledge resides, and to capture it for further use." pp. 9
"The use of templates typically requires the recipient to repeatedly observe the template in action. Repeated observation of the template in action is well known to assist in passing on craft skills." pp. 9
"Using templates often requires that the recipient organization borrows personnel from the donor to supervise the construction of the plant and oversee the start-up phases." pp. 9
What I am proposing in having the user involved in this process is fundamentally new, and something that has been proven in other solutions, (Google) that improve iteratively. If we sit down to approach the development of software in this manner. Will this be enough of a change in the process that we will be able to set out to attain what it is we are looking for? With success being the objective? Has software been developed by the user with industry wide replication explicitly stated? Not in oil and gas.
"In some cases, the template is a historical datum, originally created for its value as a business unit without regard to the possibility of replication." pp. 10
"The organization typically spends much time and energy when it engages in template construction, template refinement and codification of practice." pp. 10
"In sum: to use templates means that, one way or another an effective working example must exist, be observable and be actively used in the replication process." pp.10
"An obvious place where principles work better occurs when each potential recipients context differs so much that templates fail to capture the relevant information in a cost effective manner." pp.10

This last argument of Winters is the ideal situation. "when each potential recipients context differs so much that templates fail to capture the relevant information." This is what Principles set out to achieve. Is this possible with software? With the level of education that is generally experienced in the energy industry, Bachelors being common and Masters in most disciplines, the users that this project appeals to are well educated. It is time to ensure that this talent is captured and codified within this software.
"Because the conveying of knowledge by principles is central to the process of teaching in universities, defining principles for an academic audience hardly seems necessary; we use them all the time. But further explication may be helpful for the context of organizational routines." pp. 10
"Success in conveying principles often depends, therefore, on supplementing them with more concrete examples, models, hints and sketches." pp. 10
"Armed with solid understanding of principles, the recipient organization can often find its own way to successful implementation. (This is also the premise of much academic instruction in the "principles" of this or that.) Of course, the freedom entails a risk that the implementation will be seriously deficient, as is well illustrated by what happened in many attempts to implement "quality management" principles (Zbaracki, 1998) and in the academic setting is too often revealed at examination time. Also, reliance on the principles of any particular routine in isolation risks the missing of the hazards and opportunities arising from interactions among the routines." pp. 10
"Greek and Roman armies used the theorem of two mean proportionals to build military machines of appropriate (large) scale on site, without references to individual templates and that these principles were more robust and more useful than templates had been." pp. 11
Both principles and templates require the recipient's of the knowledge to have skill and understanding, that is background knowledge. pp. 11
One of the areas that we easily forget is, to use the technology that is available. Sometimes what can be said in a variety of text, voice, image and video is worth so much more then we realize. Companies such as Sun Microsystem post a lot of customer information on YouTube. Although my competitors are not offering green screens to the user, they certainly have not been able to implement or take advantage of the rich media that is available today.

Finally Winter's et al have some things to say regarding management and the commitment to replication.

It is not always enough for top management to display commitment. It is often important also that people in the organization have reason to believe the claim that what is being proposed can actually be done and will have the intended effects. We see parallels here with the work of Garud and Nayyar (1994), who noted that many research-oriented firms had large stocks of dormant knowledge that had been kept "alive" and that a firm could access this knowledge and exploit it perhaps in new uses not originally conceived. Such dormant knowledge has a number of features that tend to reduce barriers to transfer.
Like most situations involving organization change, the replication context is shaped by considerations of resource availability on the one side and performance pressures on the other.
It may well be that the context of performance pressure had something to do both with the choice of principles over templates and with the favorable results of that choice. At the top management level, it produced a demand for prompt action and a willingness to accept risks of failure. Down through the organization, and at the working level in particular, acceptance of the burdens of substantial change may have been encouraged by the perception of a gathering threat to organizational viability, and hence to future employment prospects.
It is not that quality oriented routines and hierarchy necessarily stop innovation; it was that the particular application of these routines and hierarchy in these organizations did so. The conjunction of too many unnecessary levels with many stifling routines served to block rather than facilitate learning.
Thus replication by principles does not necessarily require the presence of pre-existing learning skills or dynamic capabilities; rather, experience with the successful use of principles can serve as an incubator for change and learning.


As I indicated earlier, the authors were surprisingly clear in their conclusions. Recall also that these were large organizations that had deployed these changes in upwards of 1,000 employee groups. In the case of the oil distributor they were dealing with unionized truck drivers and clerical staff. Changing the makeup of positions that were previously handled by "other" groups. Conceptually introducing the new methods and replicating them through the organization would have been difficult. However the authors seem unconstrained in their support for the "Principles" method of replication.
"They used principles instead; we found that this achieved impressive results, as measured by tests of quality, speed and costs." pp. 28
"This further suggests that, however, that imitation (by principles) may be a much more significant as a threat to an innovative "first mover" than it is to the firm that has emerged as the winner in an extended competitive contest." pp. 29

Technorati Tags: , , , ,

Photo Courtesy David Sifry

Thursday, March 22, 2007

Another security concern.

I wrote earlier about my concern for the security risks associated with the new Zune and web phones, and that includes Apple's new iPhone. These large hard drives with wireless connectivity could be accessing corporate data without anyone knowing. The need to encrypt your network is critical these days, but it is also necessary to store your data in encrypted form. A very difficult task for a company to do. This new threat that I am writing about today will also be mitigated by high level encryption on the network and storage. I recommend Sun Microsystems Elliptical encryption technology.

The other product that has popped up that concerns me is Adobe's Apollo platform. In an attempt to "pick up where Java has left off" they have created a "run-time" that enables web applications to operate also as desktop applications. The manner in which they do this is of course is enabling Apollo to have access to the lower level operating system functions. This is where Java has drawn the line and it is the point where no Java application can access the data and systems of a client machine. Apollo takes this security precaution, throws into the garbage, and offers any user a tool that will enable anyone to provide web and desktop applications without knowing what is really going on. Behind the GUI application, another part of the same application may be copying data, destroying data or what ever it is they may want. It literally has nothing to stop the user from being entertained or distracted while it goes on its merry way through your client machine and network.

The key to solving this problem is to not download the "run-time" Difficult when you have many users. The "run-time" is necessary to run the "p" code that the applications will be distributed as. "p" code is not full binaries, but also not software code. As a result the user can not look at the code and determine what it's actually doing. Without the "runtime" when a web site uses some Apollo functionality, it will be unable to morph itself down into to the operating system level, disabling the feature of the website.

The other problem with this is the popularity that this platform will have. The demonstration that I saw was of an eBay Apollo application and included credit card numbers and access to the file systems. The users need to get the work done, and more and more that is all that the they are concerned about, and hence they will use what works, irrespective of the consequences of what they don't know or don't understand. The only people that I think are going to be interested in writing applications for Apollo are the ones who are currently writing viruses. The Apollo "run-time" doesn't let them in, it invites them in. No software vendor that is concerned with the security and reliability of the client systems will write to the Apollo "run-time", therefore it may simply be a matter of selection that the users are disallowed the use or download the Apollo "run-time". But then again, a good virus writer could probably install the "run-time" for the user.

Technorati Tags: , , ,

Wednesday, March 21, 2007

Hydrogen isn't it.

That is of course just one man's opinion. Thankfully the scientific community has taken up President's Bush's challenge on alternative energy sources. This video is also a continuation of the MIT Energy Research Council announced earlier and is a part of the excellent series on the challenges of energy.

The problems are derived from the energy security point of view. This video provides an understanding of the challenges that are faced in using hydrogen as an alternative energy source. This Professor stands out as being one of the recognized leaders in physics and electronic engineering and has a great delivery. As with many of the videos presenters, she identifies the problems that we face in terms of the global energy challenge from her own particular point of view. The growth in populations that are increasing their standard of living, China and India to name a few, are where the demand is increasing. Professor Dresselhaus mentions that this demand is not linear. Noting also that the U.S. consumption does not change necessarily with respect to the GDP increases.

As we are aware, the higher quality fossil fuels, are mostly located in the difficult areas of the globe. The use of coal by the U.S. and China are probably going to continue and may increase as demand for energy increases and the supply becomes more constrained. It is also projected that fossil fuels will supply 30% of the energy in the future, down from 80%, however I find that to be a surprising reduction. Some interesting points in the discussion include hydrogen provides twice the "power" of gas.

Professor Dresselhaus talk is mostly on working with hydrogen, and particularly the storage challenge it provides, and how Nano Structures provide a fresh look at these hydrogen issues. What is required in order to use hydrogen is a variety of catalysts to produce it, to store it and then to use it. The Nano Structures change the properties of catalysts. This provide three benefits during the catalysts phase. They increase the volume of hydrogen storage, they reduce the storage temperature requirements, and "borazene" gets trapped. Professor Dresselhaus also notes that gold is a catalyst in nano application even though gold is not normally a catalyst for hydrogen. She also draws a parallel to the benefits that Moore's law has provided in terms of computer processing capability. This she notes is this scope of benefit that is necessary to solve the worlds demand for energy in the future.

Hydrogen is a transmission agent of energy that were inspired by fuel cells. The use of hydrogen today is specific to its application and the U.S. produces 9 million Tonnes per year. The source of this hydrogen is from hydrocarbons and therefore limits its upward growth opportunities. What is needed is to extract the hydrogen from water which requires a catalyst and hence is very costly and difficult to do, particularly at what would be expected as commercial volumes.

Many of the areas that progress is beginning to be made seem to be more on the energy demand side of the equation. Light can be provided for half of the energy demands by using LED's and Photonics. The demand side is the area where most of the scientific advances are of benefit at this point in time. Professor Dresselhaus stresses again that the most critical issue here is the storage of hydrogen, noting that Hydrogen needs five times the storage size of gasoline. Hydrogen molecules are separated quite far apart. What is needed is a Nano particle as a binding agent to reduce the storage requirements. One binding agent Ammonia was shown to be benign and inert as a storage medium.

One can clearly see the issues that storage of hydrogen makes. The costs of these materials, the energy they consume themselves and their safety has prioritized the science community to focus on these first and foremost. One opportunity Professor Dresselhaus notes is the recent discovery in sunlight conversion multiples. Soon the output of solar cell could increase from its current 12 -13% efficiency, and with nano technologies, this can be brought up to a 30% efficiency. Professor Dresselhaus noted that an ideal application of solar may be in the production and storage of Hydrogen, this would reduce the hydrocarbon footprint of production. And a surprising comment that all of these scientific findings have been discovered since the Presidents 2003 announcement of a new energy initiative.

Technorati Tags: , , ,

Monday, March 19, 2007

SAP is SaaS (Software as a Service)

This just in from Professor Nicholas Carr. The CEO of SAP has changed his tune as too what the better software business model is. Well, we should all welcome SAP to the SaaS party, and since they are announcing a future development product, complete with its own code name "A1S" our warmest wishes to the latest and greatest of the vaporware vendors. There is also an explicit comment that the "users define their software requirements." In response to Carr's writing Vinnie Mirchandani writes that SAP is selling the SSDD.

Since SAP wants to re-tool to accommodate the new user requirements we should give them the opportunity. The point that I wanted to make here is that SAP is now in the same boat as this projects efforts are. The only difference is that SAP wants the oil and gas producer to get closer to its customers, (?) and we want to build software to expressly support the JOC, the natural form or organization for oil and gas.

So here are the energy industries options. IBM has sold out of the business, SAP is in a comprehensive rewrite due to a shift to a new (unknown to them) architecture, Oracle is rewriting their application, and we can only assume they are not employing the user since there are no Oracle Energy bats around. And there is this choice that I write about here. One that is unconstrained by the venture capitalists or capital markets, one that is unconstrained by existing code requirements, one that is based on solid research.

I guess what this really means is that SAP NetWeaver didn't work out. Exactly how many more chances does SAP have left?

Technorati Tags: , , , ,

Sunday, March 18, 2007

What its all about, the user.

The title of this entry will take you to Professor Andrew McAfee's recent entry on Enterprise 2.0. Downloading a .pdf entitled "The Future of the Web." In the document Professor McAfee makes the comment

"You can bank on a ten fold improvement in the cost and capability of collaboration technologies over the next five years. What will your organization do with that?" pp. 2
A very good question, and one that should be foremost in the minds of most Users today. This entry is an attempt to provide a User Vision that can help in defining the answer to this and other difficult questions about the work of the User.

The Future of the Web

In preparing what will become a new proposal to the 135 producers, I am noting very limited differences in the applications requirements. The dropping of heavy oil from a mining point of view is the largest and most significant change. I can't help but think that something is missing from the proposal. The "thing" being an overall vision that this project has. I have attempted to develop an overall vision in the past six months, but I have not been able to quantify and qualify it. The problem this presents is I am missing the most important component of how I see the "User", as they are mostly described in this project. Both in terms of how they are involved in the day to day of the building of this software and how this software impacts the users day to day needs. Therefore this entry is to present a user vision of this project, and as a precursor to making an overall vision. When combined with the technical vision that I have put up here, these two visions should help to understand better where I think we are heading. The final vision will contain many of these specific visions.

I have presented a Technical Vision based on IPv6, Java Objects, Wireless and Asynchronous processing. The Technical Vision helps to identify the development needs and the engineering and geological possibilities. This User Vision will provide an understanding of how I foresee the Engineers, Geologists, Administrative and Management staff do their jobs and participate in developing great software. First I will need to provide some understanding of how a few technologies will be implemented and how the users will interact with them. The technologies are the "semantic web", "enterprise search" and "end-user" tools.

It is easiest to see the end user tools that will be developed within this application. A few variations exist and are good examples of what users will interact with the Genesys system. Firstly these are analytical tools that are provided to the user based on their understanding of the organization, its assets and the data provided. Genesys is a system that provides the back end processing and transaction management to run a company with interests in several JOC's. What should be a standard level of processing and reporting would be provided, however, the ad-hoc query and special interactions that users will want to determine at any time will be developed. These are provided through end user tools that will be derivative of the thinking that these four tools provide. The four tools are, Yahoo Pipes, Teqlo and Trendalyzer.

End user tools

"A place where curious people explore all kinds of data." Upload your data and compare it and graph it to a variety of other data sets. Swivel is providing users with tools specifically to do those tasks, and to collaborate with people of other data sets.

Yahoo Pipes
One of my favorites, a place where you can automate some of the web for you. Expect many tools to be developed and provided of this calibre and quality. Google does this by publishing their API's (Application Programming Interfaces) to those that can use them.

"A Mashup Platform for everyone else", a similar tool to Yahoo Pipes but more powerful. The problem with teqlo is too many of what I call Ajax memory leaks (runaway processes) and too many requests for passwords and personal information that should not ever be given out.

Google Trendalyzer
As I indicated on Friday Marissa Mayer of Google announced Gapminder had been acquired by them for their Trendalyzer tool. Looking at raw data will become a rare exception. Analysis and tools such as these have to be put into the hands of the users so that they can interpret and develop meaning from them. This point is well put across by Ms. Mayer's comment.
Gathering data and creating useful statistics is an arduous job that often goes unrecognized. We hope to provide the resources necessary to bring such work to its deserved wider audience by improving and expanding Trendalyzer and making it freely available to any and all users capable of thinking outside the X and Y axes.
I would encourage readers to have a good look at each one of these tools and get an idea for what a productive user will be able to do with the data, transaction processing, and statutory reporting taken care of, as is proposed here in Genesys.

The semantic web

The semantic web as an interface. The next component of technology for helping to understand the user vision is the semantic web. This will be by composing simple queries to the web in much the same way a Google search currently provides. The difference will be the syntax that is followed and the results. The syntax is "subject, predicate, object". Further research is recommended for readers of the W3C website. It is a difficult concept to understand in a quick manner, and W3C does nothing to make it easy. However, data sets can be further described by associating names, labels or attributes, which is the correct term. Once these data sets have their attributes, the syntax can be used to discern meaning (the semantic part of this) that could be quickly adopted into something like Trendalyzer. The User could then apply some of their engineering, geological or management science too.

Search capability

The best description that I can come up with to describe search is that it is the closest thing to artificial intelligence that we now know. Artificial intelligence (AI) is not robots or computers that are equivalent to humans in their thinking. AI is the variety of tools that help people expand their scope of knowledge and understanding. Google does this extremely well. To conduct only a simple search with infrastructure requires massive computing power to index, store, retrieve and report. These types of tools will become more prevalent to the User as AI becomes better Google'sunderstood.

The User of this proposed software will conduct a variety of searches on the data they have access too. The access too is the difficult part when we think of 1,000's of users accessing 100,000 joint operating committees owned by 1,000's of producer companies. It is fair to assume that the domain of each user will be mutually exclusive to all other users. How then can a single user access the data they have privileges for in a manner that maintains the security and access control necessary. This is a tough aspect of this system but it can be done. Google provides their Enterprise Search tools which are a combination of hardware and software, and ultimately their algorithms would work against these data sets. Their are many other companies that provide these types of searches and are specializing in this area. A simple Google search will provide the understanding that this is a big area of concern and of research by very specialized people.

The domain of a user may spread across several producers, several JOC's, and over certain time frames. The user needs accurate data and the means to extract the information that they know exists but do not need to compile a series of reports and key the values into a spreadsheet. Most users have been doing this for the better part of a decade. The problem with this is spreadsheets are notoriously buggy and have limited access and value. Even Sarbane's Oxley notes the difficulty that spreadsheets provide. Nonetheless, how the user is to impute any value from the work they do, they will need access to the data at some certain level. With the Military Command structure being built within this project, the access to certain types of data needs to be assured as to be authorized by the right representatives of the firm. All in all a very difficult task to do. The alternative is to regress to paper and control access to the file cabinets.

Always on.

This term was used to refer to the cable modems and DSL being available at all times. Not having to dial in like a conventional modem over telephone lines. Now it means something far more sinister. Always on will mean that Users are always available. Not my or most people's idea of progress but we need to understand the technology brings the problems and the solutions. In this instance the RSS feeds and Asynchronous Process Management contained within the Genesys technical vision. These two provide the user with the ability to approach their work in a more timely and appropriate manner. The screaming fire drills of when the general ledger has to be closed will become bad nightmares for most accountants. The sense of urgency for timeliness and accuracy will still exist, however, the need to drop everything and do this, and only this, will be removed from the mindset of the user.

I like to think of this blog as a good example of this latter point. My thoughts are with me at any and hopefully all times. I have readers reading this blog from all corners of the world. (Utterly fantastic!) It doesn't matter when I post, it doesn't matter when they read the post. My thoughts and the communication of those thoughts are the driving concern from my point of view. These writings will not interrupt the readers at an inappropriate time and disrupt what their doing, they will be able to approach the writing when they have the appropriate time and motivation to review them. An asynchronous time machine if you will. In order for these systems to provide value, the ability to operate asynchronously, like this blog is considered and described to be here. I think systems of all types need to quickly adopt this type of thinking. Business does not occur on a 9 to 5 basis, bureaucracies do.

Always everywhere

One of the inherent benefits of IPv6 is the ability to register every device with its own unique Internet address. If your at a Laptop computer that is registered with the Genesys application and have authorized and authenticated yourself, then access to the system, data and information will be made available to you on that Laptop no matter where you are physically. The probability that it is not you accessing your computer is too remote for the security concerns. The same would go for your phone and whatever device may be developed to connect you to the the rest of the world. The IPv6 address is unique and secure, the system can send you information and you can ask the system from those points. If your accessing the system from a public computer terminal, your access may be deprecated in some form to ensure that no access to data or information is without the highest level of security.

A different context, a different perspective.

How much of the work that people are doing is driven by the needs of the bureaucracy or external compliance. Granted the accounting requirements are a necessary aspect of the firm. But the ability to deal with the majority of the compliance should be a natural fall out of the way that business is conducted. If you drilled a well and it discovered previously unknown commercial quantities of hydrocarbons, then the results of the drilling activity more or less dictate the compliance requirements. Why not have the compliance to the regulations be handled automatically as a fallout to the entire process.

Imagine for a moment that the accounting and tracking of information as it is produced is managed by the software. You execute a drilling contract that dictates and governs the transactions between the two firms in the market place. If we are to accelerate the activity level of the oil and gas explorers and producers are we going to need to proportionately increase the accountants, lawyers and landmen? More will have to be done by each individual. Today I think that most people have difficulty in understanding how they fit within the organization and the activities they conduct provide value to the firm. What kind of job is that? A job that is so removed from the productive process such that the individual can't see the impact their efforts make on the success / failure of the firm? How are we going to achieve the demands of the marketplace for energy in the next thirty years? We need to conduct more operations in shorter time spans with faster activity levels. Adam Smith established the division of labor was the key to increasing the economic output, how are more people going to be involved in the same process in order to achieve that increased or enhanced through put.

If we then compile the headings of these sections, we can see the User Vision that is a starting point for the user to understand the purpose and direction of these developments.
The very near future of the energy industry will see Users have the tools, data and information they need to conduct their work. Increasingly these Users will participate in the development of the systems and tools they need to innovate, anywhere, anytime and to increase the productive capacity of the producers and JOC's that employ them.

Technorati Tags: , ,

Friday, March 16, 2007

A new tool.

Marissa Mayer of Google just announced "gapminder" for a preview look. What an unbelievable tool. The world will not be seen through the data elements, but through tools like gapminder. The address to this demo is...

Technorati Tags: , , , ,

Thursday, March 15, 2007

Project status.

On Sunday I mentioned this project was in a state of flux due to the actions of the major producers CIO's decision not to proceed. Well Popeye is back with what might be a better opportunity. Being isolated from the industry for the things I said has a tendency for me not to keep up to date. I had completely lost my window on the competition. The sale of IBM's Qbyte application, and the announced 2009 termination of support services provides an excellent market for this project to fill. If I exclude the major producers from the population of Qbyte clients, I still arrive at over 135 companies that need a solution.

Therefore a marketing approach will be developed to make this project appealing to those 135 producers. I want to spend some time revisiting the project and particularly the budget. My assumptions in preparing the last budget was for a relatively stable technology industry. Clearly with the majority of the firms looking for new systems in the near term, the time frame will be one of high demand on the resources in the technology area of the City. Therefore I will prepare a proposal to them that is based on the many things being discussed here.

Deadlines for the preparation of the proposal will be March 31, 2007 with a May 31, 2007 subscription date. Same application, same vision, same leadership, I'm enthused.

Technorati Tags: , , ,

Wednesday, March 14, 2007

Industrial Dynamics, Innovation and Development

May 6 2004

Professor Richard N. Langlois

Competition through institutional form: the Case of the Cluster Tools Standards.

Another excellent paper from Professor Langlois. This paper discusses the history of the Semiconductor manufacturing equipment and how it has evolved, particularly around the intense competitive pressures from Asia. Comparing a high tech industry to a commodity business may bring criticism. I would re-assert what Matthew R. Simmons states that the energy industry is second only to the space industry in terms of the application of science. This paper's analysis focuses on the appropriate split between the firm and market, a similar discussion to what I am carrying out here for oil and gas. A discussion that focuses on the Joint Operating Committee (JOC). Langlois takes this discussion to its ultimate objective, that of course being the organizational structure as a competitive weapon.
"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." pp. 1
Key to this discussion is the standards used within an industry. Within the energy industry their has been a move to standardize the data elements between producers and suppliers. This has primarily been done through the efforts of the Public Petroleum Data Model (PPDM) I have discussed here before. As a result standards in the energy industry have been established and are used by many of the engineering and geo-technical applications in this industry. This project is committed to the PPDM model as it is both international and most of the remaining work to be done is to resolve conflicts within the industry data elements. In Semiconductor's standardization was available but not used by everyone. Many of the larger "fab" manufacturers were able to establish and use their own methods of production. Through the evolution of the industry this made for some interesting positions being taken within the competitive marketplace. The semiconductor's dynamics of this structure and the changes to the marketplace as a result are interesting from the point of view of the discussion here on energy.
"Rather than a battle of the standards, the current situation might best be thought of as a battle of alternative development paths" the closed system of Applied Materials, with its significant internal economies of scale and scope, and the open modular system of the competitive fringe, driven by external economies of standardization. At this point, the forces favoring the integrated development path are more-or-less evenly balanced against the forces favoring the path of technical standardization. I analyze these forces in terms of the trade-off between the benefits of systemic innovation and systemic coordination on the one hand and the benefits of external economies of scope and modular innovation on the other Although standards have so far kept the competitive fringe in the ballgame, modularity in the industry may ultimately take a different, and somewhat more familiar, form, as some of the larger firms adhering to the standards become broadly capable systems integrators who outsource manufacturing to specialized suppliers of subsystems." pp. 1
As most people are aware the development of the semiconductor industry has been seen as a critical point in the development of nations. Here Langlois brings in a study from Berkeley to lay the groundwork of this discussion.
"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)" pp. 3
Langlois then continues on discussing how the products are made in the semiconductor industry. This discussion is critical as background for the discussion here in the energy industry. I will pick out some of the stronger parts and make application to the energy industry later in this entry. Through analogy Langlois draws a litre of milk to the methods of keeping the semiconductor clean room. Instead of having everything "clean" for processing, and just as you would not refrigerate the entire house to keep the milk cold, the clean rooms were adjusted in size leading to new economies of scale.
"Indeed, there has arisen something of an international division of labor in the industry, partly by default. We can think of the more that 500 process steps in semiconductor fabrication as grouped into three phases akin to the steps in photo developing." pp. 5
"Instead of thinking about refrigerators, think now about dishwashers, and consider the problem of washing a kitchen full of dirty dishes. Using a dishwasher is a batch process; washing by hand is a continuous process. Loading the dishwasher may ultimately have a larger "throughput", but the first clean plate reaches the cupboard more quickly with hand washing. Batch semiconductor processing is like running dishes sequentially though many different dishwashers with many different capabilities. This creates a queuing problem, and the wafers must often sit around in WIP inventories while waiting to form a batch of the appropriate size for the next process step. By contrast, single wafer systems push only a single wafer through at a time (putting aside parallel processing steps), but the progress of that single wafer is not slowed as much waiting for other wafers to be ready." pp. 9
"Introducing a single wafer step into a batch fab instantly creates a bottleneck, of course, since throughput of the fab is limited to the throughput of the single wafer step. The obvious answer is to replicate the bottleneck stage in a parallel processing configuration. The need for parallel processing was the original motivation for common platform cluster tools." pp. 11
"Instead of running the same process in all four chambers, one could instead run different processes, using the wafer handler to moved the wafers from one to the other within a controlled atmosphere. This was the genesis of the integrated cluster tool which represents a genuine move in the direction of single wafer processing. The parallel configuration offers the benefit of redundancy, and can generate higher throughput when downtime is an issue; but as tools become more reliable, the serial configuration - which boasts superior cycles times - gains the advantage. (Lopez and Wood 2003)." pp. 12
"One way to marshal the necessary capabilities is within the boundaries of a single firm large enough to possess and wield all, or at least most of, the competences necessary to produce a cluster tool. Another way is somehow to organize and integrate through contract the competences of a number of distinct firms. The American semiconductor equipment industry uses both of these approaches simultaneously." pp. 12
"Applied (Materials) has quite deliberately chosen the opposite strategy - to develop internally capabilities in all areas of semiconductor fabrication technology. Initially, Applied did contract with firms like Peak Systems for an RTP module and GaSonics for a photoresist stripping module. Both of these arrangement generated contractual problems and were abandoned." pp. 13
This last point, "contractual problems" were earlier discussed here. This is therefore a major demarcation in this analysis of energy in comparison to semiconductor industry. The ability of the market to define the contractual basis within a market system, I have suggested exists in oil and gas. This is the cultural framework of the industry that drives the financial, legal and operational decision making frameworks in oil and gas, and the direct mechanism to operate in oil and gas is the JOC. This is also the point of conflict that I am experiencing with the CIO's of the CAPP CIO committee. The market is attempting to provide a solution, being this discussion, to solve the administrative issues of the industry. Whereas the CIO's focused on the firm are breaking down what they need to such a fine level, that $50,000 is a reasonable level of contractual requirement. Work within the industry needs to be done, and that is consistent with the understanding of Langlois, and the CIO's have failed to see this point. I would refer back to this table to see the makeup of the industry should be from my point of view. With the PPDM standards in this industry, any attempt to build systems that do not recognize the JOC would be a continuation of the forces necessary to micro manage all aspects of the industry by the individual firm. This is the reason that I attribute the CIO's are failing, and will continue to fail until they address these points.
"The emergence of standards."
"The process by which standards emerged in the cluster tool industry is rather different from those of well documented cases like the QWERTY keyboard, the VHS videocassette recorder, the IBM compatible personal computer or the 33 rpm LP record. In all of those cases standards emerged through or competition or "battle of the standards" among alternatives originally offered as proprietary schemes. In cluster tools, however, a single standard emerged immediately out of collective action with a fragmented industry." pp. 14
This last point showing a consistency between the energy and semiconductor industries. For these purposes here, there is only one data standard, PPDM in oil and gas. The value of which is well articulated by Langlois in the following two quotations. I would also add to this discussion of data standards, the copyright that I hold in the development of this research. As I have asserted I will only license one firm to develop the software for these purposes in order to focus the energy industries efforts on the one right solution. Using a shot gun approach to system development will not work with such a high level of technology being employed.
"For the moment, then, both development paths seem to be surviving, and neither is obviously driving out the other. Why? Let us pause to think about the basic economics of closed proprietary systems versus open modular ones. The primary benefits of a closed system lie in the ease of systemic coordination and reorganization. When the nature of the connections among the elements in a system are changing or idiosyncratic to application, a unified organization can more cheaply coordinate and fine tune the connections. The value of such systemic coordination depends on both technological and demand factors. In some respects, and in some technologies , the value of idiosyncratic systemic coordination may be exogenous. In the automobile industry, for example, some degree of "integrality" may be inherent in the nature of the product (Helper and McDuffie 2002) Moreover as Christensen and his coauthors have argued, an integrated organization is better able to fine-tune product characteristics to achieve greater functionality in an environment in which users eagerly demand such functionality. (Christensen, Verlinden, and Westerman 20002)" pp. 18
These are the benefits that accrue to the energy industry as a result of one software solution being built here. The focus is not diluted through the needs of venture capitalists and competition among rivals. The focus is on providing the best software solution possible to the industry in the manner that the industry defines. Langlois then shows the benefits of an open modular system. This open modular system is what I am proposing for the "market" of the energy industry. An "open" market comprised of many Joint Operating Committees.
"On the other side of the ledger, an open modular system can more effectively direct capabilities toward improving the modules themselves (Langlois and Robertson 1992). Such a system harnesses the division of labor and the division of knowledge, allowing organizational units to focus narrowly and thus deeply; at the same time, it magnifies the number of potential module innovators, and thus can often take advantage of capabilities well beyond those even a large unitary organization could marshal. In this way, an open modular system "breaks the boundaries of the firm." There are both static and dynamic benefits. At any point in time, a user can "mix and match" components from a wider variety of sources to fine-tune the system to his or her taste, and thus reach a higher level of utility or tailored functionality than pre-packaged system could offer. In the semiconductor equipment industry, this is called "best of breed."" pp. 19
"More important perhaps are the dynamic benefits. Over time, an open modular system can lead to rapid trial and error learning and thus evolve faster that a closed system." pp. 19
This is how I foresee the energy industry developing greater focus and capabilities based on innovation. The organizational structure of the JOC provides the ability to deal with the market as it needs. The market evolving essentially in response to the producers needs. This needs to be defined and built within a software structure that is the purpose of this blog. When we add compliance to the mix, I fail to see how the energy industry could continue on without the re-organization happening first, and of course that won't happen until such time as this software is operational.

Technorati Tags: , , , , , ,