It is that time again to review my favorite author and share a specifc article of his works. This also marks the fourth full year of posting on this blog.
This year I have selected Emerson's first book "Nature" as this years reading. As with all of his works I find his writing inspiring and more topical today. Nature does not disappoint. Enjoy!
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Wednesday, December 23, 2009
It is that time again to review my favorite author and share a specifc article of his works. This also marks the fourth full year of posting on this blog.
Tuesday, December 22, 2009
We are in the middle of a comprehensive review of Professor's Carliss Baldwin and Eric von Hipple new working paper "Modelling a Paradigm Shift: From Producer Innovation to User and Open Collaborative Innovation". In the last post we learned that innovation within the community of People, Ideas & Objects is considered "a non-rival good: each participant in a collaborative effort gets the value of the whole design, but incurs only a fraction of the design cost." Music to my ears and a definitive benefit when a user considers their potential involvement in this community.
In a related document, Professor Paul Romer's October 1990 "Endogenous Technical Change" discusses the impact of these non-rival goods impact on economic growth.
Growth in this model is driven by technological change that arises from international investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input it that it is neither a conventional good nor a public good; it is a non-rival, partiallyexcludable good.These non-rival goods are being codified in the Draft Specification and developed by this community in the Preliminary Specification. The community will also develop their value adding service offerings, to be used with the People, Ideas & Objects software applications they've developed, in providing their producer clients with the most profitable means of oil and gas operations. I'd like to see Oracle compete with that.
What I want to highlight is Professor Romer's note that mankind's progress was constrained for a long period of time. Not until we were able to rise above the grind of working for our basic needs did we move forward.
This result offers one possible way to explain the wide variation in growth rates observed among countries and the fact that in some countries growth in income percapita has been close to zero. This explanation is reminiscent of the explanation for the absence of growth in prehistoric time that is offered by some historians and anthropologists: civilization, and hence growth, could not begin until human capital could be spared from the production of goods for immediate consumption.Taken in this context it is clear to me that the community and these software applications have the capacity to significantly increase the productivity of the oil and gas producer. Our way of economic organizations have brought us to the point where we are today. To move forward in the future we need to revisit the ways in which we conduct business. And that is my desire for the oil and gas industry with this blog, software and communities development. What Romer has to state on this point is clearly beneficial for all concerned.
The most interesting positive implication of the model is that an economy with a large stock of human capital will experience faster growth. This finding suggests that free international trade can act to speed up growth. It also suggests a way to understand what it is about developed economies in the twentieth century that permitted rates of growth of income percapita that are unprecedented in history.We stand on the shoulders of giants and begin a process of such great potential. Please join me here in 2010.
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Monday, December 21, 2009
I can not reflect on the past four years on this blog without closing out the year by noting the significant contribution that McKinsey Consulting have provided us. This is the 64th article that I have written about here on this blog. And more then just the numbers, the topical nature and focus on the changing business times that we find ourselves in. They have done a great service to their clients and I think they have established themselves as the number one consulting firm for the twenty-first century.
This article is a brief eight minute video that summarizes everything that we stand for here at People, Ideas & Objects. The opportunities, turmoil and change are all themes that underlie the research and system specifications. It is of Professor Don Sull of the London Business School. Who talks clearly about the times we face. He also has a new book that I would recommend putting on your reading list as well. Enjoy!
(Embedded video may not render, please see the original McKinsey site.)
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Thursday, December 17, 2009
People, Ideas & Objects have define a Technical Vision that identifies and works to mitigate a technical issue that all areas of society need to address. The issue is the ballooning of data. Noted in National Defence Magazine an article entitled "Military Swimming in Sensors and Drowing in Data" it is stated “The appetite never seems to slow down.” As the energy industry is mostly based on the science of physics, chemistry and biology, it is believed this data growth will fuel innovative use and application in the industry. Those firms that have the capacity and ability to deal with this volume of data will have competitive and financial benefits arise from this capability, but only if this software development and community are funded.
The Community of Independent Service Providers and People, Ideas & Objects - Technical Vision suggests four cornerstone technologies enable this data explosion. At the same time, these technologies provide the ability to deal with the problem / opportunity. The four technologies are;
- Object based technologies, and particularly Java.
- Asynchronous Process Management.
Further information on the Technical Vision can be found here.
Today's blog of Richard Fernandez notes this issue is affecting the U.S. Military. And of particular concern, is today's Wall Street Journal video of how Predator Drones have been monitored by insurgents. (If that specific URL doesn't work, search WSJ's video site for Predator Drones.) This issue of the Predator Drones is also noted in Fernandez's second blog post.
Some may note "This explosion of data has occurred for the better part of the last 40 years. Computers have always presented this difficulty and the energy industry will address this problem as it has before." I hope not, because the volume of data and the ability to use that data are something that will have to be purpose built and dynamic. What can be monitored can also be controlled.
People, Ideas & Objects has listed this Technical Vision as the manner in which this community will approach the problem. By exploiting the advantages and having the commercial benefits accrue to those that have a handle on them, I think, will be the difference between success and failure in the oil and gas industry. Critical to the success of the oil and gas producer will be this change oriented and innovation supporting community and application.
The Draft Specification considers a scenario where the use of this type of data and the ability to manage it is possible in a fundamentally more profitable way. The example is the manner in which energy prices can dictate, on a pre-determined and agreed too basis, at what price level would trigger the production was scaled back. If prices were to drop a predetermined percentage, then the production would be autonomously scaled back by X%. And these decisions could be executed on an iterative basis to fully exploit the reserves of the specific Joint Operating Committee (JOC).
These are business decisions that can be made by the Joint Operating Committee as it holds the legal and operational decision making control of the reserves underlying the property in question. (And something today's bureaucracies can not even begin to consider.) If the JOC has the authority, and the legal agreements consider this opportunity, then the industry can move from a price-taker to a price-maker position. This last point should be coming more evident as a necessity in the industry. Leaving everything to produce at 100% and then watch the prices drop year after year must get a little tiring. Only a fool would continue to sell his resources at a price less then its cost. And in an escalating cost environment, we have many managers who know they do not have the tools to deal with this problem, and yet will not support this software development project and associated community.
If it is generally agreed by the producers that an additional $20 trillion will be spent on oil and gas operations in the next 20 years. I would suggest the producers attain these types of capabilities so that they can prove to their shareholders they have the capabilities to address these difficulties and profit from them. Or is it really assumed that the bureaucracies can exist in that prospective environment, and provide returns to those outside of their own management team. Please join me here.
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Monday, December 14, 2009
When taken together, the findings of all these empirical studies make it very clear that users have long been and are doing a lot of commercially-significant process development and product modification in many fields.
Users, as we define the term, are firms or individual consumers that expect to benefit from using a design, a product or a service. In contrast, producers expect to benefit from selling a design, a product, or a service. Innovation user and innovation producer are thus two general "functional" relationships between innovator and innovation. Users are unique in that they alone benefit directly from innovation. Producers must sell innovation-related products or services to users, hence the value of innovation to producers is derived from users willingness to pay. Thus, in order to profit, inventors must sell or license knowledge related to their new design, manufacture and sell goods embodying the innovations; or deliver and sell services incorporating complementing the innovations.
The users then earn their fees in providing the services and software to oil and gas producers. Users are licensed to access this information based on their own skills and provide those services to their oil and gas producer clients at no charge for the software or the access to the underlying IP. (Users bill their clients for their services.) Clearly the involvement of a user within this community is critical to the success of the project, as we discussed yesterday. And this success provides the users with a means to pursue their career in the most effective manner that they see fit. Why do we do this.
Reexaminations of traditional economic arguments triggered by evidence of free revealing show that innovators generally freely reveal for two economically rational reasons. First, it is in practice difficult to effectively protect most innovations via secrecy or intellectual property rights. Second, significant private benefits often accrue to innovators that do freely reveal their innovations.
Modularity is important for collaboration in design because separate modules can be worked on independently and in parallel, without intense ongoing communication across modules. Designers working on different modules in a large system do not have to be colocated, but can still create a system in which the parts can be integrated and will function together as a whole. In small projects or within modules, designers can utilize “actionable transparency” rather than modularity to achieve coordination. When projects are small, each designer’s activities are “transparent” to his or her collaborators. In open collaborative projects, modularity and actionable transparency generally go hand in hand, with both factors contributing to the divisibility of tasks (Colfer, 2009).
Building on arguments of Ghosh (1998), Raymond (1999), and von Hippel and von Krogh (2003), Baldwin and Clark (2006 b) showed formally that, if communication costs are low relative to design costs, then any degree of modularity suffices to cause rational innovators that do not compete with respect to the design being developed to prefer collaborative innovation over independent innovation. This result hinges on the fact that the innovative design itself is a non-rival good: each participant in a collaborative effort gets the value of the whole design, but incurs only a fraction of the design cost.
Sunday, December 13, 2009
Our analysis will lead us to conclude that innovation by individual users and also open collaborative innovation are modes of innovating that increasingly compete with and may displace producer innovation in may parts of the economy.
We will argue that when it is technologically feasible, the transition from closed producer or single user innovation to open single user or collaborative innovation is also desirable in terms of social welfare, hence worthy of support by policy-makers. This is due to the free dissemination of innovation designs associated with the open model. Open innovation generates innovation without exclusivity or monopoly, and so should improve social welfare other things equal.
Wednesday, December 09, 2009
The research program on which I and others have been working has been variously described as the "economics of governance," the "economics of organization," and "transaction cost economics." Whereas governance is the overarching concept, appeal to organization theory provides vital support, and transaction cost economics is the means by which to breathe operational content into governance and organization. For economists, organization is important if and as it is made susceptible to analysis.
Or--most fundamentally--why there are firms at all--why all economic activity isn't carried on by contracts among individuals. Ronald Coase asked that question in a paper entitled "The Nature of the Firm," published in the 1930s. His answer was that a producer has a choice between contracting with independent contractors for the output of the various inputs into this production of the finished product, and contracting with individual workers--employees--not for their output but for the right to direct their work--and that the employer would choose between forms of contract--the contract with the independent producers or the employment contract--on the basis of which was more efficient, given the nature of his business.
One of the most compelling observations from highly competitive environments is that many different organizational structures sometimes survive in the same industry.
Both the inter country and within country evidence indicate that no single organizational form is always the most profitable even in a particular sector of the economy. Different combinations of scale economies, principle-agent problems, compensation practices, thickness of the span of control, and many other variables highlighted in the organizational literature often produce outcomes that are about equally efficient and profitable. The outcome of strong competition is the only really decisive way to determine which are the possibly quite different but about equally efficient combinations of all these different variables.
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Tuesday, December 08, 2009
In this paper we assess the economic viability of innovation by producers relative to two increasingly important alternative models: innovations by single user individuals or firms, and open collaborative innovation projects. We analyze the design costs and architectures and communication costs associated with each model. We conclude that innovation by individual users and also open collaborative innovation increasingly compete with - and may displace – producer innovation in many parts of the economy. We argue that a transition from producer innovation to open single user and open collaborative innovation is desirable in terms of social welfare, and so worthy of support by policymakers.
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Sunday, December 06, 2009
Monday, November 30, 2009
Energy research and development challenges are becoming more complex, demand integrated and individual approaches, and are in need of wider funding sources, concluded a forum at the Society of Exploration Geophysicists annual meeting in Houston.When I read these types of articles I get frustrated and angry. Frustrated and angry at the do-nothing bureaucrats who currently occupy space at the oil and gas companies. The last six years has seen my efforts to promote this software development project, community and associated research, with absolutely no support, and not one penny from the oil and gas companies. The Journal's discussion goes on to quantify the amount of effort that needs to be undertaken.
John McDonald, Chevron vice-president and chief technology officer, reminded SEG delegates that the world took 125 years to consume the first trillion barrels of oil and is using the second trillion in 25 years. It is estimated that another trillion barrels remain to be discovered, ostensibly at a cost of $20 trillion over the next two decades.This current bunch of bureaucrats suggest and expect we just hand $20 trillion over to further line their pockets? Where is the outrage? How is it that I was able to write the Preliminary Research Report in May of 2004? Was I the only individual in the oil and gas industry to realize this? Of course not, what was known in May 2004 was that this was a trend that was developing in the industry. And as I state in that report, the industry needs to move away from the banking mentality of guaranteed returns on their oil and gas investments. And begin developing the necessary resources and organizational structures necessary to support an innovative and performance based organization to address the underlying sciences.
Sunday, November 29, 2009
If we have not found a way to make our passion our profession or to discover passion in our profession, we will very quickly succumb to the growing economic and competitive pressures that are shaping our global business landscape. The pressures will inexorably mount. Without passion, we will increasingly experience stress, our energy will be steadily drained and we will ultimately burn out under the mounting pressure. At best, we will be marginalized as we find ways to achieve “balance” and safety valves for the mounting pressure at work.The definition of passion is broken into two distinct types. Hagel says there are "true believers" and "explorers." The true believer is described as "Their passion is enduring and it does focus, but it can also blind – leading the entrepreneur to reject critical input that does not match their preconceived views." Not a productive environment in my opinion. Collaboration is a major means of how ideas are developed today. To ignore the ideas of those that are involved is somewhat disrespectful. I'd like to think that this project would be defined as an "explorer" which Hagel describes as.
These are people who see a domain, but not the path. The fact that the paths are not clearly defined is what excites them and motivates them to move into the domain. It also makes them alert to a variety of inputs that can help them to better understand the domain and discover more promising paths through the unexplored terrain. They are constantly balancing the need to move forward with the need to be present in the moment and reflect on the experiences and inputs they are encountering.I have prepared the supporting research that proves the Joint Operating Committee provides the innovative and organizational performance that the oil and gas producer must have. From this research I have been able to sketch out a vision of how a system based on the JOC would operate. The Draft Specification is the beginning of the involvement of the Community of Independent Service Providers. This is where the passions of many people will take the Draft Specification and build the software applications they will need in their day to day work in the oil and gas industry. Hagel notes;
Passion is also about pursuit. It is not passive. People with passion are driven to pursue and create. They may read books and observe others, but they are not content being bystanders. They feel an overwhelming urge to engage, to experience for themselves and to test their own capabilities. Passion compels us to act.
A global community of professionals dedicated to optimizing the performance and profitability of innovative oil and gas producers. We are focused on developing IT systems based on the Joint Operating Committee. The legal, financial, operational decision making, cultural and communication frameworks of all producers.
A community of people open to new ideas, who know that energy is the life blood of our global economy. People of action who demand more from IT, please join us.I hope that I have designed a path for others with passion to follow. The comprehensive nature of John Hagel's article is best read in it's entirety, and please review his passion manifesto. The one comment that I would leave you with, if you are in oil and gas, is People, Ideas & Objects is the place where you can find your passion and act to make a difference in the industry. Please join me here.
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Tuesday, November 24, 2009
McKinsey: How is Enterprise 2.0 changing the way we work?McAfee's answer to this question is in line with the collaborative developments of WikiPedia. How the initial start attempted to control the contributions of people, and only after scrapping the process and leaving it to self organized teams did the value, quality and quantity increase.
McKinsey: How do you get this started in an organization?
There’s a lot of debate about that question right now. And the debate is typically between people who advocate [a top-down approach and those who advocate] almost a purely bottom-up approach—in other words, deploy the tools, stop worrying about what’s going to happen, and get out of the way as the management of the company and let it percolate up from down below. Or, if you hear about a grassroots effort, encourage it, support it financially, but, again, get out of the way, let the bottom-up energy happen.
McKinsey: What else can undermine adoption?McAfee notes the unreasonable time frames put on by management. People, Ideas & Object software developments, or any collaborative project, will not be zipping along before the end of the quarter. Such expectations are how the hierarchy greases the wheels with the consumption of human energy and spirit.
Another failure mode is to be too concerned about the possible risks and the downsides. If we get wrapped up in those, we’re not going to take the plunge and actually deploy any of these new tools and turn them on and encourage people to go ahead.
McKinsey: What is the CIO’s role in encouraging Enterprise 2.0 and managing the risk?McAfee notes;
A lot of them see their roles as essentially conservative, though. In other words, “My job is to not increase the risk profile of this organization before everything else.” That’s a legitimate concern, it’s a legitimate job for the CIO, but all my experience so far tells me that Enterprise 2.0 doesn’t increase the risk profile of an organization.This is probably why I get in so much difficulty with companies. I ask sarcastically what's a CIO? I don't see them surviving in the long run. Much like secretaries and draftsmen these positions may disappear rather quickly. These types of comments should be directed to the CEO or the CFO as they have the proper authority and responsibility to make the decision.
McKinsey: What does this mean for middle managers?McAfee notes;
If you’re a middle manager who essentially views your job as one of gate keeping or refereeing information flows, you should be pretty frightened by these technologies, because they’re going to greatly reduce your ability to do that. They’re going to reduce your ability to filter what goes up in the organization and what comes down in the organization. And they’re going to greatly reduce your ability to curtail who your people can interact with, talk with, and receive information from. So if you’re inherently a gatekeeper, this is a real problem for you.
McKinsey: How should companies measure the success of Enterprise 2.0?McAfee notes;
Again, you see a lot of energy, you see a lot of people very willing to take a few seconds to answer a colleague’s question—even if it’s a colleague they don’t know. So when I see successful companies tackling this tool kit, I see them doing a little bit of thinking upfront about what problem or opportunity they’re trying to address, then deploying an appropriate technology in response to that. They then measure progress: How much uptake are we getting? What’s the traffic look like on this? Which is very different than measuring ROI, I think.
Monday, November 23, 2009
Mexico’s state-owned Petroleos Mexicanos and the Secretaria de Energia (Sener) are preparing risk contracts that will be offered to oil companies—international and domestic—in order accelerate the search for oil and gas, according to local media.These risk contracts have been used with a multitude of other methods by the NOC's before. The one constant is the Joint Operating Committee (JOC) is the means to manage these contracts. Recall the JOC is the legal foundation of the oil and gas industry. This is on a systemic and global basis with IOC's, NOC's etc. Pemex establishes the following framework for these contracts;
Sener explains that it is urgent "to speed up the discovery of new oil fields and the incorporation of reserves, as well as increase Pemex's execution capacity, particularly through new contracting schemes so that specialized companies can support its activities."
In 2005 a Vice President of Petronas speaking before the Asian Energy Forum presented the firms corporate strategy. He emphasized several elements including growth and maximizing returns for shareholders. Growth has brought the move towards a global strategy with the desire to be an overseas investor in upstream and downstream sectors as well as encouraging foreign investment in Malaysia, while maximizing shareholder profits; he also noted the company's efforts to benefit local needs through a long term program involving Malaysia, host countries and other firms.
He asserted that it is important for Petronas to work with credible partners for several reasons:
- Risks mitigation
- Access to market
- Access to proprietary technology
- Political strength
- Government to government relationship p. 21
This is not a case of nationalization, although nationalism was a factor in its original formation. It has been a generally solid and well-respected partner to both private and state entities around the world. While it has become involved in a wide range of agreements with other companies and states in which its equity percentages has varied, Petronas itself is 100% state owned. It has no present intention to privatize. p. 35
The Baker Institute Energy Forum is a multifaceted center that promotes original, forward-looking discussion and research on the energy-related challenges facing our society in the 21st century.
Sunday, November 22, 2009
And let me tell you that it's time, it's time for us to take advantage of the amazing opportunity that is before us.Yes now is the time when all the planet's line up. The technology, the business environment and society demand a greater efficiency. Schmidt notes in terms of the maturity of technology.
Why is it time? Because people are frustrated. They're tired of the complexity of all the systems that have been built up over the last 20 years. They do not work.
Scalability and Power is just at the beginning of getting this right. The message is that this is the real beginning of the real win of cloud computing. Of the real win of applications. Of the real win of the Internet. Which is changing the computing paradigm - the one we have all grown up with - so it just works. It works no matter what device you are using, whatever operating system your using, as long as your connected - even if you are not connected - your online and have everything you need.
Thursday, November 19, 2009
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Tuesday, November 17, 2009
Sunday, November 15, 2009
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